Talk:Naked short selling/Archive 1

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Con naked short opinion:

(note: The next paragraph is from a book. Does wikipedia have permission to use this text?)

confusion

Most of this article is about short selling in general - the advantages, disadvantages, etc. In this it contradicts itself. On the one hand it claims that stability would be increased if naked short sales were allowed, as artificially ramping up a price would be countered by brokerages who would sell short. Later it claims brokerages can do that anyway. It tries to make the point that markets become illiquid and criminals can operate freely just because retail investors cannot naked short. Highly unsubstantiated. The disadvantage mentioned later has nothing to do with naked short selling, but short selling in general and should be mentioned there. The only points which are really about naked short sales are: the advantage that market makers have over retail investors (and this is listed under the advantages of naked shorting!), and the bit recently added about Regulation SHO (which is very much to the point). My suggestion would be to mention those bits to the general short selling under a seperate header. DocendoDiscimus 17:35, 6 October 2005 (UTC)

The content needs a revision. Yes. -- Svest 23:34, 10 October 2005 (UTC)

Merging with Short Selling

I think it's a good idea, but in the interest of giving people a change to discuss it, what do others think? --Jim Mulvey 16:48, 7 October 2005 (UTC)

I think that it is better for an encyclopedia to be expanded. I also think that this topic deserves an article by itself because it presents a different concept than of short selling or going long. The ideal scenario is to keep this article and add a brief section in the Short selling article, and add a (:Main article: Naked short sale) reference. -- Svest 23:27, 10 October 2005 (UTC)

Please explain in what way it is different from (normal?) short selling. - DocendoDiscimus 00:29, 11 October 2005 (UTC)

Hi DD. Short selling is the borrowing of a security in order to sell it and buy it later on at a lower price than the price it was sold short.

Naked short selling is selling and buying a security without borrowing any at all. No actual stock is borrowed and delivered to the purchaser, even though the purchaser pays the short seller. The investor believes that real stock has been delivered to their account. They are just non-existant shares, call it a counterfeit of a phantom security. Though the Naked SS has been illegal in the US since 1933, neither the stock exchanges nor the SEC impose any penalties. -- Svest 18:41, 11 October 2005 (UTC)

What you're describing is not naked short selling. When you agree to sell a security, then you are always obliged to deliver this on the date you've agreed (the settlement date, usually 2 or 3 days from trading). If you do not deliver, you are defaulting, i.e. the purchaser can take you to court for not fulfilling your obligation (though it hardly ever gets that far of course). Almost all security trading is by payment on delivery, so it cannot happen that the purchaser pays and does not get his shares. The only thing that makes a naked short sale differrent from any other short sale, is that when you agree with the purchaser to trade, you do not yet know where you're going to borrow the shares from. Also market makers always have to deliver on settlement date, but as that is usually a couple of days from trading, they can typically find the shares or bonds in time. - DocendoDiscimus 21:27, 11 October 2005 (UTC)

When you say "When you agree to sell a security, then you are always obliged to deliver this on the date you've agreed" you state an obvious falsehood. There are legal exceptions to the naked selling rule and they pertain to legitimate market making and are limited to 13 days duration when the stock is on the SEC regulation SHO list of equities where there are "aggregate fails to deliver" in excess of that allowed. The SEC says there are what you claim cannot exist; the DTCC says there are what you say cannot exist. At last count, about 150 million fails occur every day (SEC data) and 1% by dollar volume of all trades in all markets fail every day (DTCC data). And, these failures persist so that after 23 days there's still 10% of that 1% that remain failed (DTCC data). So, all claims to the contrary; the NASAA, the DTCC, the SEC; they all say it DOES happen and that it happens excessively. See links "http://www.nyse.com/Frameset.html?displayPage=/threshold/", "http://nasdaqtrader.com/aspx/regsho.aspx", and "http://www.sec.gov/rules/final/34-50103.pdf" for information right from the horse's mouth.

I think this article should be merged with naked shorting. --JLV 08:22, 26 October 2005 (UTC)

It should be merged. There is no reason to have a separate topic for this topic. --Mantanmoreland 21:53, 28 January 2006 (UTC)

Title

I believe the title shoud read Naked short selling. Any comments? -- Svest 23:36, 10 October 2005 (UTC)

Yes, it should[1][2], and has been done. Shawnc 22:36, 21 October 2005 (UTC)

Thanks Shawnc. Great job. Svest 03:52, 22 October 2005 (UTC)

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More reading may help

The Naked selling is a hot issiu. You guys must read this page before you make any changes http://ncans.net/ It stands for:'National Coalition Against Naked Short Selling - Failing to Deliver'--Miskaba 06:56, 13 December 2005 (UTC) Misoka

.................................... Warning this site WAS created by www.ncans.net penny stock promoters to further their fraudulent claim that worthless penny stocks they promote (James Dale Davidson, David Patch, Patrick Byrne,Mary Helburn,et al.) are victims of 'naked shorting'.The 'experts' cited,'Bob O'Brien' and Patrick Byrne of Overstock.com have an agenda and using Wikipedia to lend credibility to their penny stock scam and supposed 'anti-naked short selling stance is part of that agenda.

The truth is all the stocks they promote are questionable investments at 

best.ALL OF THE STOCKS THEY PROMOTE HAVE MADE DEALS WITH SCAMMY PENNY STOCK PROMOTERS SUCH AS THEMSELVES AND HIDDEN THEIR OWN 'FLOATS'(shares available in market to buy or sell) AS MUCH AS POSSIBLE WHILE THE INSIDERS TO THE SCAMS HAVE DUMPED THEIR WORTHLESS SHARES IN THEIR WORTHLESS SHELLS THAT THEY CALL 'COMPANIES'.Endovasc of Montgomery,Texas and Genemax(both incorporated in Nevada where stock fraud is the norm) that was promoted by James Dale Davidson through his Agora Inc. penny stock cyberfraud operation are just two examples.No Blue Chip stock companies have made any complaint of being 'naked shorted. THIS IS A SCAM.

Even 'famed trial attorney O'Quinn' has aided and abetted this penny stock fraud.Contact 'Bob O'Brien'(not his real name) of nacans.net, David Patch(ofinvestigatethesec.com),or Patrick Byrne of Overstock.com and request they and their followers stop using Wikipedia to promote their penny stock scam and fraudulent claim of 'naked shorting'.

I may be reached at endoscam@lycos.com. Sincerely Tony Ryals

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 wikipedia and naked shorting
 by: traderdan9891  01/12/06 05:41 pm
 Msg: 388624 of 388725

 http://en.wikipedia.org/wiki/Naked_shorting#Counter_criticism

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Miskaba, I agree with your comment... this article repeatedly emphasizes the "naked shorting is a pump-and-dump scam" argument, while omitting much of the evidence that naked short selling has also been used effectively to depress stock prices. In fact, naked short-selling has been used fraudulently, for many decades, by both "pump and dump" and "short and distort" criminal conspirators.

Evidence of manipulative naked short-selling includes the SEC's Reg SHO Threshold list, which reports the ticker symbols of stocks that have had significant numbers (0.5% or 10,000) of "Failures to Deliver" occur. While restrictions on short-selling a given security kick in after it has been on the Regulation SHO list only thirteen days, numerous stocks have actually lingered on the Reg SHO list since it was created in January 2005. If short-selling is restricted and failures are being cleared, why do dozens of companies have over 0.5% of their floats, or 10,000 shares failing to deliver for weeks or months on end? See Regsholist for what purports to be an accurate summary of the list. Contrary to the claims of some, you will find many of the stocks on the Reg SHO list are not "penny stocks" or "microcaps"; many are legitimate, longstanding, profitable companies.

The organization that handles almost all US trade clearance, the Depository Trust and Clearance Corporation (DTCC) has estimated extant failures to deliver at any given time at $6 billion, while attributing "some" of the fails to causes other than naked short-selling. While this may seem like a small number compared to average US trading volume, it is unclear whether this figure is comprehensive, and the anti-naked shorting crowd believes the activity is concentrated in a small number of stocks. Thus, the problem could be significant for only a few of the stocks on the Reg SHO list, or it may actually be insignificant. The DTCC has refused to provide detailed data, citing ongoing investigations and trade strategy confidentiality.

Further, Patrick Byrne of Overstock.com and others also claim they have been unable to obtain thousands of certificates of Reg SHO-listed company stock from their brokers, suggesting there may be a shortage of these companies' actual stock certificates (as opposed to electronic IOUs). These claims irritate naked short-selling critics, who question why short interest continues to rise in some long-time Reg SHO-list stocks if actual shares, necessary for a legitimate short sale, are not available for delivery to a buyer. Are they available for borrowing by short-sellers, or are the short-sellers being allowed to sell without borrowing... naked, by definition?

The effect of 0.5% or more failures to deliver on a given stock include artificial dilution of the target company's share price (seemingly infinite supply of stock, with limited demand) and diminished confidence in the US market system. While the level of dilution of any one stock has not been released publicly, there is no question investors are growing increasingly suspicious about the secrecy and regulatory inaction accompanying this issue.

While one may question the veracity or the motives of those fighting against what they perceive as illegal stock manipulation through the use of naked short-selling, the current article certainly fails to present both sides of the debate in a manner consistent with the Wikipedia Neutral Point of View policy.

Mr. Ryals, by the way, is a well-known figure in this controversy. He claims to know the identities and affiliations of many of the players, but in reading much of his work I have not seen evidence backing his claims. His primary agenda seems to relate to a significant financial loss he unfortunately incurred some years ago in what he perceives as a "pump and dump" operation. While I don't know whether naked short-selling played a part in his misfortune, any such facts would not preclude the possibility the same tactics are used for other purposes.

Beyond an interest in fair markets, my own involvement in this matter is casual.

I will be happy to put together a more-balanced revision if the administrators believe the opposing viewpoint is credible and deserves space on Wikipedia. Given the controversy surrounding the subject, I welcome any suggestions.

Errudite (sic) 22:10, 28 January 2006 (UTC)