14 page read from 2008 ~ THE NAKED TRUTH

14 page read from 2008 ~ THE NAKED TRUTH

http://www.csb.uncw.edu/people/moffettc/Resea...BROOKS.pdf

Listed below are a large number of public information articles and reports detailing the brokerage houses, marketmakers and the conduct of the main "street" characters engaged in the illegal practice of "naked short selling", "death-spiral financing", "failure to delivers (FTDs)" and/or stock fraud.

http://www.rgm.com/shortselling.html

Hour interview well worth listening to to understand the *collusion* being done against legit companies by specific entities

http://www.netcastdaily.com/broadcast/fsn2008-0531-3b.mp3


INVESTOR PROTECTION -- (Senate - July 28, 2009)

[Page: S8183] GPO's PDF
--- Mr. KAUFMAN. Madam President, all Americans hope that the ``green shoots'' we have been seeing recently--evidence of the economy turning around--won't wither. One thing that will help make our recovery strong and sustainable is the return of investor confidence. That is why making certain our financial markets operate fairly and openly is so important.

Free and fair markets and democracy are America's two greatest pillars of strength. Our financial markets have long been the engine of American growth and the envy of the world. Efficient and free capital markets are essential to all of what makes America great: investment in private enterprise, the availability of capital to expand and grow our economy through innovation and new ideas, and the ability to save for retirement in hopes that investment will result in comfort for our later years. But we have seen what happens when you take the referees off the field, when we fail to have clear and fair rules for everyone. It is the job of our democratic government to set those rules and to keep the referees--our financial regulators--on the field.

I rise today because we continue to see that our financial markets simply do not operate on a level playing field for all investors. That is a threat to the credibility of our financial markets and, as a result, to our country's economic well-being.

We have an unfair playing field that leaves us with, in effect, two markets: one for powerful insiders and another for average investors; one market for huge volume, high-speed players who can take advantage of every loophole for profit, and another market for retail investors who must play by the rules and whose orders are filled without any special priority. This situation simply cannot continue. It is the national equivalent of ``separate and unequal.''

[Page: S8184] GPO's PDF I offer my colleagues three examples of this two-tier system which undermines the fairness and efficiency of our financial markets. First, today the biggest players on Wall Street are using their automated, high-speed trading programs to engage in short selling of stocks. Informed observers believe organized ``bear raids''--short selling combined with coordinated ``misinformation'' campaigns--contributed to the demise of Lehman Brothers and Bear Stearns, key elements in the collapse of our financial markets last year. With the repeal of the uptick rule in 2007 and no substantial substitute in its place, the threat of such damaging manipulation is still with us.

Since March 3, I have spoken frequently about the urgent need for the SEC to restore the substance of the uptick rule. This rule required investors simply to pause and to wait for an uptick in price before continuing to short sell. Without such a rule in place, investors who own those stocks are more vulnerable to hedge fund bear raiders.

So far, the SEC has initiated rulemaking and conducted on April 8 a roundtable discussion among key experts on some kind of price test that could substantially replace the uptick rule in today's high-speed, high-tech markets. While that process has begun, we have yet to see it bear fruit.

Second, big market players can engage in naked short selling--selling stock for which they have no legal claim and for which they cannot deliver. Since my first speech on this subject in March, I have come to the floor several times and coauthored letters with my colleagues about the need for the SEC to end naked short selling. In that abusive practice, traders bet on shares losing value--shares they have not borrowed and in some cases never even intend to borrow--in time for settlement.

Yesterday, the SEC made permanent a temporary rule they had enacted last fall and proposed some new transparency measures, and the Commission announced plans for a roundtable discussion on September 30--2 months from now. The Commission will finally begin to discuss publicly the potential solutions that a bipartisan group of Senators and I have been urging: either a pre-borrow requirement or a centralized ``hard locate'' system. The Depository Trust and Clearing Corporation tells us it has the capacity and the willingness to implement that system but only if the SEC requires it through a rule.

That is some progress, but we need more urgency at the SEC to implement tougher rules that will stop naked short selling through an enforceable system. This is imperative, because the current ``reasonable belief'' standard is virtually unenforceable, even against those who engage in concerted action to manipulate prices downward.

Yesterday's announcement by the SEC admits that the rule they made permanent yesterday has only reduced fails to deliver by 57 percent. That leaves a lot of room for improvement. Why not have an enforceable system such as that proposed last week by seven Senators of both parties that could end naked short selling once and for all? I am hopeful we will soon see movement on this.

Third, we have the most recent revelation of so-called ``flash orders'' by high frequency traders. These allow exchange members who pay a fee to get a first look at share order flows before the general public. By viewing this buy and sell order information for milliseconds before it goes in the wider market, these investors gain an unfair advantage over the rest. Today I join Senator Schumer in urging the SEC to prohibit the use of these flash orders used in connection with optional display periods currently permitted by DirectEdge, Bats Exchange, and NASDAQ.

As the New York Stock Exchange complained to the SEC on May 28, selling flash orders for free provides:

Non-public order information to a select class of market participants at the expense of a free and open market system.

Markets that permit a privileged few to have special access to information cannot maintain their credibility.

I ask: Is this what is happening on Wall Street today? When millions of Americans have lost so much money in the stock market, do Wall Street actors continue to make record trading profits by exploiting loopholes using high-speed computers?

William Donaldson, former chairman of the SEC and the New York Stock Exchange, has said:
This is where all the money is getting made ..... If an individual investor doesn't have the means to keep up, they're at a huge disadvantage.


As Senator Schumer wrote in his letter:
If allowed to continue, these practices will undermine the confidence of orderly investors and drive them away from our capital markets.


America simply cannot afford this loss of integrity of its financial markets.
Amazingly, it is a loophole in current regulations that allows this unfair practice. This can and should be fixed immediately.

Flash orders, the uptick rule, and naked short selling are not just a list of complaints. I believe they are interconnected.