CRGI short position:
I still believe, based on a number of well founded observations,
assuming that the Tom's DD is correct and we will find out
soon as the financials show up,
that there is a big short position on CRGI.
Of course, I may be wrong, but we will see.
Short sellers, beware, the normal investor crowd is reacting!!!
Some information on Short Sellers and the SEC I found on SI.
To: +Mighty_Mezz (3765 )
From: +bob sims
Friday, Aug 27 1999 11:20AM ET
Reply # of 4045
SEC Probes Short-Selling Abuses by Day Traders
As part of an investigation into the practices of online brokerage firms
and day trading houses, the Securities and Exchange Commission is
examining whether the firms and their customers abide by the
regulations governing the short selling of stocks, which is a bet that prices
will fall.
One former day trader who has told his story to regulators said the firm he
was associated with employed a system to circumvent short-selling rules
and estimated that illegal short sales accounted for as much as 30 percent
of the sales at one office while he was a customer.
Regulators are stepping up their
scrutiny of online brokerages as the
number of investors making
computerized trades at home or in
day trading rooms is exploding. The
number of online brokerage firms
stood at 140 in June, up from 100 six
months earlier. The number of online
brokerage accounts is expected to
reach 10.5 million by the end of 1999,
up from 7.1 million in 1998, according
to Gomez Advisors, a research firm
specializing in electronic commerce.
Regulators have grown increasingly
concerned that some online firms are
not fully enforcing securities
regulations.
How firms enforce the rules that
apply to investors who sell stocks
short is of concern to the SEC and is
one of the issues the commission is questioning online brokerages about,
confirmed SEC spokesman Chris Ullman.
Selling a stock short is a relatively sophisticated technique that enables an
investor who is pessimistic about a company's prospects to profit from a
decline in its shares. A short seller essentially sells stock he does not own,
hoping to buy it back later at a lower price. If the stock rises instead, the
investor will have to pay more to buy it back than he received when he
sold it, creating a loss in his account.
The business of selling stocks short is more highly regulated than the
outright buying -- known as going long a stock -- or selling of shares held
by a customer in his or her account. That is because in the years
surrounding the 1929 market crash, groups of short sellers were found to
have harmed investors by forcing down the prices of certain stocks by the
sheer force of excessive and unrelenting selling.
To rid the markets of such manipulations, regulators devised a rule that
investors can sell short only if a stock's last trade was at the same price or
higher than the previous trade. Regulators also require that investors who
sell shares they do not own must first arrange to borrow the shares so that
they can be delivered to the person buying them. This is supposed to
prevent the sales of many more shares of a stock than are available for
trading, a technique known as naked shorting. If an investor is unable to
borrow a stock, he is not supposed to be able to sell it short.
Muriel Siebert, chairman of Siebert Financial Corp., a well-known discount
brokerage firm, said her firm's computer system automatically alerts a
manager if a customer tries to sell a stock that is not held in the account.
The manager then tries to locate shares to borrow. If successful, the trade
is done; if unsuccessful, the short sale is not executed.
A story in the Wall Street Journal earlier this month reported that some
investors are selling short shares of initial public offerings of stock, even
though those shares are not typically available to be borrowed.
But professional traders say that naked shorting extends well beyond
shares in IPOs. These people suspect that the rapid-fire trading that is
common among day traders does not leave a firm enough time to ascertain
that a stock can be borrowed before the trade is executed.
These traders also suggest that some firms flout the uptick rule and allow
their customers to sell stocks they do not own even when the stocks are
declining in price.
These fears are confirmed by the experience of John Skiersch, 33, a
performance artist in Chicago who lost more than $200,000 day trading
stocks in 1997 and 1998. Skiersch described how one of the two firms he
traded with allowed its customers to circumvent short-sale rules.
Upon opening an account at the firm, which Skiersch declined to identify,
customers were asked to pay $100 to have a corporation set up with its
own taxpayer identification number. Then the firm created an account for
the entity that was linked to the customer's regular account. Phony
stockholdings were then placed in the corporate account.
In Skiersch's case, his "corporate" account held $200,000 to $250,000
worth of stocks for which he had never paid a cent. The phony holdings
included 500 shares each of Intel, Dell Computer, Cisco Systems and other
stocks that a customer might want to sell short.
"They manufactured these positions," Skiersch said. "The software was
then tricked into believing that you were long the positions so you could
initiate sales without ever owning the stock. I believe it was intentionally
premeditated to violate the essence of the short-sale rules."
Skiersch estimated that up to 30 percent of all the sales executed in that
office of the day trading firm violated short-sale rules. "When regulators
were in the office one day, the whole office was instructed not to sell on
any downticks that day," he recalled. Skiersch does not know if the
questionable practices are still taking place at the firm, but he has since
talked to the SEC, the National Association of Securities Dealers and the
Illinois state securities regulator.
Day trading firms may try to skirt requirements by allowing a customer to
short a stock as long as someone else in the day trading room owns the
shares in question. Day traders may also sell stocks short without
borrowing them during market hours as long as they close out their short
position before the end of the day. Regulators say both practices are
against the rules. Some short sellers and other traders have argued that the
rules are outmoded and should be changed.
Several veteran Wall Street traders said that one sign of illegal shorting
occurs when the daily trading volume in a stock far exceeds the number of
shares available to the public, known as the float.
One trader pointed to the recent trading in Grand Toys International, the
Canadian distributor of the popular Pokemon and Furby toys, as an
example. The company has a little more than 1.5 million shares available to
public investors, but on Wednesday, almost 20 million shares, or 13.3 times
the public float, changed hands. Even if only 1 percent of those trades
were short sales, they would have exceeded the public float by half a
million shares. |
