NASD Regulation 3370 Goes Into Effect Today: Illegal Naked Shorts on the
Run
For those of you who have been following this issue, I have an update. If you see
some Bulletin Board stocks begin to trade a little crazy, it may be the result of
this new regulation.
I have reported on this issue in four previous editions, and I have learned a new
rule went into effect today which appears to be the answer to a problem which has
plagued the microcap market for many years.
Illegal naked short sellers have been able to funnel trades into US markets
through Canadian Brokerage firms to the detriment of many investors. US brokerage
firms are regulated by both the SEC and the NASD. Canadian firms are not.
NASD Regulation 3370, entitled "Affirmative Determination Requirements" places
the responsibility on the US Brokerage firms to determine if sellers who are non
NASD member (coming from outside the US) can actually deliver the securities they
are selling. If they cannot, the trade cannot be executed on their behalf.
The new NASD rule went into effect today, and rumor has it that illegal naked
short sellers are scrambling to find a home for their positions. I don't believe
they will be forced to cover existing shorts, but for future trading the loophole
has been closed. Look for this to have a very positive effect on many microcap
stock values. If you want to read the rule, simply click here.
[Image]Market Comment: COMP Breaks Out- Look Out Above[Image]
[Image] For those of you who like to read the technical tea leaves, today has
been a very constructive day for the long argument. In last weekend's
edition we published a chart and described three possible scenarios for the short
term in the market. I thought it was most likely the COMP will retest the recent
low before breaking above the resistance line you see in red on the chart.
Instead, the market broke out above the downtrend line today, suggesting a trend
reversal and an end to the correction we have been mired in since the end of
January.
Tomorrow will be a crucial day. The market is waiting with bated breath for
tomorrow's employment numbers. If the market likes the report, look for the COMP
to challenge this year high of 2157 over the next month or so. If the market does
not like tomorrow's report, this may end up being a big head fake, and the double
bottom might still be at hand.
Tomorrow will be interesting. |
