A few posts by Patch and Truthseeker that deal w/ 2 issues we've discussed here:
1) Abuse of MM exemption
2) How do you determine whether a non-reporting pinkie's fails are over the threshold limit?
Message 23415115
To: TheTruthseeker who wrote (98891) 3/30/2007 10:10:57 AM
From: Patchie 1 Recommendation Read Replies (1) of 98938
Actually Floyd, Alan is WRONG.
Until recently the requirement to be on the SHO list required that the company be a filing company such that the 0.5% fails level could be accurately calculated. Therefore the excuse that a share structure is unknown is bogus. Only recently did that change to where a minimum dollar value was assigned to those non-filing pink sheet companies. The non-filing pink sheets being a small minority of all companies listed on SHO. If that was Alan's issue he should have blocked the changes to the calculation process and not this more global issue.
What a short sighted buffoon.
As for the SHO list mean that a company was "illegally" naked short sold is an interpretive issue.
Does a market maker using an exemption to naked short do so illegally? You would say no 100% of the time because the exemption exists. But when a fail persists for months and it was a fail held under this exemption you have to question whether that meets the standards of market making.
How do you know that a market maker did not get caught on the wrong side of a market when making a market and created additional naked short positions to protect that initial position taken. Is that market making or market manipulation?
Lots of areas without transparency. What we do know is that the exemption was to address "temporary" volatility issues and there is nothing temporary about months long fails.
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Message 23415208
To: who wrote () 3/30/2007 10:34:48 AM
From: Patchie 1 Recommendation of 98938
As defined in Rule 203(c)(6) of Regulation SHO, a “threshold security” is any equity security of any issuer that is registered under Section 12 of the Exchange Act, or that is required to file reports under Section 15(d) of the Exchange Act (commonly referred to as reporting securities), where, for five consecutive settlement days:
There are aggregate fails to deliver at a registered clearing agency of 10,000 shares or more per security;
The level of fails is equal to at least one-half of one percent of the issuer’s total shares outstanding; and
The security is included on a list published by a self-regulatory organization (SRO).
A security ceases to be a threshold security if it does not exceed the specified level of fails for five consecutive settlement days.
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3210. Short Sale Delivery Requirements
(a) If a participant of a registered clearing agency has a fail to deliver position at a registered clearing agency in a non-reporting threshold security for 13 consecutive settlement days, the participant shall immediately thereafter close out the fail to deliver position by purchasing securities of like kind and quantity.
(b) The provisions of this rule shall not apply to the amount of the fail to deliver position that the participant of a registered clearing agency had at a registered clearing agency on the settlement day immediately preceding the day that the security became a non-reporting threshold security; provided, however, that if the fail to deliver position at the clearing agency is subsequently reduced below the fail to deliver position on the settlement day immediately preceding the day that the security became a non-reporting threshold security, then the fail to deliver position excepted by this paragraph (b) shall be the lesser amount.
(c) If a participant of a registered clearing agency has a fail to deliver position at a registered clearing agency in a non-reporting threshold security for 13 consecutive settlement days, the participant and any broker or dealer for which it clears transactions, including any market maker that would otherwise be entitled to rely on the exception provided in paragraph (b)(2)(iii) of SEC Rule 203 of Regulation SHO, may not accept a short sale order in the non-reporting threshold security from another person, or effect a short sale in the non-reporting threshold security for its own account, without borrowing the security or entering into a bona-fide arrangement to borrow the security, until the participant closes out the fail to deliver position by purchasing securities of like kind and quantity.
(d) If a participant of a registered clearing agency reasonably allocates a portion of a fail to deliver position to another registered broker or dealer for which it clears trades or for which it is responsible for settlement, based on such broker or dealer's short position, then the provisions of this rule relating to such fail to deliver position shall apply to the portion of such registered broker or dealer that was allocated the fail to deliver position, and not to the participant.
(e) A participant of a registered clearing agency shall not be deemed to have fulfilled the requirements of this rule where the participant enters into an arrangement with another person to purchase securities as required by this rule, and the participant knows or has reason to know that the other person will not deliver securities in settlement of the purchase.
(f) For the purposes of this rule, the following terms shall have the meanings below:
(1) the term "market maker" has the same meaning as in section 3(a)(38) of the Exchange Act.
(2) the term "non-reporting threshold security" means any equity security of an issuer that is not registered pursuant to section 12 of the Exchange Act and for which the issuer is not required to file reports pursuant to section 15(d) of the Exchange Act:
(A) for which there is an aggregate fail to deliver position for five consecutive settlement days at a registered clearing agency of 10,000 shares or more and for which on each settlement day during the five consecutive settlement day period, the reported last sale during normal market hours for the security on that settlement day that would value the aggregate fail to deliver position at $50,000 or more, provided that if there is no reported last sale on a particular settlement day, then the price used to value the position on such settlement day would be the previously reported last sale; and
(B) is included on a list published by NASD.
A security shall cease to be a non-reporting threshold security if the aggregate fail to deliver position at a registered clearing agency does not meet or exceed either of the threshold tests specified in paragraph (f)(2)(A) of this rule for five consecutive settlement days.
(3) the term "participant" means a participant as defined in section 3(a)(24) of the Exchange Act, that is an NASD member.
(4) the term "registered clearing agency" means a clearing agency, as defined in section 3(a)(23)(A) of the Exchange Act, that is registered with the Commission pursuant to section 17A of the Exchange Act.
(5) the term "settlement day" means any business day on which deliveries of securities and payments of money may be made through the facilities of a registered clearing agency.
(g) Pursuant to the Rule 9600 Series, the staff, for good cause shown after taking into consideration all relevant factors, may grant an exemption from the provisions of this rule, either unconditionally or on specified terms and conditions, to any transaction or class of transactions, or to any security or class of securities, or to any person or class of persons, if such exemption is consistent with the protection of investors and the public interest.
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Message 23415373
To: Patchie who wrote (98896) 3/30/2007 11:27:45 AM
From: TheTruthseeker 1 Recommendation Read Replies (1) of 98939
Subject to the requirements of NASD Rule 3210
Where, for five consecutive settlement days, there are aggregate fails to deliver at a registered clearing agency of 10,000 shares or more and the reported last sale during normal market hours would value the aggregate fail to deliver position at $50,000 or more.
When this occurs, the security becomes subject to mandatory close-out requirements outlined in NASD Rule 3210.
The allowed values are:
Y = Yes, if the issue is subject to mandatory close-out requirements of Rule 3210.
N = No, if the issue is NOT subject to mandatory close-out requirements of Rule 3210. |
