Naked Shorting-Hedge Fund & Market Maker manipulation? Message Board

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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation?

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To: pcyhuang who wrote (3547)	7/17/2008 6:48:43 AM
From: rrufff	of 5034

Excerpts from your posted article very well affirm what many of us have been saying here for years, Take any thinly capitalized company looking to grow under the protective umbrella of the US Capital Markets. Each relies heavily on share value to raise capital to re-invest in development. Share value requires long term investor interest in the company’s future. Now add the drastic and uncontrollable fall in stock pricing due to abusive short selling. What results is a loss of confidence in company growth by the limited investment base this thinly capitalized company can attract. This loss in confidence further impacts stock pricing and makes it far more difficult to raise necessary capital to succeed. It only takes a short window of time before a growing company stall under the pressures of a death spiral. Those investors lost will forever be lost from future re-investing because that is how an investor thinks. . . . Second, the proposed rule changes should strictly prohibit the options market maker from engaging in a naked short into the equity market to hedge their book. If the market maker chooses to allow the book to get vastly out of balance due to their pricing strategies the only option available to them on a hedge would be to short the equity similar to any other public investor. There can no longer be the unlimited volume of Put contracts issued against a public company where the resultant is unlimited naked shorts exercised into the equity market at the expense of long equity investors. . . . Finally, the SEC must place firm constraints on how long a failed trade exists regardless of level of fails in a market. There are few valid reasons for a failed trade to persist for any length of time, including bona fide market making, and thus limits must be placed on what is considered a reasonable effort before additional more drastic steps will be required. The SEC can no longer allow the institutions that facilitate these fails to ignore them because it is not cost beneficial to have them closed. That is not an option affordable to the marketplace. Naked Shorting finally made it to the front pages but it took the destruction of the #5 US banking institution, the near destruction of the #4, and several more sitting on this fence to get Washington to take this seriously. Unfortunately, while these may represent huge market capitalization losses it pales relative to the total capitalization losses incurred over the hundreds of smaller companies abused and those smaller investors. It also pales in comparison to the jobs and technologies lost to this abuse.

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