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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From: basserdan	5/5/2009 4:19:55 PM
	3 Recommendations of 5034

OEA memo: Impact of Recent SHO Rule Changes on Fails to Deliver O E A MEMORANDUM TO: File FROM: Office of Economic Analysis DATE: April 16, 2009 SUBJECT: Impact of Recent SHO Rule Changes on Fails to Deliver This memorandum examines fails to deliver before and after the elimination of the options market maker (OMM) exception in Rule 203 of Regulation SHO and the implementation of interim final temporary Rule 204T (T+3 Close-out Rule). This memo includes three additional months of data and updates results from earlier memos dated March 20, 2009 and November 26, 2008. The findings here are consistent with those in the earlier memos. In general, the current memo shows much larger declines in fails measures than the earlier memos. Due to the contemporaneous implementation of these two rules, they are analyzed together.1 Since the rule changes significantly shortened the window to close-out most fail to deliver positions and expanded the close-out provisions to all equity securities, we would expect to see a decline in average daily fails due to compliance with the new rules, all else equal. However, it is also possible that certain behavioral changes or other factors could mitigate or exacerbate any effect. For example, faster "cycling" of fails (more rapid fail-closeout-fail-closeout) could lead to full compliance with the new rules but no change in average daily fails. In summary, the results indicate that fails to deliver decreased significantly after the elimination of the OMM exception and the implementation of the T+3 Close-out Rule. Fails declined by 56.6% across all securities and 73.5% for threshold stocks. In addition, there is some evidence that optionable stocks experienced larger declines than non-optionable stocks. There has been a large downward trend in fails since July 2008. Continued at: sec.gov

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