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To: tyc:> who wrote (7460)	2/27/2005 10:31:49 AM
From: rrufff	Respond to of 12465

Tyke - there are lots of opinions and theories about the extent of naked shorting, ranging from "it doesn't exist" at one end to "it's the cause of all problems" at the other end. Your question reflects my opinion that it needs to be fully investigated and then regulated with clear cut rules. Market makers short naked under the guise of making an "orderly market." Many feel that they use this exception or loophole to basically line their pockets given the general lack of liquidity in many start-ups and other OTC BB stocks. Over the past year or two, there has been much written claiming that brokers have not borrowed stock when they were supposed to do it. Some of the rules and practices were vague, perhaps purposely, so that aggregation was considered adequate or that perhaps some other loophole existed. Personally, I think much of it came down to "don't ask, don't tell." Just my opinion. There are other articles about overseas shorting. Canada, from what I understand (see truthseeker posts) allowed naked shorting until recently. There has been much written about the Berlin exchange and the listing of US stocks there without any application by the company by one or two individuals, who are suspected of being involved with naked shorting. There are issues involving complicated concepts of arbitrage, international "desking" of orders, and other purported loopholes, each of which could take pages to discuss the varying opinions. It is also claimed that retail investors are taken advantage of through PIPE's, convertible debentures and manipulative tactics by managements and touts. Often, it is argued, that this activity manipulates through naked shorting. Hedge funds have mastered the loopholes and procedures, it is claimed, to make naked shorting an integral part of their business. Keep in mind that the prior sentence is a vague one subject to lots of permutations and combinations when it comes to arbitrage, etc., such that one could argue definitions. The bottom line is that most of us retail investors can't do it. In fact, it is tough, but not impossible, for us to short even with our nakedness covered (no matter how fashionable is our green <ggg>), particularly in illiquid stocks, stocks under $5, OTC BB stocks, Pinkies, greys. I'm all for making it easier for everyone to short, but I'm not for naked shorting. I'd favor a system where everyone with proper margin capital has equal access to a borrow of shares. Let's bring the entire issue out into the open instead of hiding in cryptic messages from one side or the other. The reg SHO recently promulgated seems to have been an effort to acknowledge that there is an issue here and perhaps even a problem. However, prior naked shorting was, in essence, "grandfathered." This leads many of the opponents of naked shorting to say there is a conspiracy to hide the extent of the problem. In any event, it's a complicated issue and I don't profess to know much more about than the surface. That's why I can't understand why anyone would oppose a clear cut investigation into the extent, how loopholes are used, how international transactions play into loopholes, and, in general, the need for and the regulation of market makers given the advent of 21st century trading technologies and advanced true-auction software systems.