This is the goofy argument that I often get. That is, that I'm detracting from scams on the long side, by focusing on Naked Short Scamming.
I'm for going after all scams. There are plenty of people writing about and much is being done to eliminate scams on the long side.
I also disagree with other aspects of your post.
Because of secrecy in the hedge fund industry, we really don't know the extent that small hedge funds participate in the Elgindy type transactions. In fact, I've just cited a co-defendant who pled guilty who was a hedgie. His website was populated by hedge funds. Read the transcript.
As far as your contention that "most all" manipulators play the long side and not the short side, I'd agree that there is more scamming on the long side. That's because there is more trading on the long side and short scamming is typically better hidden. Off-shore transactions, complicated arbitrage deals and vested interests in keeping the current MM system, among other things, make it harder to fully understand the scope of the problems involved on the short side.
As far as the worry that increased regulation will hurt the market, that is also bogus. I'm suggesting that we open up the books. Let's see the disease before we make the diagnosis, before we prepare the remedy. The industry, including hedge funds, is fighting tooth and nail, to prevent changes. If it turns out that this is not a significant problem, then I'd listen to your argments. However, as I suspect, that this issue doesn't go away, it's time to make our markets and information equal and accessible to all, without the capability for vested interests, including hedge funds and MMs, to scam.
As far as the vocal supporters of regulation, including Bob O'Brien and others hurting anything, your comment is quite frankly, ridiculous. Without him and others bringing this issue to light, nothing would have happened in this area. Hedge funds would continue to get their hugely inflated returns. MM's continue to enjoy the current abusive system.
Bear in mind, I am not suggesting that, in any way, penny stocks contribute to most of the hedge fund transactions or most of the NSScamming. Because of the number of posts that deal with penny stock companies, it seems that way. This type of message board gets most of its posts from those who trade penny stocks and so the comment is weighted inthat area.
However, I disagree with your implication that there is NO scamming or manipulation in this area. The issue of NSScamming is, I agree, more of an issue with respect to hedge funds in larger microcaps and small caps. In the penny stock area, changes need to be made in the MM system and with respect to strict enforcement as you suggest, requiring the elimination of fails to deliver.
I'd do agree that we should start with enforcing the current regulations. However, the industry comes up with these bogus arguments that the "dog ate the certificate" as excuses. I believe that the industry can come up with a realistic time frame for the determination of fails to deliver. Maybe it's 3 days, 5 days, 13 days. Beyond that, require mandatory determination and buy-in. Eliminate the exceptions and loopholes that occur through the ex-clearing process, through overseas "desking," arbitrage, etc. Require transfer agents books to be open and up to date.
There is no excuse for the grandfathering of this scam. Eliminate this. There are companies on the Reg.Sho list for a year. There is no excuse for this.
You seem to be worried that hedge funds will go out of business. I'm not for regulating them out of business. I'm for registration of all that offer securities in the US, without loopholes for size or location. However, I'd be willing to have an efficient system of regulation, not one that gets mired in the paper work that affects the mutual fund industry.
If your fear is that once started regulation becomes overwhelmed in red tape, then I share your concern. Reg Sho is an example. However, government inefficiency is no reason to allow scams to go unchecked. As we are seeing a move to make Reg Sho more efficient and less CYA paper shuffling, the same could be done with a total revamp in the way the markets function. Let's have markets that really are auction based, up to date, taking advantage of the technology of the 21st century.
Try thinking outside the box. It's the only way we can create a system that works efficiently, and provides a level playing field, minimizes the potential for scamming on both the long side and the short side and which covers a myriad of individuals and entities. |
