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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation? -- Ignore unavailable to you. Want to Upgrade?

To: rrufff who wrote (3661)	8/3/2008 8:32:15 AM
From: tracor	Read Replies (1) \| Respond to of 5034

This letter to the SEC. <<From: Gary D Markoff Affiliation: Senior Vice President Citi/Smith Barney July 29, 2008 Dear Sirs, I've been participating in the financial markets for nearly 30 years advising clients on both the long and short sides of the market. I'm deeply concerned over the imbalances created since the 'uptick rule' was removed 12 months ago,the subsequent explosion of short interest and the Bear Market that has followed. It's either unusually coincidental or more probably causal with the broader market meltdown we've been experiencing since the rule change. I have no objection with shorting, but I do have an objection to hedge funds (or anyone else) manipulating the process and the price of securities by selling shares that haven't at least been borrowed first and then slamming the bid with short sales on rapid downticks. I am not allowed to do that for clients at my firm, and can't understand why anyone else should be allowed. Returning to the Uptick rule and requiring prior authorization on a Borrow need to appply and be enforced for ALL publicly traded companies and not just FRE, FNM and the primary dealers. The ability to sell 'market on close' for a short seller is major unintended consequence of the 'uptick' removal, especially in smaller cap (say under $5 bill but more significantly on market caps below $1 billion). This has enabled shorts to dominate the end of day trading and 'mark' the closing price (daily, weekly, monthly, quarterly) which is illegal for both shorts and long side players. The difference is that longs must identify themselves in filings to the SEC at least once per quarter and anytime positions go up or down thru 5, 10 or 15% thresholds. Short sellers DO NOT have this requirement and because of this ability to be anonymous, the SEC does not have effective control of surveillance nor do the shareholders and the company itself know who is short. My request and recommendation is that for transparency purposes, ALL positions both long and short be filed equally and size restrictions be implemented on shorts the way they are on longs. As a shareholder, I should be able to know in the proxy statements who the short sellers are that are short more than 5% of a company just the same way I can see who is long greater than 5%. I also can't understand why stocks that are showing up on the Reg SHO lists aren't subject to immediate buy-ins after a minimum grace period. It's the SEC's job to enforce this and hasn't. Why have a rule if it is not going to be enforced? I also take issue with short interest getting up to over 50% in some companies. Again, without transparency as to WHO is short, it's possible that one player can corner the market (short) in a declining environment. Position limits apply in commodities for a reason, they should apply in equities,too. All of these factors have gone on to raise the cost of capital for companies unnecessarily, and to bring about a broad disengagement from public participation. It's time to turn those factors around before we create another Depression. Thank you for your consideration, Gary Markoff Senior Vice President, Smith Barney- Boston>>

To: rrufff who wrote (3661)	8/3/2008 9:08:42 AM
From: rrufff	Respond to of 5034

Lots of excellent commentary in the past 10 posts with many aspects of the issues covered. One thing I'd like all to keep in mind is that absolutist arguments are not the best way to eliminate manipulation in the market. Those who are self-styled "cybersleupps" do this by claiming that all stocks (particularly that of smaller companies) are overpriced scams. Many of us over here, on the other hand, often think that one aspect of the market is to blame. In reality, there is plenty of scamming to go around and when an opportunity to scam the market arises, a scammer will take advantage of that, irrespective of whether he is long or short, hedged or naked, etc. To that end, an overall reworking of the regulatory environment and trading practices is necessary to bring our markets into this new century and to make them fair for the public. For consideration as part of a comprehensive package of change 1. MM, specialist and intermediary function brought into the best practices and technology of auction markets. Emphasis on service and reasonable payment, not for lining of pockets of broker-dealers and close associates. 2. Reasonable efficient and effective registration and regulation of hedge funds and other pools of money, associated and coordinated traders, with rules that are easy to understand and hard to circumvent offshore or through paper shuffle. 3. Elimination of naked shorting and very strict limits on option and stock MM failures to deliver on all sides of trades, long and short. 4. Strict elimination of vulture financing, toxic convertibles, PIPE's, insider dumping, promotional dumping without full publication in advance (perhaps 7 days) on Edgar. Although this may seem extreme and harmful to the toxic financiers and their targets, unless one admits that the real victim is the public, why should any company be able to blindly dump without advance notice huge percentages of the float? 5. Clear and effective enforcement of manipulative schemes irrespective of whether the same is on the short or long side of the market. 6. Disclosure requirements that are similar to those who promote on the long side. That is, if someone is publishing and is affiliated with a hedge fund or other potentially large holder or shorter (with definitions linked to float percentages for simplicity), then the disclosures should be very similar to those who are paid to promote on behalf of companies and insiders. Again strict enforcement on both sides of this equation should cover message boards, blogs, e-mailings and other communications to the public. 7. Clear and defined limits to manipulative trading, e.g., painting the tape with spoofing, uptick provisions that are reasonable with respect to shorting, etc., and tied to clear definitions.