April 23, 2009
273 pages that completely miss the point.
SEC says "Short selling involves a sale of a security that the seller does not own or a sale that is consummated by the delivery of a security borrowed by, or for the account of, the seller."
SEC SHOULD SAY "Short selling involves a sale of a security that the seller does not own that is consummated by the delivery of a security borrowed by, or for the account of, the seller."
That is to say, a short sale that is NOT consummated by the delivery of a security borrowed by or for the account of the seller is not a short sale it is a security entitlement that has been created out of thin air and placed in the account of the buyer.
If a crook can manufacture as many security entitlements as they want to dilute the actual shares of an issue, why would they not? Especially when the SEC refuses to acknowledge that failures to deliver are illegal and enforce the law? Particularly when SEC ignores millions of failures to deliver on Reg SHO Threshold Lists for years on end as if they do not exist?
Stop the FTDs. Settle the trades. If short sellers get burned by forcing settlement, so be it. Fake shares should not be allowed to sit in the accounts of buyers. It is obviously wrong, patently unfair, and offensive to every principle of fair markets and trading.
Uptick and circuit-break all you want. As long as failures to deliver persist abusive short selling will continue.
Thank you,