March 29, 2007
revision of SHO greatly needed. the amount of manipulation can be compared to the excesses of Jay Gould and other legendary manipulators. Short sales need regulation-FTD shares should be COVERED with real shares not IOUs within a short time. the huge amount of shorts in some stocks equals more than the amount of tradeable shares-in effect the excesses produce counterfeit or non-existent shares. these trades are made for manipulation. for example, a stock selling for $5.00 has 10 million shorts, including 208,000 puts.
i must caution regulators, in trying to overturn SHO abuses,you are bucking against big money-Lehman,Gildman,Morgan et al. they run a business locating shares to short and substituting IOUs for FTD shares. this is a billion dollar business. you will have formidable adversaries.
you must also regulate to some extent-the option market-ex.-sellers of puts can issue puts without regulating the covering shorts.