Subject: File No. S7-12-06
From: Bruce Thompson

April 12, 2007


There is not a single institutional or individual investor who owns 2.5 million shares of Novastar Financial stock. Not one.

How, exactly then, does a 2.5 million share block of NFI trade out of the Chicago Exchange today?

Looking at time sales:

13:14:56 $5.33 2,531,000 shares CHX Chicago bid/ask = 5.20/5.21

That is 6.6% of the authorized shares of the company in one transaction. Anyone who owned that many shares or who bought or sold them long would have to file a notice with the SEC.

Is it an options market maker creating some liquidity? If so, for whom? Why? The Stock has traded over 7 million shares today. Twenty times it's average volume. There seems to be plenty of liquidity. Or is it a naked short seller borrowing the market maker's exemption so he can mark the sales LONG while dumping heavy (1/3 of today's total volume)into the good news released yesterday by NFI management? The object being to kill the demand again? The share price closed down $.50 from the open on that very heavy volume

Even unwashed among us can see examples of manipulation when out faces are rubbed in it over and over again every day.

Why can't the SEC?