July 14, 2008
Here is the answer to the problem, in Mark Shearer, Honolulu, Hawaii's letter on Reg Sho. Thanks to Kurt Shearer and Linda Rittenhouse for a simple solution. Thanks to Mark Shearer for spreading the word.
I support the comments here by Kurt Schacht and Linda Rittenhouse of CFA Institute Centre for Financial Market Integrity.
Treat systematic failure to deliver as fraud and hold the broker-dealer responsible for delivery. When any issue remains on the threshold list for an extended period with huge numbers of FTDs relative to shares outstanding, identify the broker-dealer(s) allowing this to happen and initiate enforcement action. You don't need a new rule, you just need to enforce existing law. Other broker-dealers will see this happening and clamp down on specious locates. Problem solved.