Naked Short Sales Hint Fraud in Bringing Down Lehman

The dates you post are almost irrelevant considering at that point the stock was finished. Much more important are the dates proceeding it and as I stated in my post the days necessary to cover shorts. Who loans out stock when it is trading for pennies? No one. Once again I am not saying short selling did not pressure the stock. Did it cause Lehman to fail? I still fail to see the evidence.

As far as congressional action goes you may be correct. To feel somehow justified by it puzzles me though. Unfortunately we will see all sorts of overreaction in the coming months and once enacted we all know how hard it is to reverse.
 
Quote from gtcharlie:

The dates you post are almost irrelevant considering at that point the stock was finished. Much more important are the dates proceeding it and as I stated in my post the days necessary to cover shorts. Who loans out stock when it is trading for pennies? No one. Once again I am not saying short selling did not pressure the stock. Did it cause Lehman to fail? I still fail to see the evidence.

As far as congressional action goes you may be correct. To feel somehow justified by it puzzles me though. Unfortunately we will see all sorts of overreaction in the coming months and once enacted we all know how hard it is to reverse.
More...

Looking at failures to deliver as a ratio to overall volume, as you did in your prior post, does indeed tell us that the percentage of fails to market volume did not change all that much, as you correctly point out. However, i wouldn't agree that this observation is particularly relevant here. Naked shorting by other than Market makers, ie. hedge funds, etc., is usually focused with a particular goal, that being to drive share price down. The across the board figures here are not relevant in my opinion. What is relevant is which entities were in the cross hairs and what was the result.

Like you, i don't know if naked shorting caused Lehman to fail, but it seems to me that the evidence is quite convincing that it at least played a role. Certainly the largest role was played by Lehman itself by taking on far too much leverage; thus setting themselves up for failure.

It may finally dawn on the financial world what seems so terribly obvious to some of us, viz., naked shorting ought to be shut down for all except those charged with making a market, and even those folks must be monitored by the SEC to assure that they are not using their special position in the market to drive down share price beyond what is necessary to maintain liquidity, and in particular, to perhaps ruin their competitors.

Capitalism, to survive, requires close supervision. In my personal opinion, the SEC, aided by the laissez faire attitude of the Fed Chairman, has done a poor job of regulating markets for at least the past 20 years and the past 8 have been rather disastrous.
 
Quote from flytiger:

Now, because a fail does not become a fail until T+3
More...

Investors must complete or "settle" their security transactions within three business days. This settlement cycle is known as "T+3," shorthand for "trade date plus three days."

T+3 means that when you buy a security, your payment must be received by your brokerage firm no later than three business days after the trade is executed. When you sell a security, you must deliver to your brokerage firm your securities certificate no later than three business days after the sale.

The three-day settlement date applies to most security transactions, including stocks, bonds, municipal securities, mutual funds traded through a brokerage firm, and limited partnerships that trade on an exchange. Government securities and stock options settle on the next business day following the trade.

3 day time frame is an anachronism. 24 hours shall be sufficient...
 
Quote from piezoe:

Looking at failures to deliver as a ratio to overall volume, as you did in your prior post, does indeed tell us that the percentage of fails to market volume did not change all that much, as you correctly point out. However, i wouldn't agree that this observation is particularly relevant here. Naked shorting by other than Market makers, ie. hedge funds, etc., is usually focused with a particular goal, that being to drive share price down. The across the board figures here are not relevant in my opinion. What is relevant is which entities were in the cross hairs and what was the result.

Like you, i don't know if naked shorting caused Lehman to fail, but it seems to me that the evidence is quite convincing that it at least played a role. Certainly the largest role was played by Lehman itself by taking on far too much leverage; thus setting themselves up for failure.

It may finally dawn on the financial world what seems so terribly obvious to some of us, viz., naked shorting ought to be shut down for all except those charged with making a market, and even those folks must be monitored by the SEC to assure that they are not using their special position in the market to drive down share price beyond what is necessary to maintain liquidity, and in particular, to perhaps ruin their competitors.

Capitalism, to survive, requires close supervision.
More...


I agree with your assessment of Lehman Brothers. The largest responsibility must lie with them. Their failure to reduce exposure and leverage especially in light of what happened with Bear Stearns is almost unfathomable. Either their assets were simply impossible to sell or their actions were indefensible. If the former is the case bankruptcy may have been inevitable. Given the way these firms fund their assets and the leverage they employed the house of cards would have to fall.

I also agree with your assessment of short selling. It is a necessity in order to maintain markets but one that needs to be watched closely for manipulation. My feeling is this manipulation happens much less than we have been lead to believe in the last few months but if someone provides me with true statistical evidence rather than anecdotal instances I am willing to listen.
 
Quote from gkishot:

What is the difference between naked short selling and short selling?
More...

Naked short selling is selling a stock short without first locating a borrow of the shares for future delivery.
 
Quote from gkishot:

What is the difference between naked short selling and short selling?
More...

Flytiger is the real expert, but essentially it is selling short without borrowing stock (i.e., without "delivery") . This sets a a situation in which it is possible to have more shares sold short than the float, because if there is no delivery, the same shares my be sold short again and again. Its like me selling the same lawnmower to ten different people!
 
Quote from gtcharlie:

Naked short selling is selling a stock short without first locating a borrow of the shares for future delivery.
More...

I guess only brokers themselves can do that because they would never let retail customers short a stock without locating the borrowers first.
 
the hotshots shoot from the hip, get the short off on a "locate" that's weak,a nd then go look for it.

You'll be seeing "firm borrow" requirement/

A lot of this stuff exists "ex clearing", which is like limbo for stocks. It's I owe yas between the brokers. Hearing it's getting harder and harder to hold that stuff.

this company paid out a special dividend, payable in name ONLY TO THE EXISTING SHAREHOLDER, in an effort call in certs.

http://www.investigatethesec.com/drupal-5.5/files/SettlementFailures.pdf

Total failure. The new shares showed up in street name all over the Street. Impossible to stop - then. This is ex clearing, and it's how they played the game. We've got a dozen like the above. Now you'll say, "yeah, but what a shit company". Well how many complain about CNBC.? This was all Street guys that did this:

event:http://www.allbusiness.com/technology/software-services-applications/6573772-1.html

http://www.woodbourne.com/clients/JAGfn.cfm

These were the kinds of stocks we first used to figure out how it was done. Elgindy was the first time it was discovered why and how the big boys got the same treatment.....amzn, dell, orcl, etc.
 
You must log in or register to reply here.
Back
Top