some of this was posted months ago by DC:

on Naked Shorting (slightly OT)

posted on Jun 30, 11 10:01AM Use the IP Check tool [?]

Here are three paragraphs about High Frequency Traders in the silver market that silver analyst Ted Butler had in his commentary to paid subscribers over the weekend...

"Who are these HFT traders? You guessed it – mostly the big silver shorts, led by JPMorgan and other dominant CME Group members. Only these big traders can afford the million dollar computer hardware and software to run the HFT algorithms. How has it come to the point where giant traders with documented concentrated silver short positions have been further allowed to dominate daily trading volume that causes sharp dives in the price of silver? It is so crazy and outrageous that it should make your blood boil. Believe it or not, I’m trying to contain my outrage. These HFT traders, led by the JPMorgan silver crooks, are like a band of outlaws in the old West who have come to control and terrorize a town and its citizens."

"The central cause of this travesty of a group of crooked traders coming to dominate positions and volume by virtue of concentration is the CME Group. The CME has created this Frankenstein of a market. Because the CME is a for-profit corporation, it is concerned primarily with generating additional profits. Its revenue comes from trading volume, as the CME gets paid for every contract traded. Therefore, it will do anything to increase trading volume, including, I believe, promoting increased volume by illegal means. I would define illegal as including the promotion of practices encouraging concentration, which HFT does."

"Let’s face it – HFT is about massive concentrated computerized day trading designed to manipulate the price and bring in trading revenue to the CME. It’s not about promoting true price discovery and an increase in legitimate hedging, the economic purpose of futures trading. At the exact same time that actual COMEX silver deliveries are hitting historic low levels, electronic volume has hit new highs. This means that COMEX silver is becoming a paper trading mechanism, as opposed to a legitimate futures exchange where real producers and consumers go to hedge. In short, the COMEX is more a bucket shop than a legitimate exchange."

a bit on naked shorting from Dr D

posted on Jun 06, 11 01:13PM Use the IP Check tool [?]

Worldwide, everybody has absolutely had it with the thievery on Wall Street to the point where the pitchforks are being sharpened. It’s really that bad. Abusive naked short selling is the only form of securities fraud on Wall Street that is 100% Wall Street versus Main Street. There is money attached to every “buy” order that goes into the system and that becomes the target. If a crook sells nonexistent shares into that buy order he gets “first dibs” on portions of that money proportional to how much he can manipulate the share price downwards even if he never delivers anything. If he can “successfully” bankrupt the company then he gets to keep all of the money without needing to claim a capital gain.

Main Street people cannot participate in this particular fraud. In the attacks on easy to kill penny stocks you need to gain access to a corrupt MM willing to ILLEGALLY share his bona fide MM exemption from making pre-borrows before short sales. In order to gain access you don’t bribe them with cash but you bribe them with “order flow” which is the same as cash to a MM. Main Street investors don’t have the wherewithal to direct enough order flow to a MM to illegally rent space under their umbrella of immunity from making pre-borrows before short sales. Corrupt hedge funds, however, certainly do. It is the larger MMs that have a superior visibility of buy orders and therefore access to the money attached to the buy order that are going to enjoy the lion’s share of this illicit order flow. THAT’S HOW THEY GOT TO BE THE BIGGEST MMs.

There is a dilemma for these criminals. The easy to kill development stage NONMARGINABLE penny stocks are the hardest to LEGALLY short sell. There are very few if any legally borrowable shares held in margin accounts or held by institutions willing to loan out shares to short sellers in order to make a little extra income. You have to attack the weakest prey ILLEGALLY usually through a co-conspiring MM pretending to be acting in the capacity of a bona fide MM willing to “inject liquidity”. Truly bona fide MMs must cover preexisting naked short positions on the next downtick after the naked short sale was made. They can’t legally establish enormous naked short positions.

Re: a bit on naked shorting from Dr D

in response to a bit on naked shorting from Dr D by dcbass

posted on Jun 06, 11 05:18PM Use the IP Check tool [?]

People have a tough time with the concept of abusive naked short sellers never, never, never having to cover unless a breakthrough by the preyed upon corporation forces it. In our corrupt clearance and settlement system you need not deliver that which you sold in order to gain access to an investor’s money. This insanity forms one of the many pillars supporting this fraud. Most countries with the notable exceptions of the U.S. and Canada have a “withhold the mark” policy with “the mark” being the investor’s money. If you don’t deliver what you sold you don’t get access to the buyer’s money just like at the grocery store.

When you NSS into a buy order with the cash of the buyer metaphorically “stapled” to it, the target of this crime, you get “first dibs” on a portion of that cash if a downtick should occur even if you never deliver that which you sold. If that isn’t insane enough, the buyer of the never to be delivered shares gets a readily sellable “security entitlement”/IOU credited to his brokerage a/c. This is over and above the number of shares already outstanding. This adds to the “supply” of that which is readily sellable which automatically depresses the share price. Refusing to honor your contract to deliver that which you sold by T+3 therefore not only established a naked short position and thereby giving the crook access to “the mark” it also depresses the share price which gets this cash flowing into the wallet of the criminal all in one fell swoop. This money of the investor becomes “free money” to any party willing to break their contract and refuse to deliver that which they sold.

The question arises, why would you EVER cover this naked short position if you not only have already been given access to the targeted cash of the original investor but the very act of covering would drive the share price up which would then force you to aim a portion of the stolen cash to your clearing firm in order to meet your “marked to market” collateralization requirements. Would you not instead be highly financially incentivized to continue to naked short sell into yet more buy orders to induce yet more share price depression to induce yet more flow of the cash of the investors being defrauded both well in the past and more recently in the past? The question becomes do you want more “free money” or do you want to be forced to give up some of the money you stole in the past. IN FACT, A CRIMINAL WOULD BE CRAZY TO EVER COVER UNDER THESE CIRCUMSTANCES.

Abusive naked short selling is similar to a drug binge. Once you get started even if you wanted to stop you sometimes can’t. The very act of stopping your daily “fix” of naked short sale orders would release the potential energy encased in the coiled spring you’ve been compressing while forcing the share price down day after day. If you fail to bankrupt the targeted corporation you can quickly get to a point at which you can’t cover without risking serious financial calamity. When you get to this point you typically recruit Wall Street fraternity brothers to help you polish off this feisty corporation that you theoretically have on their death bed. Once the “recruits” realize that they got sand-bagged then all kinds of things can happen. This includes covering by the recruits with lesser naked short positions and then going net long to take advantage of the blood in the water coming out of the “recruiter”. In summary, all buy orders by Main Street investors have money attached to them but all sell orders by Wall Streeters do not have meaningful delivery obligations attached to them. This asymmetry serves as another pillar supporting these crimes. Since these criminals never have to cover until forced to the aggregate size of naked short positions is accretive by nature. They get larger and larger month after month.

From Dr D:

Jim, I'm not certain that I understand what you are saying. How are the abusive naked short who have no intention of covering held accountable?




The single most effective way is to simply succeed in your business plan. This is so rare for companies under attack that you rarely see it. Above and beyond that there are a variety of strategies to implement at the proper time. Operating in a sector like the junior mineral exploration sector that has ultra-high risk and ultra-high reward built into it helps a lot. These people have more discipline as to mitigating losses than we investors do. The hedge fund managers will continue to make gazillions of dollars as long as they don't screw up on any one deal big time. The management teams and compliance officers of the publicly traded crooked clearing firms and crooked MMs will also do quite well as long as they don't blow it real bad on any one deal or allow their shareholders to learn what they do to shareholders for a living. This series of attacks started when XXX was trading at over $2 back pre-Lipangue when they deserved to be trading at lower levels. The problem with these attacks is once you start it's tough to find the brakes when you need them. These people are collectively short many thousands of companies. Part of the goal is to get covering our naked short position to the top of their "to do" list. "Qualified" cash dividend distributions and tenders for assets that lead to qualifying dividends are the be all and end all.

If you study the 30-day period before any generous qualified cash dividend distribution "record date" there will be a lot of buying by opportunists but very little selling by shareholders lest they not earn the dividend. When that wave of buying comes in the naked short sellers have 3 options. They can NSS into these buy orders and be forced to match an astronomical number of cash dividends. They can sit on their hands and do nothing and let the share price break out to the upside until the % of share price the dividend represents moderates out or they can cover at the same time no natural selling is occurring and waves of opportunistic buying is entering. The second they stop their daily "maintenance" NSS-ing they must constantly do to keep their collateralization requirements in check the share price will gap upwards by itself without all of these other factors. In essence, you take away the daily status quo and FORCE them to make a lose-lose decision.

The status quo is bad in that it basically involves we investors riding donkeys with our fists clenched yelling at them to deliver the shares they sold to us chasing them across the prairie while they drive off in their Ferraris and flip us off. What you need to do is to route them into a "qualified cash dividend" box canyon and force a shoot out

Naked Shorting: Majority of Investors Say Penalties

Should Be as or More Severe Than for Fraud and

Counterfeiting

Monday February 13, 2:06 pm ET

Issue Could Have an Impact at the Polls According to New Study by Harris

Interactive

ROCHESTER, N.Y., Feb. 13 /PRNewswire/ -- Three out of four U.S. investors(1) (76%) say someone

who naked shorts a stock should face civil (8%) or criminal penalties (9%) or both (59%). By the same

margin (76%), investors believe such penalties should be about as (65%) or more (11%) severe than

those for fraud and counterfeiting, according to a recent survey commissioned by Working Americans

for an Open Economy, conducted online by Harris Interactive® among 1,243 investors nationwide.

Investors' support for cracking down on naked shorting could play a role in upcoming congressional

elections with 38% of investors saying they would be more inclined to vote for a congressional

candidate who addresses the issue of naked shorting. Among investors aged 55 or older, fully one-half

(50%) say they would be more inclined to vote for such a candidate.

"This study leaves little doubt as to how seriously investors view the illegal practice of naked shorting,"

said Mark Wirthlin, senior vice president of the Harris-Wirthlin Brand and Strategy Consulting Practice

at Harris Interactive. "If this issue moves front and center, it clearly has the potential to influence both

legislation and congressional elections."

The study was designed to understand investor attitudes toward the practice of naked shorting.

"Naked shorting has become the game on Wall Street in the past 10 years and its pervasiveness

creates serious risks to our system," said Steve Wark, spokesperson for Working Americans for an

Open Economy. "These results show that the public is ready for the government to take real and

meaningful action against hedge funds, brokerages and individuals breaking the law."

When it comes to specific actions that could be taken against those found guilty of naked shorting, vast

majorities of investors are behind every alternative tested:

* Requiring the federal government to publish the identity of brokerages

and individuals found guilty of naked shorting (79%)

* Allowing individuals, investors, pension funds, and small companies

financially damaged by naked shorting to sue to recover their financial

losses (75%)

* Revoking the securities licenses of those found guilty of committing

naked shorting (75%)

Findings for the study were compiled from an online study of 2,486 U.S. adults conducted December

6-8, 2005. These questions were then asked of the 1,243 who currently own stocks, mutual funds or

401(k) funds. The sampling error for the investor results is +/- 4 percentage points at the 95%

confidence level.

QUESTION WORDING AND TOPLINE FINDINGS:

BASE: ALL RESPONDENTS

QA Thinking about something new ... Which of the following do you own?

48% OWN STOCKS, FUNDS OR MUTUAL FUNDS

29% Stocks

27% Mutual funds

29% 401(k)

43% None of these

9% Decline to answer

BASE: OWN STOCKS, MUTUAL FUNDS OR 401(K)

QB Please read the information below, then answer the questions that follow.

In stock trading, there is a stock purchase called "shorting" or "short selling" and one called "naked

shorting."

When someone shorts a stock, he/she borrows shares of that stock from his/her broker, typically for a

fee, and sells those borrowed shares on the open market. When the stock goes down, he/she buys

shares in the market and returns them to his/her broker who lent them to him/her. Short selling is legal

and the borrower pockets the money he/she makes from borrowing low and selling high.

Let's say you noticed the price of moose antlers was soaring -- which in turn would hurt the earnings of

Deer Antlers Incorporated. You decide to go short on Deer Antlers Incorporated, so you borrow 100

shares of Deer Antlers Incorporated from your broker and sell them at $30 per share. Two months

later, Deer Antlers Incorporated falls to $25 a share. You buy the shares back and pocket the $5

difference per share for a $500 profit. If you do this you are a "short-seller" or "selling-short" Deer

Antlers Incorporated.

In naked shorting a short-seller makes a stock trade without ever owning or borrowing the shares

he/she sells. Some professional investors and hedge funds take advantage of loopholes in the rules to

sell shares without making any attempt to borrow the stock. When a stock is naked shorted, there is no

limit on the downward pressure a short-seller can apply to that stock and some companies can be put

out of business by this practice. Naked short sellers sell and profit from something they don't own or

haven't borrowed. Naked shorting is illegal.

In your opinion, should someone who naked shorts a stock face civil and criminal penalties?