Tuesday, December 06, 2005

NASAA Transcript Now Up At NCANS.NET

On the News Page. A stunning read. www.ncans.net/news.htm - check it out.

18 Comments:

Anonymous Anonymous said...

Does anyone have a link to Carol Remonds "article" summary of the event?

Here she is for anyone interested in putting a face to the enemy.

http://www.anderson.ucla.edu/x5317.xml

1:49 PM  
Anonymous Anonymous said...

Remove spaces:

http://images.google.ca/

images?hl=en&q=carol%20s%20remond&sa=N&tab=wi

3:05 PM  
Blogger SECFOInfo said...

They removed Jamie Brigglebutts comment using "Piddly" to refer to the average investors account.

I guess it offended some others too. Nothing like a transcript that gets scrubbed. Just like Reg SHO.

3:54 PM  
Blogger SECFOInfo said...

I found it further down in the transcript. Good for Ralph keeping the documents legit. Unfortunately they attribute the comment to 'male" as opposed to the SEC.

The fact that an SEC official is on record, in written form, referring to investors accounts as piddly is golden.

4:19 PM  
Blogger bob obrien said...

And she's not just a pretty face, either.

Her article is a piece of apologist propaganda - actually more like pure dung. I will excerpt portions, copying under fair use protection.

Let's start with the completely false and deliberately misleading title:

"DJ SEC Official Debunks Small Cos' Naked Short-Selling Fears "

Anyone reading the transcript would walk away with much, but the SEC debunking anything isn't one of the things they would take away. The only way you could spin the meeting's outcome like this is if you were a pathological liar, or hadn't listened to the meeting. Carol was far too busy to attend, so we know she didn't listen in person, and judging by this article, she didn't listen to it either.

""While there may be instances of abusive short selling, 99% of all
trades in dollar value settle on time without incident," said James
Brigagliano, assistant director of market regulation at the SEC. "

Well now, that certainly puts my mind at ease. I noted in a prior blog that 1% of all trades in dollar value don't settle on time, thus fail. The DTCC settles roughly $400 billion or more per day, telling me that $4 billion per day isn't settling. Multiply that by 250 and you have 1% of the annual number being a staggering sum. And let's not forget that the lion's share of those failures are happening in small cap companies and Reg SHO companies, leading me to correctly conclude that $4 billion of fails per day are concentrated in a handful of companies. How precisely does that debunk or make the problem smaller? Seems like it underscores my point - that huge dollars are failing in a handful of companies' stocks, comprising 20, 40, 60% of all their volume on a given day.

How is that to set my mind at ease if I own one of them? Like OSTK, or NFI, or TASR, or MSO, or KKD, or OVTI?

Try these gems from later in her masterpiece:

"Anand Ramtahal, vice president in the NYSE's division of member firm
regulation, also told panelists that the exchange was conducting
rigorous examinations of its members to make sure that they are complying with Reg SHO.

Responding to questions about whether more information about the
amount of fails to deliver would help facilitate clearing and settlement, SEC's Brigagliano said the commission is considering the matter.

Cameron Funkhouser, NASD's senior vice president of market regulations, told panelists that he found no evidence of rampant naked short selling. Funkhouser also told participants that, although a number of companies have in the past alleged their shares have been manipulated
through the listing of their stocks on foreign stock exchanges, he had found no evidence of such activity.

"We took [these allegations] very seriously," Funkhouser said. "We
have seen not one instance of naked short selling or any abusive short activity" through foreign exchanges, the NASD enforcer said."

Nice, Carol. First of all, if the NYSE is rigorously examining all these folks, precisely who is doing all the failing that has companies on the SHO list for a year, and why can't guys like Patrick Byrne get his stock for two months? Carol also ignores that one of the panelists, I think it was either Shapiro or Finnerty, basically said that was hot air - something to the effect of "then where is the enforcement actions?"

That shut up the grandstanding, as I recall.

As to Cam's statements, he was describing his little trip to Berlin, where he failed to notice that 100% of the companies listed on Berlin were done so by one broker who paid $12K per company to do so - a company that had been a minority owner of Ladenberg Thalman when it was doing all the abusive PIPEs deals in 2000, and which is a known friendly to creative hedge funds and short sellers. Wonder who paid them to do that, and wonder why they did so, given that 99% of those companies trade 0 volume there? How to monetize that investment? Apparently, it was charity, per the NASD - an act of altruism. Not a calculated way of creating an international arbitrage scenario for unscrupulous market manipulation.

For the record, nobody has claimed that there was abusive short sales coming from German bourses - the claim is that their presence on those exchanges was to contrive a plausibly deniable pretense for failing here due to arbitrage.

I could go on, about the half of the article devoted to describing who was in the audience - Jag and Universal Express - and how they were rat bastards, at least per Carol. But why? Given that she didn't make it into the audience, and given that they had no part in the proceedings, it is strangely impossible to me that it was relevant, but what do I know?

4:44 PM  
Blogger bob obrien said...

Anyone that can identify the male voices on the transcript should feel welcome to do so and it will be changed to reflect the accurate attribution.

Like someone that was there.

I thought it was Peter that made that comment, but I would love to konw if it was him or James.

Anyone?

4:47 PM  
Blogger SECFOInfo said...

Let's say it was Peter. Does it change anything? Peter wrote the rule for the SEC while he was there.

In addition, Jim's arrogance using obfuscatory words like "innocent fails" and "1%" still stirs my ire. Only an Industry waterboy would do that in that forum. It's insulting. If it wasn't him on "piddly", my apologies. Both of them worked at the SEC when they wrote the rule so it doesn't matter to me.

Either way the SEC has lost sight of who they are supposed to be protecting. Just my "piddly" opinion.

6:22 PM  
Blogger mfairview said...

Perhaps start a "Memorable Quotes" from the SEC. This one goes up with Anne Nazareth's.

6:40 PM  
Blogger Tommy said...

So per the SEC, FTDs are a yearly $1.44 Trillion Dollar problem.

$4 billion x 360 = 1.44 trillion.

I wonder what a really big problem is supposed to look like.

7:11 PM  
Blogger SECFOInfo said...

$4 billion new fails don't happen each day.

It's a mark to market carry to each day that includes new and aged fails.

The DTCC says it's 6 Billion so mr. Brigliatano missed one of his Industry talking points by a couple Billion.

7:29 PM  
Blogger bob obrien said...

The 1% confused me, and now we have the SEC on record stating that it is a 1% of trades PER DAY that don't settle, in dollar volume.

Here's what he didn't say: He didn't say it is 1% of all transactions. That could be accounted for easily - 1% of all transactions per day fail, but given that many of the fails are in .01 cent stocks, you'd expect that the absolute number of transactions would be high, but the dollars would be minor.

What he said was 1% of trades, in dollars, don't settle. Per day.

I find that curious.

Is he deliberately understating the problem by 50%? Why would a representative of the SEC go to a forum where he knew what the topic would be, and knew what the first questions would likely be, and then understate the problem by 50%? Isn't that sort of like lying through your teeth?

Assuming that he's not wrong, does that mean that $4 billion fail PER DAY? If no, how do you know? I mean, if he's willing to misstate facts at that level in an open forum (which I'm not saying he is), how would we know which statements from the SEC are the truth, and which are gross misrepresentations? Were you lying then, or now?

See what I'm saying? The numbers are wildly out of kilter - $6 billion, $4 billion - big discrepancy there.

Either he is misstating the numbers at such a profoundly bad level, then the SEC is really obviously suspect. If he is accurate, then the DTCC is really misstating the rolling total - it would have to be far, far larger.

Those are the only two answers that make sense, and both are alarming in the extreme.

Comments?

8:16 PM  
Anonymous Anonymous said...

Well, I notice that on the nyse site...

http://www.nyse.com/Frameset.html?displayPage=/threshold/

...they don't list the issues that have moved to the pink sheets such as dalrq.pk.

Makes me wonder if the SEC is counting the fails for the issues that have been moved???

Besides that point, another is that its a mark to market X billion so no telling how big it was when it was created.

Another "duh" reason the dollar value of the fails has gone down since REG SHO was introduced is because the mark to market value of many if not most of these companies have gone down. Geez 127 days ago DAL was above $4.00, now at .50. Duh. Duh. Duh.

10:22 PM  
Blogger Tommy said...

It $4 Billion new fails per day, not a rolling carry figure. The dollar amount of the current open FTDs is, on any given day, is probably int the $100s of Billions at least.

What the SEC said seems very clear to me. 1% of daily trades measured in USD, fail to deliver.

Nothing about the dollar value of current FTDs. This is what we'd all like to know but the SEC and DTCC don't want us to know, lest we all lose faith on the market.

11:22 PM  
Anonymous Anonymous said...

The fails are a rolling number that sums up to $6 Billion. As new fails enter the system some old fails are removed. This is how the DTCC tracks it.

The only real question is how that number is calculated i.e. Are shares that settle through the DTCC stock borrow program in that calculation since theoretically it settled with a share?

3:43 AM  
Blogger SECFOInfo said...

The fact that SecJamie was using those Industry talking points tells me a couple things:

1. The Industry has bought and paid
for the SEC through lobbying. You will remember a DTCC representative was invited but declined. SECJamie picked up the slack on the talking points. SECJamie made a statement about his "own" views and not those of the SEC but still went on the Industry talking points. That is both telling and disturbing.

2. The $6 Billion may not include any fails in companies that do not file with the SEC ie. companies that were driven out of business long ago. Reg Sho deliberately left them out of the equation. Why?

This has been one my problems with this. I have a company on my statement that ceased to operate as a company five years ago. I never sold it b/c I wanted to see how long it took for the brokerage to force me to close it out without paying a commission for a sale. They haven't.

I truly believe there are Billions of shares sitting on Wall Streets books that have never been closed out but get marked to market at sub penny each day in their systems. Why else would they let these long defunct companies sit on the books and trading identifiers? and why else would the SEC deliberately leave all of these companies out of Reg Sho?

This whole affair smells so bad from an ethical, tax, regulatory and legal standpoint that you realize why they are in Cover-up mode. This stinks to High Heaven.

6:31 AM  
Anonymous Anonymous said...

Recently I tried to sell a company that has long since stopped doing business and trading for a small fraction of a penny. I was saving it for an offset. They couldn't just write it down, since according to the broker, a market was still being made in the issue. Now they did waive the commission since the proceeds were about $0.30 (of which the SEC took a penny, ha). So they put in a market order, and this "market" order just sat there for hours not executing despite there being an advertised bid. I called them and they insisted a market was still being made in the stock, which I don't see how that can be with the market order just sitting there. Anyway, after much back and forth, eventually they told me they called somebody somewhere and called in a favor by asking them to execute the order.

Guess I caused somebody on the other side of my offset to owe some tax.

9:56 AM  
Blogger SECFOInfo said...

There is no market. That's the point. It's just a phantom system enabling the mark to market of these defunct corporations that were naked short sold.

Wall Street needs a way to say an active market exists so that they do not have to close out ALL, let me repeat ALL transactions, when the security ceases to trade. There are stocks that have shut their doors ten years ago with a symbol. Let me give you an example, the symbol is ACAR.PK, trading at .003. WHY? This company shut it's doors in the 90's.

This is where the IRS, the SEC and Congress need to get their act together. Talking about deficits when Wall Street owes Billions in unpaid taxes.

11:00 AM  
Blogger SECFOInfo said...

Note that Pink Sheets is a privately owned Industry tool. It's an interdealer quotation system. Pinksheets LLC..

This is a disgrace. A "piddly" human can get an IRS audit for 50 bucks in unpaid taxes but the SEC and IRS can't close a loophole involving billions.

11:13 AM  

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