Talk:Naked short selling/Archive 3

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The Editing War Resumes

Again we're getting wholesale changes to shift to an anti-shorting polemic. I note that one anonymous user was blocked and another performed the identical biased edits, (sock puppets?) --Mantanmoreland 17:09, 3 February 2006 (UTC)

Ditto. Identical changes, different anon user, ignoring prior warning. Would appreciate some support in the editing. This seems to be the result of an organized campaign.--Mantanmoreland 21:03, 3 February 2006 (UTC)

  • I'm watching it too - you just are very good at beating me to it! I have inserted a comment that wholesale changes should be discussed here first. Looking at WHOIS data, I think that the anon edits are all coming from the same user on a dynamic IP from Verizon - but without proof we can't really act on a 3RR. Let's just keep doing what we're doing - I don't think we're overwhelmed yet. (ESkog)(Talk) 21:16, 3 February 2006 (UTC)
    • You can act on 3RR on evidence like that. In any case, if the edits of two users are indistinguishable from one another, the Arbitrators have ruled that they may be treated as being the same editor for dispute resolution purposes. However, I don't think a block does much, since the IP is clearly dynamic (or easily refreshable). I'm torn over whether to full- or semi-protect. However, with the repeated nature of the changes, the lack of edit summaries, the refusal to discuss (and the rant nature "I WANT THE TRUTH" of the top of the page), I find myself running very low on good-faith. The editing pattern also prevent users formerly in disagreement from actually constructively editing the article, and so the anon/new user is being quite disruptive to the "normal functioning" of Wikipedia. That's borderline vandalism, so I'm going to semiprotect for a little while. -Splashtalk 23:19, 3 February 2006 (UTC)

It does look like that -- same user. Always the identical edits.--Mantanmoreland 21:25, 3 February 2006 (UTC)

Yes, and another thing I find troubling is that the changes are always identical, indicating a central source. I removed the additional links, which were not in the compromise version, are mainly lists of numbers and should not have been added without prior discussion. --Mantanmoreland 14:52, 4 February 2006 (UTC)


Hello Group, I decided to join here to correct the bias and erroneous description of naked short selling. I am also appalled at the fact that external links to unbiased Freedom of Information Act releases are being hidden in favor of opinions by journalists. What is there to hide?

I am am member of NCANS and the FOIA request itself shows the extent of naked shorting, so this data is not in dispute - it comes from the SEC directly.

The Eagletech case shows that naked shorting in the form of a bear raid can decimate the price of a share -this too is beyond dispute, it's all in the court record.

So I ask that this Wiki entry be changed to show the real unbiased data and description there of. The extent of naked shorting is not in dispute - the SEC data tells us exactly how much is going on in trades that go through the DTCC. Trades that go around the DTCC just adds to the total. The amount of "ex-clearing" or outside the DTCC naked short selling is speculative. But here again, the DTCC itself has said that the number of naked short sales there is about 3-4 times larger than those failing through the DTCC.

And let's get it clear that if there is a naked short sale, there is also a failure to deliver - by definition.

I'm going to try to add to this record in a civil way. NCANS has several hundred members and we just recently found out about this entry in WIKI.

I do have proposed changes and text, matter of fact it was I who edited this WIKI entry, so most of you have seen it.

I merely left what was already said, for the most part and added the unbiased information.


Also the description here is so poor, that the very second sentence is just wrong.

WIKI entry: "Critics contend that its practice as a wager against share price declines is illegal."

No folks, it's a wager FOR a share price decline, not against - the opposite of what the WIKI entry says it is.

So I'd appreciate if the basic descriptions and factual SEC links be included. tommytoyz

Tommy, as long as you cite reliable sources and do not severely favor one particular point of view, we'd love to have your contributions (as soon as you pass through the window required by semi-protection - we have been the target of a lot of vandals who fly in, edit, and don't explain their contributions). (ESkog)(Talk) 02:48, 5 February 2006 (UTC)


Thanks ESkog, I am new here and barely know how to edit here. How do I make my contribution, or participate in the discussion? Please advise. Any tab I need to link to or press? THanks.

Anyway, another FOIA was just released by the SEC showing that on August 1, 2005, 90% of shares traded in OSTK failed to deliver, that is they were naked shorted to that extent on that day.

Here's the link to the SEC letter and the release : http://www.thesanitycheck.com/Portals/0/foia013006.pdf http://www.thesanitycheck.com/Portals/0/foia013006data.pdf

Remember, this is an aggregate number of fails for that day, not cumulative.

Here's commentary : "So 90% of the trades for that day, failed. This is entirely consistent with Byrne being unable to get 50K shares purchased around then for two months, as well as his dad being unable to get almost 200K bought randomly in the open market during that period, and further is consistent with Byrne's broker indicating that likely none of the shares trading in OSTK could be delivered if a buy-in was executed, as none of the volume was genuine shares being sold. That is all documented.

This is shocking, and frankly, confirms my worst fears. It also should serve as a wake up call to investors, as well as to the apologists for naked short selling, who insist that there is no problem."


Forgot to menton, it's 90% of traded shares because on that day, about 614,00 shares traded and of those about 550,000 where naked shorted and failed to deliver. This is beyond dispute.


Seems to me that those that keep harping on "vandalism" are the ones keeping the whole truth from being stated. I think that mantanmoreland should cool his objections to "wholesale changes to shift to an anti-shorting polemic" (by the way it's anti-NAKED shorting). As it was said before, it is truly troubling and unethical to publish untruths and then complain about needed changes. Either learn the truth and live by it or get off the subject. This has gotten to be a schoolyard contest and I think it immeasureably hurts the credibility of this venue. I for one will discontinue any further attempts to try to make this a worthy endeavor to give a truthful explanation of this subject. river 05:57, 5 February 2006 (UTC)

I've corrected the error in the first paragraph, and I appreciate the user who pointed it out. However, the remainder of the arguments being advanced above illustrate why it is essential that this page remain protected from insertion of dogmatic opinion masquerading as "indisputable fact."

The assertion that a "fail to deliver" is, per se, naked short-selling, illegal or not, is contradicted by objective evidence including the SEC material cited in the current page, the SEC "frequently asked questions" that are linked. Therefore the statements made above, such as "90% of shares traded in OSTK failed to deliver, that is they were naked shorted to that extent on that day" are simply allegations stated as fact.

The links that were removed are lists of the "fails" numbers being presented, in a one-sided and misleading fashion, as what they are not, which is prima facie naked shorting. Among the articles currently linked is a TIME piece describing the naked-shorting point of view, including a discussion of the "fails" from the point of view of the anti-shorting camp.

The statement that "Eagletech case shows that naked shorting in the form of a bear raid can decimate the price of a share -this too is beyond dispute, it's all in the court record" -- is incorrect. The SEC and U.S. Attorneys office charging documents released to date are devoid of any reference to short selling, much less the "naked" short-selling that is the subject of this article. On the contrary, they describe a stock manipulation in which the shares were pushed upwards, not downwards.

The second user's comments impugning motives and such have no place in this discussion and underline the concerns that I and others have mentioned previously. --Mantanmoreland 14:52, 5 February 2006 (UTC)


Let me point out some more errors, since I already pointed out the one in the second sentence :

1) "Critics contend that its practice as a wager for share prices to decline is illegal." 

  - That is incorrect. The practice of naked short selling is actually  legal. Those against naked short selling know this.

2) "Naked shorting is attempting to perform this transaction without first borrowing the stock." 

  - That is incorrect. If one fails to borrow a stock before selling it short, does not make the sale a naked short sale. There is no requirement to first borrow a stock to do a legitimate short sale.

3) "Some alleged targets of naked short-selling include...." 

  - All securities on the REG SHO list have been abusively naked shorted, that is the definition of the list per the SEC. The argument that failing to deliver does not equal naked shorting does this WIKI entry a total farce. Even proponents of naked shorting know that for every single share that is naked shorted, there is an equal number of failed deliveries. 12 shares sold short naked = 12 shares failed to deliver.
  There for, the FTD list is a perfect indicator of naked shorting. Abyone deep into the subject on both sides knows this basic fact. How else can a share fail to be delivered, if it wasn't sold naked. IF it is delivered is isn't sold naked. It's a basic elemental knowledge and is mandatory to explain correctly in this WIKI entry so as not to make it a farce.
  All the studies and papers on naked short selling refer to FTDs as a perfect indicator of naked short selling. Failing to Deliver and Failing to Receive are the products of naked short selling.

  This is just so basic guys.

  now the "Guardians" of this Wiki Entry do link to the SEC explanation of REG SHO. So let's quote from this SEC explanation and see that even the SEC equates Naked short selling with failing to deliver :
     "Regulation SHO is designed, in part, to fulfill several objectives, including (1) establish uniform locate and delivery requirements in order to address problems associated with failures to deliver, including potentially abusive “naked” short selling"

And here : 

       "On the other hand, a participant must close out a fail to deliver position in a threshold security that has persisted for 13 consecutive settlement days irrespective of the dates of the participant’s trades in that security. "

And here : 

  "For example, if a participant sells short a security that is not a threshold security on the date of sale, the close-out and pre-borrow requirements would not apply to a fail to deliver position on the participant’s net short settlement obligation unless the security later becomes a threshold security and it maintains that status for 13 consecutive settlement days and the participant has delivery failures for all of those days."

  The way the REG SHO list is maintained on a daily basis by the number of FTDs in a security. So the even the SEC and the SROs all keep track of naked short selling by the number of Failures to Deliver and the definition of a security that is on the REG SHO list, is that is has been abusively naked shorted.

So a link to the REG SHo list is legitimate as is a link to the number of FTDs as put of by the SEC under the Freedom of Information Act.

4) "Cameron Funkhouser, NASD's senior vice president of market regulations, told the forum that NASD had found no evidence of rampant naked short selling. 

  - Yes, that is an accurate quote, as is the one deleted by Ralph Lambiase, who was disgusted by what he heard. And he is a securities regulator as well. Why include one quote touting the SEC line, but not another from another regulator? Also let;s inlude the recent DTCC release, where they state that they weren't invited to the NASAA Forum, when indeed they were - a flat out lie.

5) " Your National Association Against Naked Short-Selling, only turns up one entry in Google, an article in the Indymedia Milwaukee. Is this a legitimate group? Until I read that acronym here, I'd never heard of it. However, National Coalition Against Naked Short Selling - Failing to Deliver at NCANS.Net is a legitimate group with 357 registered members and TheSanityCheck.Com blogs get about 200,000 hits a day. Just do a Google, enough said.

6)All the FOIA data coming directly from the SEC are numbers than anyone should be able to look at and make up their on minds as to what they mean. removing even raw government data, which had to be pulled out of the SEC via legal means, makes me very suspect.

7)The SEC link provided is to an explanation about REG SHO. Yet an external link to the securities on the REG SHO list was deleted. Also not a word is mentioned in the WIKI entry about what REG SHO is.

8)In light the low level of understanding displayed here by some "guardians", like having stated that naked shorting is an bet AGAINST the fall of a share price (when indeed it's the opposite), or making statements that FTDs are NOT linked to naked short selling (when indeed they are), I can't accept or take serious those people who would like to insert themselves as guardians of this WIKI entry. Perhaps some further discussion would elucidate for those original guardians to the real facts.

I could go on, but that's enough for now. I hope we can make this a respectable WIKI entry, rather than what it is now. Respectfully, tommytoyz


I don't see the point of harping and repeating the first-paragraph error, which was an unintentional one on my part, in which I accidentally said that naked shorting was a bet "against" a share price decline when I meant the opposite. I immediately corrected that. It was not, in fact, noticed by some of the persons from the anti-shorting camp who made substantial other modifications to the page. While I regret that error I did fix it immediately and I frankly don't see why it is mentioned again, since it was fixed.

The other argumentative points raised above don't provide a viable reason to change the page at all, and the sarcasm, dogmatic tone and insults I think support Splash's earlier comments.

The above commenter says critics don't think naked shorting is illegal. However that is a claim repeated time and time again in anti naked shorting literature and websites. If the commenter has alternative language, he should propose it.

Yes, a stock can be shorted without borrowing it if one determines that it is borrowable. However, naked shorting abuses are predicated on selling stocks without borrowing. The definition, while simplified, is correct. Again, if the preceding user has an alternate neutral description, he should suggest one instead of hurling sarcasm and insults.

The depiction of the Reg. SHO list -- "All securities on the REG SHO list have been abusively naked shorted, that is the definition of the list per the SEC" -- is not true.. The SEC says specifically in its FAQ that fails to deliver do not necessarily indicate naked shorting.

If this user or another has a valid change, he shoud bring it here and offer it in a constructive fashion. Since no effort is being expended in that direction, I think the protection of this page should be made permanent. --Mantanmoreland 20:57, 6 February 2006 (UTC)

  • That's definitely not ever going to happen; it simply isn't how Wikipedia operates. We should be open to presenting any information that is supported by sourcing, and should remain open-minded to the possibility (if not the certainty) that the page as it stands is not the best article it could ever be. (ESkog)(Talk) 00:15, 7 February 2006 (UTC)


Mantanmoreland, In your statement of, "The SEC says specifically in its FAQ that fails to deliver do not necessarily indicate naked shorting." you'll need to quote that passage. Because you will not find a quote from the SEc that says that, I'm sure. I have extensively quoted to support my statements where you have not yet, as far as I can see. My quotes from the SEC contradict what you claim. So I and all here really need to see you revealing quote from the SEC.

I'm not here to insult or be dogmatic. I'm just bullet pointing my comments here because I'm pressed for time and doing this between my work, which is busy today.

About dogmatism, I'm NOT asking for Cameron Funkhouser's quote to be removed, I'm merely asking that a quote from another securities regulator, from the same meeting, from the same transcript from which Cameron's quote was lifted from, to be included as well, to add balance. I think that's only fair. So is that dogmatic or the the insistence on Ralph Lamiase's quote be excluded being dogmatic? Ralph Lambiase moderated the Forum and called for it in the first place.

About the legality and mechanism of naked shorting... It's still not correctly described by you nor what is said on the anti naked shorting websites that I frequent. Perhaps another quote to support your claim is in order. But let me clarify what I said about this and what is clearly described on those sites.

Legal naked short selling requires no stock to be borrowed, located or anything. Nor is it necessary for the naked short seller to rely on the belief or availability of legitimate shares either. The SEC is clear on this. That's just how it is right now.

Illegal naked shorting, is just not permitted under any circumstances, so whether or not they have located shares or not will probably vary from one illegal seller to another. Some may deliver just outside 3 days (the legal limit) while other might not deliver for years.

The point is that they WILL fail to deliver in the required time frame of 3 days, otherwise it's not considered a naked short sale, and when that happens after 3 days (T+3), an FTD notice goes out to the seller and an FTR (failure to receive) notice goes out to the buyer.

I need to propose alternative language and I'll do so later, I just have no time right now....more later...no offense meant to anyone here, just want to correct the facts. That's what WIKI is all about, no?


SEC says and I quote.... Regulation SHO is designed, in part, to fulfill several objectives, including (1) establish uniform locate and delivery requirements in order to address problems associated with failures to deliver, including potentially abusive “naked” short selling

Regulation SHO is intended to address the limited situations where fails are a potential problem (for example, fails in securities on a threshold list).

End quotes

No meaningful description or understanding of naked short selling is possible by claiming that naked short selling, legal or illegal (abusive, per SEC), does not produce fails every single time. There is a 1 to 1 correlation. Failing means shares were sold naked, always. Perhaps legally and not abusively, as the SEC defines it, but naked never the less. —The preceding unsigned comment was added by 71.107.8.172 (talk • contribs) 00:07, 7 February 2006 (UTC)

  • You are welcome to propose some different wording and we'll see how best to include it. You might also consider creating an account and waiting the "holding period" so that you can edit this and other semi-protected pages directly. That will also make it easier for us to have conversations with you over this and any other pages. (ESkog)(Talk) 00:12, 7 February 2006 (UTC)

I'm tommytoyz, the author of the unsigned entries above. Sorry about that folks, I'll learn to edit here as I go along, please bear with me in the mean time.

I would also like to add another quote that goes with the thread of mine above. This quote comes directly from the DTCC and they too mention that naked short selling produces fails.

Quote Reg SHO also allows market makers to legally “naked short” shares in the course of their market making responsibilities, and those obviously result in fails. We can’t do anything about them but what we are doing: that is, report all fails of more than 10,000 shares in any issue to the marketplaces and the SEC for their action. End Quote

I will propose new language as unbiased as possible with supporting external links, from unbiased sourced (government data). Thank you, tommytoyz


Tommtoyz -- you can sign your posts by simply clicking the symbol at the top.

Responding to your query re the SEC FAQ, the FAQ says, in the same sentence that you quoted, that "fails to deliver can occur for a variety of legitimate reasons, and flexibility is necessary in order to ensure an orderly market and to facilitate liquidity." It then goes on as you quote it. The SEC does not say anywhere in that or any other document that fails in securities on a threshold list constitute naked shorting, as you previously stated as "the definition of the list per the SEC."

While that is the position of critics of naked shorting, it needs to be stated as just that, a position that is contrsdicted by others, and not as established fact "per the SEC."

ESkog, I'm all for new information coming in. What I hope can be prevented are the "borderline vandalism" by multiple anonymous users of the kind that resulted in this discussion.--Mantanmoreland 00:53, 7 February 2006 (UTC)

  • Agreed. The discussion should hopefully drive the article, not the other way around. (ESkog)(Talk) 00:56, 7 February 2006 (UTC)


Tommytoyz here again. Mantanmoreland, I then regard your previous statement that , "The SEC says specifically in its FAQ that fails to deliver do not necessarily indicate naked shorting." as an opinion of yours as there is no such statement by the SEC.

So let's only consider what the authorities do say, the SEC, NASD and DTCC.

The DTCC says, "Reg SHO also allows market makers to legally “naked short” shares in the course of their market making responsibilities, and those obviously result in fails." End Quote

The DTCC says it is obvious, why then are we arguing here otherwise?

And this is obvious to anyone who knows about naked short selling or has thought it through, it's not opinion. I hope it's equally obvious then, that illegal naked shorting, or abusive naked short selling as the SEC calls it, also produces fails. The share and the math doesn't know if the sale was legal or not. But the math works the same way regardless. IF it was abusive or illegal, it'll produce a fail, obviously, because the share is not delivered, borrowed, or located when "it's" sold and unavailable to the buyer by settlment date (T+3). Whatever you want to call "it", because "it's" nothing, a pretend vapor share that does not in reality exist, but for which real money is forked over by the unknowing buyer to the clearing agent. And selling without first borrowing is the defenition of a naked short sale, no? "Naked shorting is attempting to perform this transaction without first borrowing the stock." Wiki entry on page 1.

The SEC also says, quote, "Regulation SHO is designed to, among other things, address the problem of naked short selling." End quote. And we know that REG SHO is about naked short selling, or about dealing with the abusive practice, at least on paper. We also know that the SEC speaks of settlement failures in abusive naked short selling. The SEC even keeps track of the REG SHO list via settlment failures.

SEC Quote "In a "naked" short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard three-day settlement period. As a result, the seller fails to deliver securities to the buyer when delivery is due (known as a "failure to deliver" or "fail")." End quote

Mantanmorelan, above is the SEC statement you claim does not exist, that links naked short selling and failing to deliver. So the SEC and the DTCC say the same thing and contradict your opinions.

So there is a clear link in the statements by both the DTCC and the SEC between naked short selling and fails, even of legal naked shorting kind. May I again point out that the DTCC even uses the word "obviously". So why are we even belabouring the point?

So please, let's stop contradicting the SEC's and the DTCCS statements and paraphrasing quotes that do not exist.

I'll explain a small loophole that the SEC or DTCC don't explain fully, as it's negligible and not a problem for anyone really, namely that a broker can naked short sell and somehow still find the shares in time to deliver within the 3 days, thus avoiding a fail notice. That I'm sure happens often enough. So not all naked short sales are producing fail notices. However all fail notices are naked short sales.

And nobody really gets worked up about shares sold naked short through that loophole because it's not a problem. The shares sold through the loop hole are not the naked short sales everyone is referring to. It's those naked short sales that DO make it to a fail status and are not delivered, that everyone is referring to.

So it's possible to naked short sell and not fail to deliver. But if you did fail to deliver, you never borrowed, located or had the share when you sold it, which is the very definition of a naked short sale.

There for, all fails, were sold naked short.

Again, even the REG SHO which is a short sale rule, keeps track of abusive naked short selling via the REg SHO list, by how many setlment failures there are .. "Threshold securities are equity securities that have an aggregate fail to deliver position of..." again from the SEC.

So before I go on suggesting edits to the text, we must first agree on the basics that, shares that fail to be delivered were sold naked.

If that passes, then a link to the number of fails from the SEC, to indicate naked short selling activity would also be seen as legitimate and everything that entails.

Can we start by agreeing on that? If not, please do quote to the contrary from government sources, rather than just offering up opinions. I think that this is not too much to ask.

If we can't even agree to this, I afraid I can't get through here. Hopefully we can resolve this impasse. Thank you, tommytoyz--Tommytoyz 05:57, 7 February 2006 (UTC)

What you are saying is that all fails are naked shorts -- "Shares that fail to be delivered were sold naked" -- and that showing up on the threshold list makes it an "abusive short sale." ("keeps track of abusive naked short selling via the REg SHO list").

To put this subject in perspective, I should point out that these fails statistics are used by the anti-naked shorting movement to bolster it's view that there is a massive "stock counterfeiting" conspiracy underway. That needs to be mentioned in any revision of the page, as well as the fact that these allegations have been vigorously denied by regulators.

I am glad we agree that the DTCC is authoritative on this fails subject. I think the best discussion of this whole fails issue is by the DTCC, which says in its Naked short-selling FAQ as follows:

  • There can be any number of reasons for a “fail to deliver,” many of them the result of investor actions. An investor can get a physical certificate to his broker too late for settlement. An investor might not have signed the certificate, or signed in the wrong place. There may have been human error, in that the wrong stock (or CUSIP) was sold, so the delivery can’t be made. Last year, 1.7 million physical certificates were lost, and sometimes that isn’t discovered until after an investor puts in an order to sell the security. There are literally dozens of reasons for a “fail to deliver,” and most of them are legal.

At the NAASA forum already cited, Jim Brigagliano, assistant dir. of market regulation, said at page five that "while their may be cases of abusive short selling and the Commission will pursue those cases vigorously when it has evidence of violations, that 99 percent of trades by dollar volume settle without incident." [emphasis added] At page 17 he said the SEC is looking into why fails happen for such a long period of time. It "may" result in an enforcement issue.

Obviously this further contradicts the view that appearance on the Threshold List is prima facie evidence of abusive shorting.

Cam Funkhouser of the NASD said at the same forum (page twelve) that it has asked the self-regulatory organizations to look at companies that have been on the Threshold List for a time. He also said there was no evidence of rampant naked shorting, as currently noted on the page.

Pleas also note the following from DTCC web page, which states as follows in the FAQ, which is in Q&A format. This relates back to the dramatic allegations made by the anti-shorting organizations:

"Q: Do you think there is illegal naked shorting going on?

"(DTTC Asst. Gen'l Counsel) Thompson: Certainly there have been cases in the past where it has, and those cases have been prosecuted by the SEC and other appropriate enforcement agencies. I suppose there will be cases where someone else will try to break the law in the future. But I also don’t believe that there is the huge, systemic, illegal naked shorting that some have charged is going on. To say that there are trillions of dollars involved in this is ridiculous. The fact is that fails, as a percentage of total trading, hasn’t changed in the last 10 years."

Note also the following in the FAQ:

"dtcc: If the volume in the Stock Borrow program is so small, why are these companies suggesting it is a major issue?

"Thompson: Frankly, we believe that the allegations are attempting to purposely mislead those who are not familiar with this program. A number of small OTCBB and so-called “pink sheet” companies have contended that this practice is driving down the price of their shares and driving them out of business.

"According to their own 10K and 10Q reports financial auditor’s disclosure statements, many of these firms have admitted that “factors raise substantial doubt about the company’s ability to continue as a going concern.” They have had little or no revenue, according to their financial reports, and substantial losses, for periods of seven or eight years. One of these companies has been cited for failing to file financial statements since 2001. Another has been cited by the SEC for press releases that misled investors on expanding business contracts that didn’t exist. They will do anything they can do that takes people’s attention off that kind of record, especially if they can convince a law firm to take the case on a contingency basis, which is what has happened."

I am glad we agree that the DTCC, SEC and NASD are authoritative and I hope you agree with me that the above DTCC quotes are conclusive on this issue. Rather than get bogged down in statistics that are subject to interpretation, I think we should look at how they actually are interpreted by the DTCC, NASD and SEC.

If we are going to put in the naked-shorting lobby's view of the fails statistics, we should not state that as what it is -- a viewpoint, not as unassailable "facts."

We need to point out that critics are using those fails statistics to allege "massive fraud" and "stock counterfeiting." and that those allegations are vigorously denied by the regulators and by critics of the naked shorting movement.

However, to suggest that the fails statistics and/or threshold list are conclusive proof of abusive naked short-selling, and that we have to all fall in line behind that point of view, is totally unhelpful and ignore regulators' consistent statements saying that there is no massive naked shorting problem.

--Mantanmoreland 15:31, 7 February 2006 (UTC)


Mantanmoreland, You cross your wires and mix and match and get off the topic completely now.

For starters, the stock borrow program (SBP) has nothing to do with this. They don't produce fails or naked shorts. Why bring it up? It's just clutter. What's that got to do with anything? There goes 30% of your post right there.

Next, you quote as to weak financials at companies as a reason for their price fall. So? Again, what's that got to do with naked short selling and their resulting fails? Another chunk of your post that has zero to do with the topic of naked short selling. Nothing.

Next, I'll give you the 1.7 Million shares that were legitimately lost last year and perhaps caused a fail, though just for kicks, try selling shares through your broker sometime without first bringing them into your brokers office. That pails in comparison to over 1 Billion a day fails through the OTC/NYSE/NASDAQ last year. 1.7 Million lost? so what. AN there were probably a few for the other reasons cited, but the quotes you cite quote no data. Just " it's not a big problem, bla, bla.."

Also you keep selectively citing from the NASAA forum while ignoring that there are other regulators with quotes that contradict those you cite. I don't. The take away from the NASAA forum should be, at a minimum, that there is controversy even among the securities regulators. That is why I wanted both quotes from both sides, from respectable sources, all securities regulators, to be in the WIKI entry, but you dogmatically want to only let one side stand, why? Who is being dogmatic here?

Let there be light and transparency on the issue. The problem has long been that many want to bury the facts.

This includes the SEC, NASD and DTCC, who have steadfastly denied there is a problem but refused the release of data, that's why the Freedom of information act was invoked.

But even in their explanations and writings they make the clear case, that's its OBVIOUS that naked short selling will produce fails. Again stated here, "Reg SHO also allows market makers to legally “naked short” shares in the course of their market making responsibilities, and those obviously result in fails." Why do you not believe this?

Yes there is a small subset of fails that have not been naked short sold, like those you mentioned, but even a few million a year is peanuts compared to over 1 Billion a day of fails, as reported by the SEC and DTCC. Used as a pretext that "aha, not ALL fails are naked short sales, see..." is silly. Yes it's technically true. But that subset is so minor it can be ignored.

And "only" 1% of shares, per dollar volume that fail per day seems dismissive. That's $6 Billion USD per day by the way, quoted from the DTCC as well. What's the cumulative number? That 1% per day adds up over the days and years, don't you think? And concentrated mostly on the 200-300 companies that are on the REG SHO compared to the 2,800 on the NYSE and the 3,300 on the NASDAQ is really bad news for investors of those REG SHO listed companies with abusive naked shorting, don't you think? Especially looking at them and seeing that they are small to mid sized companies.

The Freedom of Information Act release of January 30, where it shows that 78% of OSTK shares failed to be delivered is indicative that the 1% or $6 Billion in daily fails are distributed more heavily on these shares listed on the REG SHO list. http://www.nasdaqtrader.com/aspx/regsho.aspx http://www.nyse.com/Frameset.html?displayPage=/threshold/

And your argument tangent about legal and illegal naked shorting does not address or argue against the fact the naked shorting in fact does produce fails. It doesn't matter if it was legal or not. The topic of legal or illegal naked short selling is another topic. But in any case, they both produce fails.

"Reg SHO also allows market makers to legally “naked short” shares in the course of their market making responsibilities, and those obviously result in fails." Why do you not believe this?

So can we stay on topic and agree that naked short selling (legal or illegal) produce fails? It's not just your opinion here that counts either Mantanmoreland. I'd like to hear others in what they think and start editing this WIKI entry. --Tommytoyz 19:54, 7 February 2006 (UTC)


  • I'm having difficulty following your reasoning in this, and with all due respect I think you are making the subject murkier and more complicated than it is. I don't have infinite time and patience to debate the same points over and over again. I think the Naked short-selling FAQ , from an organization you acknowledge as authoritative, should be read at the source by persons wishing to learn about this subject prior to weighing in.--Mantanmoreland 20:08, 7 February 2006 (UTC)

Mantanmoreland, Now your showing your dogmatic colors here by the link you posted above. It's not a naked short selling FAQ, as you mis-labeled it, it's a FAQ about the Stock Borrow Program. What place does that have here in this discussion? Please answer that question since it's the second time you allude to the Stok Borrow Program without any explanation and completely off topic.

Or is this your pattern? Create confussion? But even the link above of yours is from the DTCC.

So please answer at least one question from a DTCC quote and we can all move on, "Reg SHO also allows market makers to legally “naked short” shares in the course of their market making responsibilities, and those obviously result in fails." Why do you not believe this and keep disputing what the DTCC clearly says? Please answer this question, I've asked it repeatedly already, so please answer. It's fundamental here. Thank you.--Tommytoyz 21:07, 7 February 2006 (UTC)

  • No, again you are incorrect. It is not a "FAQ about the Stock Borrow Program." The title of the FAQ is "Naked Short Selling and the Stock Borrow Program." The rest of your post is self-answering as it is essentially one long ad hominem.--Mantanmoreland 22:07, 7 February 2006 (UTC)
  • Mantanmoreland,

Your linked FAQ discusses if the Stock Borrow Program causes fails. That is off topic here and not in the WIKI entry anyway, one way or the other, so again, why bring it up? We're trying to see common ground on the relationship between naked short selling and fails and you insert the Stock Borrow Program without any explanation what so ever, as if it was relevant to the discussion. It does NOT address in any way, if naked shorting cause fails.

So I think it would be immensely helpful if you were to state here, once and for all, if you agree with the DTCC statement or not that says naked short selling causes fails. Here it is again, "Reg SHO also allows market makers to legally “naked short” shares in the course of their market making responsibilities, and those obviously result in fails." Agree or disagree Mantanmoreland. --Tommytoyz 00:45, 8 February 2006 (UTC)

  • And again we need to also include in the description of naked short selling, legal or illegal, makes no difference, that it produces fails or unsettled trades, as stated by the DTCC. --Tommytoyz 18:54, 8 February 2006 (UTC)

--Mantanmoreland 14:57, 9 February 2006 (UTC)== One Man's Opinion ==

Tommytoyz, you asked for further input from others, so here are my two-cents worth. I, for one, find the article as posted to be fair and unbiased. I see no reason to make wholesale changes to it. In my opinion, the changes you have posted and are suggesting are extremely biased. It seems obvious to me that your interpretation of the issue is clouded by your belief that there is a major problem and you, therefore, are unwilling to entertain that there could possibly be a definition of Naked Short Selling that doesn't agree with your beliefs. I understand your concern, but can't agree with you that there is only one way to account for the FTD's. My vote is to leave the definition as is and move on to other important issues.

The only change I have posted is to add the quote from other securities regulators. That's the only one I've posted. That's extremely biased? --Tommytoyz 20:58, 7 February 2006 (UTC)

I agree with the first person above, unsigned. This discussion has now deteriorated into name-calling and I for one am at the tail end of my patience with the kind of tactics employed here. I agree with the person who posted above that the current version is fine and I would add that all we are getting here, from both sides, are arguments for continued protection of the page.--Mantanmoreland 22:12, 7 February 2006 (UTC)

  • Mantanmoreland,

Your impatience is not a good reason for WIKI entry protection. The factual discussion will go on, with or without you. I have provided many quotes and links in my arguments and have not strayed from the logical progression in this discussion.

Naked shorting causes settlement failures or failures to deliver - Fails The first thing that must either be accepted or rejected once and for all and for cause, is if naked short selling causes fails or not. At this time, the assumption in the WIKI entry is that they do not cause fails.

I contend that this is an error and makes the WIKI entry inaccurate. I offer up the DTCC quote that concurs with this. "Reg SHO also allows market makers to legally “naked short” shares in the course of their market making responsibilities, and those obviously result in fails." So this should be the final authority on this issue and I should be allowed to insert that into the WIKI entry.

Mantanmoreland, you refuse to answer why you think the DTCC is wrong, just flat out refuse, so I'll take it that you can't support your position that contradicts that of the DTCC.

This has nothing to do with Ad Hominem logic. I support my views from government sources.--Tommytoyz 00:35, 8 February 2006 (UTC)

  • No, you haven't strayed. You've said the same thing over and over again. Please stop.--Mantanmoreland 03:50, 8 February 2006 (UTC)

This discussion isn't really getting anywhere. Surely we can come up with some sort of a compromise other than "my version or no version". Demanding permanent protection is simply not an option here. (ESkog)(Talk) 03:51, 8 February 2006 (UTC)

  • The current page is a compromise. --Mantanmoreland 04:00, 8 February 2006 (UTC)
    • But it appears - at least to my untrained eye - that more information is being presented here, with sources just as credible as we have listed in the article now. We asked others to discuss major changes here first, and they're doing that. That doesn't mean we instantly rule out all major changes and stick to this version no matter what. (ESkog)(Talk) 04:03, 8 February 2006 (UTC)


  • ESkog,

I'm becoming more familiar with WIKI policy and will create an off line alternative/temp page on naked short selling, with as neutal a tone as possible, with undisputable sources linked to what is being described. When it's ready in a few days, I'll create it and we can debate further. --Tommytoyz 08:34, 8 February 2006 (UTC)


I think we are getting lost again in the distinction between illegal, manipulative naked short-selling and simple naked short-selling. The distinction is minor, as no one claims there is a pandemic of legal naked short-selling, but without the data we simply cannot know. Those who have the data love to throw up the "some naked short selling and resultant failures to deliver are legal" argument. Those of us who want to uncover and stop the illegal activity resent this evasive tactic.

I think it would help if we agreed to make the subject of this article (not the title) illegal, manipulative naked short-selling. We could then deal with the fact that legal naked short-selling exists in unknown numbers, and move on with the discussion of the illegal variety. That is all anyone cares about. The legal version is irrelevant. --Errudite (sic) 14:07, 8 February 2006 (UTC)

It certainly is irrelevant, and it is indeed a minor distinction in the view of both sides of the issue, so therefore there is no reason to change the title. Eskog, no changes, major or minor, were proposed in any coherent way. I assume the "new information" you're referring to is the raw SEC statistics that are evidence of "massive fraud" to some and "meaningless" to others. --Mantanmoreland 14:57, 8 February 2006 (UTC)

Mantan, I specifically said "make the subject of this article (not the title) illegal, manipulative naked short-selling" (emphasis added), meaning I am not suggesting a title change. My suggestion is to focus on the illegal activity rather than getting caught up in debates over the legal kind of naked short-selling.--Errudite (sic) 16:29, 8 February 2006 (UTC)

OK, I see your point. Actually most of the sources I posted above relate directly to that. --Mantanmoreland 16:42, 8 February 2006 (UTC)


  • And we need to add that naked short selling, legal or illegal, produces settlment failures or fails, as stated by the DTCC. --Tommytoyz 18:59, 8 February 2006 (UTC)

For the umpteenth time: so what? Lots of things that aren't naked shorts produce fails. Let's move on from that silly red herring.--Mantanmoreland 21:22, 8 February 2006 (UTC)

To try to amicably resolve the issue, I added a couple of paragraphs to the page to address the "fails to deliver" issue, putting it in context and adding the link to the FOIA numbers cited by Tommytoyz, as well as the views of the DTCC and SEC as recited in the DTCC FAQ and a recent SEC legal brief. I also changed the first paragraph to address the "legal vs. illegal" issue. While I don't think it is necessary, it certainly does no harm. I also quoted some additional material from the DTCC FAQ and added it to the links. I think this resolves the "fails" and "legal vs. illegal" issues in a neutral fashion. --Mantanmoreland 14:57, 9 February 2006 (UTC)

I'm pleased to see that we have moved to minor edits of the page, and hopefully the "editing war" is over. Bob O'Brien, who is director of the anti-naked shorting association NAANS, inserted some good points reflecting his organization's position. However, these were essentially positions of his organization represented as facts, so I added responses from the SEC in order to restore neutral POV. --Mantanmoreland 19:43, 10 February 2006 (UTC)

One of Mr. O'Brien's changes made a correct statement (the Cameron Funkhouser quote) incorrect. Please do not make a change until you have verified it with the source material to ensure that it is factually accurate. --Mantanmoreland 20:30, 10 February 2006 (UTC)

I added a Level 2 headline, "Regulators Respond," just to break up the text, as I thought "The Effects" section ran on too long. Also I made a minor change re the Berlin exchange. Funkhouser's remarks concerned just that exchange. --Mantanmoreland 20:46, 10 February 2006 (UTC)


Mantanmoreland, The phrase, "Critics say that one indication of large naked short positions are large numbers of "fails to deliver." is not accurate for 2 reasons.

So the sentence should read something like , "...since naked short selling produce failures in the delivery of shares....

Your argument above of, "For the umpteenth time: so what? Lots of things that aren't naked shorts produce fails." is strange. We are not talking about those "lots of things" that can produce fails. We are talking only about naked short sales that do produce fails.

In reading the WIKI entry again, I also really see a bias to only select quotes that deny any major problem exist, when in fact there are quotes from securities regulators, journalists and Professors that have studied naked short selling that offer a different opinion. Why would these not be allowed in? Why only one side?

The list of bias goes on,

  • "The allegations have also been criticized by journalists and market commentators." (Many Journalists and commentators have the opposite view, why not mention that as well, or just delete the one sided entry?)
  • "On the "fails" issue, the DTCC, the SRO responsible for handling the trades, says that "fails" can occur" (No, the DTCC says they DO occur, not can occur)
  • "The SEC concurs, observing in a recent legal brief that fails to deliver do not result in any disadvantage to customers and do not necessarily result from naked short-selling." (The brief is mostly about the Stock Borrow Program and the CNS system, reciting federal rules and claiming that federal rules preempts state law. How about the legal brief that claims to the contrary, since you're quoting legal briefs.)
  • "Critics including the Depository Trust & Clearing Corporation, whose stock loan program is at the center of the naked short-selling controversy.."(The stock borrow program is not center of the controversy, it's the fact that the SEC doesn't enforce delivery rules already on the books, qupted in the legal brief, and force buy-ins to force delivery, that is front and center)
  • Your refusal to allow quotes and links to evidence by the SIA, discussing and admitting that over votes are a common occurence, despite what the SEC rules are and what the SEC says.
  • Your refusal to allow quotes from the NASAA forum, except those that you selected, depite the fact that there are other quptes there from regulators that say the exact opposite.
  • Your refusal to link to NCANS.NET and instead state that an organization by the name of NAANSS, which dies not exist, as far as I know, is the main ant-naked short selling organization is also baffling. OSTK CEO and many others support NCANS and you did cite the OSTK CEO Patrick Byrne, did you not?

It's not what the federal rules and laws are, nor what the SEC says. It's fine quoting them. The Anti Naked Short Selling crowd is incensed about is the lack of enforcemet of the rules and the pardoning of past abuses via the "Grandfathering" provisions of REG SHO. So to balance the blind rule quotations, we need to provide eveidence and information of what really happens in the real world with the evidence to back it up, despite all the laws and rules.

When I have time, I will prepare a tem/naked short selling entry and we can consolodate. Right noe this WIKI article is just way biased--Tommytoyz 01:33, 11 February 2006 (UTC)

  • Mister, you've made me out into some short-selling ogre. I'm just a student with a paper to do so your single-minded focus on me is amusing. This page was frozen by a Wikipedia administrator, not me, and because of vandalism (his word) by people representing your point of view. Your argument is not with me, it's with the SEC and NASD and the other regulators. What you keep trying to bury under all your verbiage is they don't think this naked shorting stuff is a major problem. They have made that perfectly clear. Since they feel that way, I personally think this whole thing could be tucked away in the short selling entry with brevity. Also you should channel your rage into a study of Wikipedia policy requiring a neutral POV. A neutral POV means that you give one side and then the other side. It does not mean that you give one side and then one side. There has to be "another side." You want only one side presented, and your continual ranting and raving and attacks aren't going to make that happen because that is not what Wikipedia is all about. --Mantanmoreland 02:30, 11 February 2006 (UTC)


I think the article fairly reflects both sides of this issue, and just needs a little sprucing up. I changed "pervasity" to "pervasiveness," for example, as that is the correct word I think. --Tomstoner 18:04, 11 February 2006 (UTC)


Mantanmoreland, All I am doing is pointing out the inaccuracies of some ofyour statements, which when challenged, you don't care to answer for, so be it. Rather than either admitting you’re wrong or proving you’re right. It was my impression that you were responsible for freezing and editing this entry, as you've made changes. If that's not the case, I was mistaken. My bad.

This discussion page is to discuss the editing of this WIKI entry. So if you're posting here and making erroneous statements, I have a right to challenge the veracity to try and improve the accuracy of this WIKI entry. If you're going to be posting here your should discuss what you state, that's what this page if for.

The quotes from the DTCC that conflict with your statements, you do not answer to. To this day you haven’t answered why you ignore it and continuously state the opposite. Either you can quote the DTCC and securities regulators, or you can’t. Thus far you selectively do so paint an erroneous picture.

So I'm not single mindedly focused on you, I'm just trying to stop the falsehoods from spreading which you so cavalierly contribute to and fail to answer to and discuss. the truth is my single minded focus. Not you. If you don’t want to discuss the issue point for point, why do you continue posting here with your POV and ignore the evidence provided?

THere are many people who care deeply about this issue, so if you don't and care more to be proven right about your firmly held POV, rather than care for the accuracy of this WIKI entry and discussing the points here, where it's supposed to be discussed, then why are you obsess with continuously posting here, I wonder?

Again, this is the discussion page. So I suggest you stop avoiding the discussion if you’re posting on this page and answer, for once, the questions put before you. Otherwise I think you're contributions can pretty much be ignored. --tom 19:31, 11 February 2006 (UTC)


Sorry for being harsh and probably violating WIKI policy. Let's put it all to rest and discuss the issues. Have a nice weekend--tom 19:52, 11 February 2006 (UTC)


There are certain posters here that refuse to discus the points raised but insist on their POV anyway, post after post. Now they want to delete an article that is not even Wikifies yet, without even giving one single factual reason for it, oter to state that ot's a POV. Why so? Facts only please. --tom 23:35, 13 February 2006 (UTC)

POV Forking Underway

An effort is underway to make an end run around this discussion and the effort to achieve a neutral POV treatment of naked shorting, by creating an article entitled Failure to Deliver Stock. This article has not yet been Wikified, but can be located, via external link, here. One of the principal authors of this article is User:Bobobrien, who is Bob O'Brien, head of the coalition against naked short selling (NCANS).

This article combs out one aspect of the naked shorting controversy and builds an entire article around it. The majority of this article is a discussion of naked short-selling from the point of view of the anti-shorting camp. It is a textbook case of POV Forking, if ever there was one. --Mantanmoreland 22:09, 11 February 2006 (UTC)

The approach to a POV fork is a)try edit it down, with a combination of merge, redirect and removal; b)take it to AfD and conduct a nomination for deletion on the relevant grounds; if good evident of POV forking can be presented, AfD is often sympathetic. -Splashtalk 22:59, 11 February 2006 (UTC)

Thanks, Splash. Deletion would seem to be the only practical option. As you can see, this is just a duplicate anti-naked-shorting page, with "FTD" substituted for "naked short-selling." However, I am unsure of the mechanics as this article has not yet been Wikified. There does not appear to be way to internally link. --Mantanmoreland 23:31, 11 February 2006 (UTC)


There are certain posters here that refuse to discus the points raised but insist on their POV anyway - post after post. Now they want to delete an article that is not even Wikified yet, without even giving one single factual reason for it, other than to state that it's a POV. Why so? Facts only please. --tom 23:35, 13 February 2006 (UTC)

  • Edit this main article, and if you are making a change that is rather extensive and/or controversial, try to discuss it here first (or, at very least, be ready to discuss it after the fact). It is against our guidelines to create a new article on the same topic to avoid discussing fair presentation and POV issues. I agree that the page may not currently be as neutral as it could be, but you need to work with the existing product rather than ignore the discussion and create something new. (ESkog)(Talk) 23:49, 13 February 2006 (UTC)


ESkog, Thanks for your input. I will start editing this page. The new page on Failing to deliver shares is another topic from naked short selling.

The one thing I do agree with Mantanmoreland on, is that naked short selling is not the same as failing to deliver, though the two are related by the fact that some naked short selling causes FTDs.

It's like having an article on an Orchestra and also another one on the different instruments contained within the orchestra.

One is not an end run around the other.

If there is a factual error in the new article, I'd be happy to hear it.--71.106.236.198 01:06, 14 February 2006 (UTC)

No, that's not my view at all. The two articles looked at the same subject from two perspectives. That's a POV fork, by definition.

I think that the last user should probably propose his changes here to avoid another editing war.--Mantanmoreland 01:49, 14 February 2006 (UTC)

Also, and you have been warned on this and you continue to do so, please stop personalizing discussions and please stop making this into a "you said this now you are saying that" Usenet-style debate. First, as indicated repeatedly, directing remarks toward users is against Wikipedia policy. Secondly, you are mischaracterizing my earlier remarks completely.

What happened was that you made this remark, ". . .614,000 shares traded and of those about 550,000 where naked shorted and failed to deliver. This is beyond dispute." I pointed out that naked shorting and failure to deliver are two separate things. You have now seized this remark as an excuse for your POV fork. The fact that they are two separate things does not mean that you can now comb out "failure to deliver" to attack this same subject from your POV. --Mantanmoreland 14:38, 14 February 2006 (UTC)


It's interesting, it's now admitted that naked short selling and FTDs are two seperate things, but only one WIKI article is allowed? I guess only in WIKI.--tom 10:43, 15 February 2006 (UTC)

Yes, two separate things. As I have said many times, fails to deliver are a technical securities processing issue of no importance to the public whatseover except as an aspect of the naked-short selling controversy.

They need to be discussed, and put in context, as part of the naked-shorting controversy. Were it not for the naked-shorting controversy, only a few technocrats would have any interest in fails. However, consistent with your approach in the Failure to Deliver Securities article, the two phrases are used interchangeably in anti-shorting literature.

Except for discussions of naked shorting, the only other place you ever see FTDs discussed are in books about the securities clearing process, along with dozens of other technical terms of no interest to the public. For example, I have in front of me a book called "After the Trade is Made: Processing Securities Transactions," by David M. Weiss, published by the New York Institute of Finance. There is a grand total of one extremely uncontroversial reference to FTDs in that entire book.

That book covers about 1000 securities processing subjects of greater significance than FTDs, all also of no interest outside of the securities industry.

So the answer to your question is no, you can't bypass the discussion to build consensus here by creating a separate article on this same issue and call it by another name. That is a POV fork. --Mantanmoreland 14:21, 15 February 2006 (UTC)

Mantanmoreland, Is it possible, that the combined knowledge of WIKI contributors is far greater than a single author of a book on the same topic? I think that's the power of WIKI.

Also when was the book published? The naked short selling controversy has recently grown with the creation of REG SHO last year and the Freedom of Information Act releases, last year and the one last month. More are coming.

A lot of the data was simply not available to anyone outside the DTCC or SEC.

I'm OK with deleting the article I put up, so long as the knowledge and support documents contained there are merged over, in essence, over to this article. It's all based on fact with supporting documents from authoritative sources from the DTCC, SEC, SIA, SEC Legal Brief, etc...

I don't know for a fact and neither does anyone, but I think many people would be interested to know about the effects of naked short selling.

One of those is the creation of FTDs. So what's an FTD and what happens to them? They create "Securities Entitlements", which the SEC says has the same rights as a real share, etc...I'm not making this up and people should know the legal reasoning the SEC is using in permitting naked short selling.

I haven't had much time in the last few days, but I'll start editing this page soon, all documented and maintaining a neutral POV. --tom 19:54, 15 February 2006 (UTC)


Resuming the Consensus Discussion Proposed

I frankly think that there is already ample discussion of the "fails to deliver" that are not related to short-selling.

Every other use of the term "fails to deliver" is just a euphemism for naked short-selling.

I'm sorry, but we've had an editing war, vandalism, personal attacks and now a POV fork to circumvent the discussion here. Also, and more fundamentally, we failed to come to a consensus because you went off and did your page.

The discussion just stopped, and before I knew it there was this massive duplicate page being created off somewhere, projecting the anti-shorting point of view, with naked shorting now called "Fails to Deliver". I don't believe the normal assumption of good faith editing applies in this kind of situation, given what has happened here.

Moving en masse chunks of the rambling polemic that was created as Failure to Deliver Shares will do nothing more than to turn this page into a rambling polemic. It will just load up this page with a lot of confusing verbiage and statistics that we already discussed.

Therefore, I think that we should resume the discussion that was halted earlier when the POV fork was created. All significant changes proposed edits need to be posted here first and discussed. Otherwise we are just going to have a resumption of the earlier problems. --Mantanmoreland 21:46, 15 February 2006 (UTC)


I've made a few edits to clean up the "EFFECTS" sections to merely reflect effects and update the links. Some links didn't work so I deleted them. The "pets" example I couldn't find evidence nor did the link work so I removed it.

also removed the link to the Freedom of Information act release on OSTK fails data, as it's not clear what tat data even means. Since it's not clear and the SEC won't clarify, it shouldn't be used, so I removed it.--tom 01:37, 17 February 2006 (UTC)

  • For what it's worth, I think your edits look reasonable at first glance. (ESkog)(Talk) 01:41, 17 February 2006 (UTC)

Yes, but some important points were removed -- Martha Stewart as a supposed victim of naked shorting -- and some of these changes fail to adequately state the position of opponents of the naked shorting campaign. For example, there is the bald statement that the SEC says fails result in "entitlements." Rather than use technical jargon like that without explanation, it would be better to explain that the SEC says that investors are not disadvantaged in any way. I've made some changes to restore neutral POV to the page and remove duplication (repetitive in two sections). Also, I agree about removing the link to the FOI data -- actually it was left in at the bottom of the first section, and I removed. --Mantanmoreland 15:03, 17 February 2006 (UTC)

Please restore to earlier version, as factually incorrect information keeps getting inserted.

  • The SEC never said investors are not diadvantaged, please quote where they say that before entering such statements
  • The SEC does say naked short selling creates securities entitlements, there's no need to omit information or dumb things down
  • Patrick Byrne never said that most naked short selling is done by a Sith Lord, just that there is one involved in OSTK's manipulation, an important distinction

I am also reverting to a more clear english composition style with more --tom 18:08, 17 February 2006 (UTC)paragraphs, rather than the run-in style

Matter of fact, important distinctions keep getting changed as well all over my edits. I deliberately edit in "abusive" naked short selling that is illegal, not just naked short selling. Please don't remove that as there is a difference between the two. It's factual and even the SEC makes that distinction. If these changes that keep occurring a repair becomes more difficult and a rewrite easier. --tom 18:18, 17 February 2006 (UTC)

I have also noticed that there is continuous confusion inserted as to who is actually "critic" of this or that. On several passages the critic is actually a proponent or supporter, this error too, seems to kreep in again and again. --tom 18:43, 17 February 2006 (UTC)

On your last point, it was necessary to clarify that not all critics of the anti-shorting campaign are necessarily "advocates of naked short selling." That is not necessarily true. It is simply not correct to say that there are "supporters and opponents of naked shorting." It is more accurate to say that there is a campaign against naked short-selling and criticism of that campaign. Not all the critics of that campaign advocate naked short-selling.

To say that there are only two forms of naked short-selling -- "legal" and "abusive" is perjorative and is contrary to neutral POV. I think that the current wording is neutral.

I retained references to "abusive" where it is fair. It is not fair to say that, for example, "some say abusive naked short-selling is a positive market force" or such as that is not one-sided.

You're right about Byrne -- I have fixed that reference.

Re the SEC and fails, the SEC FAQ says that "The lending and delivery of shares through the SBP. . . does not relieve the member that has failed to deliver from its obligation to deliver securities."

In the brief cited it says that when there is a fail, the broker must "treat the person for whom the account is maintained as entitled to exercise the rights that comprise the security." I'll add the cites to the brief and the FAQ if they are not there already.

So according to the SEC, the customer in a fails to deliver still gets the shares and doesn't lose any rights. It also says that the number of shares outstanding is not changed by this process. Thus it is perfectly good encyclopedic usage to summarize the above jargon by saying that the public is not disadvantaged in any way.

As for "entitlements" -- using this jargon without explanation, as was in the earlier version, is misleading. --Mantanmoreland 18:52, 17 February 2006 (UTC)

The whole controversy about abusive naked shorting revolves around the "counterfeit" issue. It's THE central issue and root cause of the problem, according to the critics. And the SEC feels it had to answer that barrage of complaints in a legal brief, saying that naked shorting creates "securities entitlements" and not counterfeit shares. So we should explain this and not omit this important definition by the SEC. It's central to the entire issue so people understand why abusive naked short selling is so controversial. Otherwise a big chunk of understanding is just missing.

If we are going to even mention the word "counterfeit shares" and what critics of this are saying - and we have to, as it's central to the controversy, we also have to state the other side of the coin as to what the SEC says. By that I mena excatly what they say, not just taking encyclopedic liberties.--tom 19:10, 17 February 2006 (UTC)

"Some opponents of the naked shorting campaign say that naked short selling functions as a mechanism for correcting abuses in the marketplace,..." This is what I'm talking about, it's the supporters, not the opponents........please be careful what is ascribed to whom. I've seen it in various places.--tom 19:19, 17 February 2006 (UTC)

No, it was correct as it was. The "campaign" refers to the anti-shorting campaign. There is no other "campaign." The first paragraph was also correct as it was. The lawsuits filed by companies have been entirely unsuccessful to date. I left in the reference to SEC suit and clarified that.

You have an unsubstantiated "SEC quote" that I cut, as well as the all the standard polemics on "fails to deliver" that have been debunked by the every single objective regulator. This is definitely a work in progress as it still reads like an anti-naked shorting flyer.

You also kept substituting the vague term "many" which should read "critics of the anti-naked shorting campaign" or words to that effect. --Mantanmoreland 21:14, 18 February 2006 (UTC)

Naked Short Selling Targeted

Seems like the seriousness of this subject is more universally accepted than some here believe.

See: www.nypost.com/business/61958.htm

February 16, 2006 -- Two state securities regulators have issued subpoenas to get at the trading records of Wall Street's largest firms in a quest to stamp out the controversial practice of naked short-selling, sources said.

Might want to read the whole article for enlightenment. river 19:48, 16 February 2006 (UTC)

There are a lot of articles worth reading on the subject. I don't think that the purpose of the Talk discussion page is to post articles, but rather to discuss the Wikipedia entry. Also please direct your remarks to the issue and not the editor. --Mantanmoreland 16:28, 17 February 2006 (UTC)

Insertion of the New York Post story was disruptive and I am going to ask that it not reoccur. This is not a Usenet bulletin board or discussiong group. --Mantanmoreland 21:37, 17 February 2006 (UTC)

Minority Opinion Given Excessive Deference

I wanted to address the points raised previously, re the recent edits, before discussing the issue raised in the head above.

First we need to accurately characterize the controversy. The article had previously inaccurately described it as people who were "pro" and "con" naked shorting.

That is not correct. This is a controversy between a handful of critics of naked shorting and their critics. The bulk of the critics of the campaign are not people who "like" naked shorting but rather are persons, mainly objective regulatory officials, who oppose naked shorting but say that the problem has been exaggerated and has been used as a scapegoat.

As for the SEC's position on "stock counterfeiting" -- they just don't talk about "entitlements" and whatever and leave it at that. As I have pointed out several times, they are quite plain in saying that stock counterfeiting does not exist. They say so in plain language-- that naked shorting does NOT inflate the number of shares outstanding. Period. I have said this several times, to no effect, and yet we still get editing that attempts to obscure that central point.

There is no need to use jargon when someone (or entity) has said something plainly. To do so is not fair to that person and obscures what that person (or entity) plainly said. Let's be clear on this and not foam it up with mud.

The position of the regulators on naked short-selling can be summed up as follows:

  • Stock counterfeiting, the central thesis of the anti-shorting campaign, does not happen.
  • Fails to deliver do not disadvantage investors.
  • The whole issues has been exaggerated.

The word used by Cam Funkhouser of the NASD, in referring to one aspect of the controversy, is "hysteria." See transcript of NASSA panel, November 2005.

More fundamentally, I think this issue has been handled more than fairly so far. In fact, I think this page has been skewed far too much as it is in favor of the anti-naked-shorting coalition.

Wikipedia: Neutral Point of View states as follows:

  • Articles that compare views need not give minority views as much or as detailed a description as more popular views, and may not include tiny-minority views at all (by example, the article on the Earth only very briefly refers to the Flat Earth theory, a view of a distinct minority).

In this instance, we are giving equal weight to the regulatory agencies responsible for policing naked shorting and a small handful of pressure groups. I think that our doing so, in and of itself, gives this article a bias in favor of the anti-naked-shorting forces. We are in effect saying that "there are two equal and opposite points of view: the SEC and NASD etc. on the one hand and the coalitions against naked short-selling on the other hand." I think that is a mistake.

I think that, given the above, the current compromise article is overly biased favor of the anti-naked shorting position as it is, and that if anything the attention devoted to that POV should be reduced.

I also think that we should not bog down this article with a lot of verbiage and technical detail, particularly in characterizing regulatory viewpoints when regulatory agencies have spoken out plainly on the subject. --Mantanmoreland 21:37, 17 February 2006 (UTC)

This article needs to be fact based

  • You can have what ever opinion you want, the introduction of facts that are verifiable should not be denied here, not matter what you think. For instance, the repeated deletion of SEC references and direct and exact quotes by regulators should not be constantly deleted. I ask that it not happen again.
  • Anyone can add factual data here, but to delete the contributions and information that others provide that are fact based and correct, should not be deleted. For instance allowing one quote from the NASAA and deleting all other is not acceptable to maintain a neutral POV, it does the opposite. For these reasons, I ask that this stop.
  • No assumptions should be made. This article needs to be fact based. Just because one person, government entity, company, politician, executive, etc.. says something, doesn't make it a fact. It's just a statement. The data is there for everyone to make up their own minds, especially on a controversial subject like this one.

--tom 22:27, 17 February 2006 (UTC)

The article is "fact based," but this is an encyclopedia and it cannot be written in a way that is just a hodge-podge of confusing facts in which every point of view is given equal weight. If you have any specific changes or additions you would like to make, please make them specific and focused on specific entries in the article. --Mantanmoreland 01:16, 18 February 2006 (UTC)

  • This article is still a work in process. I would generally err on the side of including information rather than ensuring a really tight organization for the whole thing. However, I do share your concern that one "side" of this situation should not be given a huge amount of weight. We obviously can't parrot every single source that says anything about the subject, so we have to be selective to some degree. (ESkog)(Talk) 01:30, 18 February 2006 (UTC)

The article already has more than ample exposition on the anti-naked-shorting position and the response. What more are we going to add? What important aspect of this controversy has been neglected?

The fact is the central allegation of the anti-shorting pressure groups, the "stock counterfeiting" charge, is vigorously denied by every regulatory agency responsible for policing this issue. We have chapter and verse cited here, and frankly I just don't think it is ever going to be enough for anti-naked shorting advocates.

Yes, objective regulatory agencies do have greater weight than pressure groups with allegations of "massive counterfeiting conspiracies."

I'm not saying the article is perfect, but let's get some specifics as to what should be added. Let's discuss it here before making changes, please. Tommytoyz is not the only person who feels the article is imperfect. I happen to feel that the article can be trimmed considerably, but I am not making any cuts out of the spirit of compromise. Remember, this article already is a compromise. --Mantanmoreland 02:02, 18 February 2006 (UTC)

Well, I see we are still going round and round. The article has improved, imo, but some edits appear to be rather biased toward the government's point of view. By the way, while the anti-naked-short-selling "movement" is small, it is not a small proportion of those familiar with the practice.

This one's a gem (by Matanmoreland):

"As for the SEC's position on "stock counterfeiting" -- they just don't talk about "entitlements" and whatever and leave it at that. As I have pointed out several times, they are quite plain in saying that stock counterfeiting does not exist. They say so in plain language-- that naked shorting does NOT inflate the number of shares outstanding. Period."

Let me get this straight: the SEC says naked shorting does not increase shares outstanding.

You cite that as proof that naked short selling (NSS) does not result in counterfeit shares.

Seems logical, huh?

Try this: the Federal Reserve says currency counterfeiting does not increase money supply.

Now, I have no idea whether counterfeit currency is estimated in M1, M2, etc., but I do know this: if I print a fake 20 and pass it at 7-11, the Fed doesn't know unless they are hiding under the counter. If I pass a thousand fake 100 dollar bills at the Luxor tomorrow, the Fed doesn't know. To say "outstanding shares are unchanged, thus stock counterfeiting does not occur" is equivalent to saying "money supply is unchanged, thus currency counterfeiting does not occur." As if the outstanding shares / money supply people get daily production reports from the counterfeiters.

The SEC's statement about naked shorting not increasing shares outstanding is completely useless, off-point, and misleading. Anti-naked-short-selling activists don't say NSS increases shares outstanding. They claim a naked short seller takes cash from a buyer without first locating and borrowing the shares sold. In other words, the shares sold are OUTSIDE THE SHARES OUTSTANDING. What did you think, they call up the board of directors and ask them to issue more shares so they can sell them short? "Sure pal, we'll just bump up the shares outstanding! Thanks for calling! Have a nice day!"

More and more, I think this topic is over the heads of even the relatively clever participants of Wikipedia, and it should be removed altogether. Even the most inane remark by an evasive regulator counts as fact, while comments by deeply knowledgeable observers are dismissed. Amateur market observers assume authority over topics they will probably never understand, quashing the opinions of those with far more knowledge of the subject matter, earned through years of experience and significant financial losses and gains.

I haven't checked, but I bet the Wikipedia entry for "Curious George" is pretty good. I am not sure this model works for "Naked Short Selling" and other complex, controversial subjects that demand specialized knowledge earned through decades of experience, along with a healthy dose of informed skepticism. If any yahoo with a posting history can erase the input of a seasoned specialist, mediocrity -- or outright BS -- will ensue. --Errudite (sic) 02:34, 18 February 2006 (UTC)

  • Well, that's both the beauty and the danger of the Wiki model. Our audience, though, is not generally those with decades of experience in the subject, but people looking for a first bit of information on a particular subject. It certainly isn't going to be "removed altogether" anytime soon - the best thing we can do is work on making it better, and deal with those times when we disagree on "better" over here. (ESkog)(Talk) 04:30, 18 February 2006 (UTC)


I have corrected some factual errors, one of them that no lawsuits have ever been succseeful. That's not true. Even the SEC has filed suit against brokers and levied penalties against brokers and barred some for life for naked short selling. Some Civil suits have been successfui in extracting DATA from the DTCC, that are still pending. The list the DTCC puts out on it's eb site is not complete and no SEC enforcement action against NASD members are seen there either.--tom 20:13, 18 February 2006 (UTC)

Reply

Errudite, please direct your comments to the issue and not the editor. This pattern of personal attacks is one of the problems that has beset this page, along with the editing war, vandalism, and still unresolved POV fork.

The SEC and regulatory agencies didn't just issue an edict concerning naked-short selling and airily dismiss the allegations of the anti-naked shorting groups out of hand. They've spent massive amounts of time and resources investigating it and exploring the issue and come up with the conclusions that I have quoted.

The scenario that you describe has been rejected by the SEC, not summarily but in detail, most recently in the legal brief cited in the article. The SEC has no motive whatsoever to conspire to conceal a massive effort to dilute shareholder equity.

Regulators have not been "evasive." They've made forthright comments stating that "stock counterfeiting" does not exist. What possible motive could they have to totally ignore a "massive stock counterfeiting conspiracy," to use the language of the anti-naked shorting coalition?

The NASD, for example, is not ignoring naked shorting nor being "inane" and "evasive." Quite the opposite. They sent a team of investigators over to the Berlin exchange, after what Cam Funkhouser described as "hysteria" over Berlin used as a venue for naked shorting, and found not one instance of it taking place there. Shall we give the naked shorting theorists equal time with the NASD on this issue too? I would say, no. Should we edit it out and ignore it? Again, no, because it demonstrates how many of the central accusations of the naked shorting pressure groups have been investigated and debunked.

What we've basically done in this article is to give equal weight to a wild conspiracy theory and the objective regulatory agencies that have debunked it. The article should not be removed but it should be handled in the appropriate manner, with the minority anti-shorting "stock counterfeiting" position not given the same prominence as the views of regulatory agencies that are objective and that have investigated this matter thoroughly and have issued clear statements of position.

Right now, the bulk of the article consists of lengthy allegations by the anti-naked shorting coalitions, with reaction by regulators and other critics. Personally I think the article takes the whole anti-shorting movement far more seriously than it deserves, given the definitive way its allegations have been rebuffed by objective investigators. I do not believe that it serves readers to give these minority allegations such prominence. --Mantanmoreland 14:50, 18 February 2006 (UTC)

Mantan, please advise which of my words constituted a "personal attack" so that I may avoid attacking someone again. That is not my intent. TIA --Errudite (sic) 23:43, 18 February 2006 (UTC)

Just for the sake of discussion, I have been involved in requesting information,among other things, from your highly regarded regulators. I can tell you from first hand experience, they are not forthcoming. Everything is privileged information. Do you think the Freedom Of Information Act was used as a first option to get at data?

Also the Berlin exchange was never used a means to conduct naked short selling, it was a means to get around the "locate" rule. So listing on the Berlin exchange gives brokers the excuse to say, "hey. we bought them on the Berlin exchange and the shares are in transit..." No trading needs take place there. It's just the creation of a viable excuse to say you have located shares. So Cameron Funkhouse is correct in saying there was no problem on the Berlin Exchange in trading of shares. But that's not what the exchange was used for or why the shares were listed there. It was simply to create an excuse as to why you didn't deliver, without getting afoul of the required "locate" requirement. --71.106.226.32 20:50, 18 February 2006 (UTC)

Your argument is with the regulators who say your entire movement is based on misconceptions of the securities trading process. --Mantanmoreland 21:18, 18 February 2006 (UTC)

Good point Mantan. Maybe that's the whole problem: we don't understand the trading process... the one the regulators created. In fact, maybe we just don't understand trading.

Fellow editors, regarding whether this article should give minimal or substantive space to the anti-naked-short-selling "movement", let me offer the following perspective:

After all the fancy words, impressive acronyms, and binders full of regulations, an equity trade is still just... well, a trade. And trading is supposed to be simple.

Say you have a 1974 Bob Gibson baseball card, and I have $200. I happen to like Bob Gibson (relief pitcher for the St. Louis Cardinals with a blistering fast ball, but I digress), and you think $200 is a fair price, so I inspect the goods, accept it, give you the money, and it's a done deal. It works because it follows a few simple tenets:

1. Supply is finite, otherwise goods would have little to no value;
 2. Price is simply a function of supply and demand;
3. Seller owns the goods or has secured the rights to sell them;
4. Buyer receives the goods; and
5. Seller receives funds.

That's how a trade works, no? Surely, we all agree on this much? If equity trades don't follow these basic tenets, at least most of 'em, every single time, something just might be wrong, no? Guess what... in naked short sales, they don't. Well, mostly...

In a naked short sale:

1. Supply is not finite. The seller need not first locate a share to sell it; instead, the buyer gets a "securities entitlement", and the Stock Borrow Program serves to conceal the deficit, apparently indefinitely in some cases. Buy-ins just don't happen; don't know why. Demand is satisfied without reduction of supply -- in fact a sale can occur regardless of availability of supply.

2. Price cannot be simply a function supply and demand, as supply of securities entitlements is not finite; a sale can occur despite the absence of supply of actual shares.

3. Seller neither owns nor has borrowed the goods by definition, thus demand is satisfied with no corresponding effect on supply of shares.

4. Buyer receives "securities entitlements" rather than goods. That sounds fine, cuz the Uniform Commercial Code says I get the rights of the shares. But wait... how many "securities entitlements" are outstanding? Is there a "securities entitlement" (SE) public float? Should we start computing earnings per SE rather than earnings per share? Come to think, we should probably look at EPSSSE (earnings per "sum of shares and securities entitlements). How about dividends and distributions per SSSE? I'm guessing you're getting the point by now. Securities entitlements are not in finite supply, and the entire body of securities regulations revolves around shares issued, not "securities entitlements" or any other concocted, temporary instrument. What do you call it when I introduce a bunch of instruments, not actually shares, and allow them to function as shares for the purpose of sales? What if I did that with Bob Gibson baseball cards? "Securities entitlements" or "counterfeit shares"? Choose your euphemism.

5. Seller receives funds... now that part works pretty good. Huh. Imagine that.

Four of the five most fundamental characteristics of a "trade" are violated when a naked short sale occurs, regardless of the reason for the resulting failure to deliver. The one that works? The seller gets the buyer's money. All the others fail.

And from the regulators responsible for maintaining a fair trading system, and presumably culpable in the event the trading system is found to be unfair? "Keep it moving... nothing to see here."

No wonder some people think there may be something fishy going on.

Or maybe I just don't understand what a "trade" is.

Disclaimer: the preceding is offered for the purpose of discussion and reflection to all participants. My comments are not directed toward any individual, but rather to the Wikipedia editor membership in general. Anything resembling a personal attack is unintentional, and will be promptly withdrawn upon request. --Errudite (sic) 14:50, 19 February 2006 (UTC)

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