Talk:Naked short selling/Archive 7

Revising lead
Can you explain the reversion, Janeyryan? My initial questions are: If I read the "synth" objection correctly, possibly the lead should be more careful to note that the regulations create requirements for short selling generally rather than focusing just on the "naked short sales." In any case, these are mainly what I was attempting to correct. Mackan79 (talk) 17:10, 16 September 2008 (UTC)
 * 1) Whether we shouldn't clarify that we're talking about U.S. regulations (or if we know this is solely a term used in the U.S.)
 * 2) Why we are starting with a presumption that it would be illegal,
 * 3) Which part of the reverted version was unsupported by the source,
 * 4) Whether it makes sense to begin with a pro-argument before we've given much if any explanation of what this is or how it works, and
 * 5) If the standard for illegality is whether it drives down share prices (if "drive" means "is used to drive" then it would be illegal, but I don't believe that is a standard for naked short selling).


 * I went to the source that you cited and I did not see any explicit statement in support of your wording. Going back to the original version, I saw that in 'Key Points' there was explicit and clear language. Perhaps the preexisting language could be improved, but for now it seems to better reflect the underlying sources.--Janeyryan (talk) 19:07, 16 September 2008 (UTC)
 * Ok, I tried again, attempting to address this. I'm guessing the disagreement has to do with the word "prohibits," which I suppose isn't necessary.  If I was synthesizing, is was based on the "locate" requirement discussed in the Key Points document, which would seem to mean then that the sale isn't "naked."  The exceptions then are as I understand for "Market Makers," or where there is some unforeseen event that prevents delivery (I didn't read through all the exceptions in detail).  In any case I do think one problem with the article has been hyper-focus on declaring this "legal" or "illegal," so I'm glad to avoid it, if that was the issue. Mackan79 (talk) 06:49, 17 September 2008 (UTC)
 * I've fiddled with it a bit. Going back to 'Key Points,' I noticed that the SEC uses 'broker dealer' and 'seller' interchangably. So I substituted 'broker dealer' at one point for seller. When I sell shares, certainly I as an investor am not asked to deliver them; this is a requirement of the firms executing the trade. I also added back in the sentence on the legality. I see now your point that it did not need to be quite so very very high in the article, but it is still a useful fact that should be retained I think.--Janeyryan (talk) 12:22, 17 September 2008 (UTC)
 * Thanks for responding. As a quick point about the "not necessarily illegal" paragraph, the problem I was getting at is that, yes, intentionally driving down the price of a stock is illegal (as market manipulation), but that's not a rule just about naked short selling.   The rules that address naked shorting are primarily to my knowledge the "locate" and "close out" requirements in Reg SHO, and other requirements that apply specifically to shorting.  This is why the statement that it's not necessarily illegal, but is when it drives down prices, is problematic without some clarification (also because it would still have to be intentional for the general rules on market manipulation to kick in, which the statement we had isn't clear about). Mackan79 (talk) 17:09, 17 September 2008 (UTC)


 * I should explain why I removed the section. The extent that naked short selling actually occurs is greatly disputed, and the legality is quite nuanced as Mackan79 says. This should be covered in the article and perhaps in the lead summary style, but that lead would not boldly make propositions about a practice with almost totally disputed prevalence, and an arcane regulatory scheme.
 * At the same time, it's probably worth noting that legal naked short selling exists because it helps with liquidity. Cool Hand Luke 23:48, 17 September 2008 (UTC)
 * I think that the last paragraph in the present lead is not very good at all. Too abstract, and too much crammed into one sentence.  Just my 2 cents. Huldra (talk) 01:29, 18 September 2008 (UTC)
 * That was me, apologies. To clarify my meaning, some of the main disagreements appear to be over 1. whether the regulations are enforced or not and how widespread it is, and 2. whether it is primarily beneficial by contributing to market liquidity, or primarily a vehicle for abuse.  I was finding it difficult to spell this out but would welcome any attempt to build on this. Mackan79 (talk) 07:11, 18 September 2008 (UTC)

As far as the first paragraph, one point I think would be great to include is what happens next, after the fail to deliver. The various scenarios I'm aware of include, 1.) the transaction is undone and a fee is assessed, 2.) the transaction is eventually completed when shares become available, or 3.) the transaction sits open indefinitely. But I still don't feel that I've seen this adequately explained.  If anyone can clarify this point, I think it would be one way to solidify the basic explanation of what is a naked short sale, how they work, and what happens when you sell shares in this way. Mackan79 (talk) 07:33, 18 September 2008 (UTC)

"Other legislation" section
Considering the recent thrust of national regulation, it seems strange we have a whole subheading dedicated to a repealed bill in Utah that was probably unenforceable anyway. It seems like a dated jab at Overstock.com. I propose this section be removed; or perhaps moved to Overstock.com. Any thoughts? Cool Hand Luke 14:13, 17 September 2008 (UTC)
 * Agree, remove it, or mv it to Overstock.com, keep possibly half a sentence here, saying something like "Attempts were made in 2006 in Utah at the behest(?) of Overstock.com to introduce legislation to curb naked short-selling."  Regards, Huldra (talk) 00:09, 18 September 2008 (UTC)   (PS: I don´t think the word is "behest"..but my English isn´t good enough to find the correct word)
 * One might accurately say, "...at the urging of Overstock.com..." PatrickByrne (talk) 00:41, 18 September 2008 (UTC)
 * Ok, I just removed most of it. It was really totally out of proportion. Huldra (talk) 00:56, 18 September 2008 (UTC)

Text about North American Securities Administrators Association
I've removed this text from the "litigation" section because it seemed misplaced there. It doesn't seem obviously related to any litigation mentioned (or to the 2007 Senate commentary, which immediately preceded it). The Whistler case (with the nsas amicus brief linked) isn't discussed, and the letter cited in the footnote is about Regulation SHO. I'm not sure what to make of this:


 * The North American Securities Administrators Association, representing state stock regulators, filed a brief saying that if the claims were correct, its shareholders "have been the victims of fraud and manipulation at the hands of the very entities that should be serving their interest."

Cool Hand Luke 03:17, 18 September 2008 (UTC)


 * Thanks for taking this on, Luke. I tried to get some interest for the subject, I wasn´t very successful...I left a note earlier over at WikiProject Investment (trying to bribe them with barnstars!) ..but I didn´t get any takers. It looks as if this article is still suffering from leprosy. Anyway, logging out now, good luck, Huldra (talk) 03:54, 18 September 2008 (UTC)


 * I think I'm going to work on this topic for a while. I remembered today how much I criticized ArbCom for their slowness, inefficiency, and so forth. But they asked the community to work on these articles&mdash;it was one of their remedies, and it's a good idea. So I'm here. Cool Hand Luke 04:06, 18 September 2008 (UTC)

OK, that's enough
Banned by the SEC. I really think we need to drop the whole media section and do a thorough rewrite. Its reached the point that even if we dont rewrite the section, we need to remove the current contents. (Anyone else feeling vaguely guilty about WP's role in all this?) -- Relata refero (disp.) 04:48, 18 September 2008 (UTC)


 * Wow. I had not heard about that. Yes, I agree. Cool Hand Luke 04:53, 18 September 2008 (UTC)
 * I took a shot at adding this to the lead. Mackan79 (talk) 08:23, 18 September 2008 (UTC)

I have reinstated the media section, which was removed peremptorily and without discussion or obtaining a consensus.

Notable views of expert journalists do not become less notable because of the passage of time. They do not become 'outdated,' as was used in an edit summary, because of the late SEC action. I think Wikipedia readers are entitled to this information. If other articles need to be added, then they should be added. Removing the articles mentioned wholesale, as has been done, strikes me as a significant violation of WP:NPOV.

The rewritten paragraph also is not accurate. It cites the Jenkins and Norris articles, both of which are against action against NSS, by saying that they 'support the regulator.' They did not. This created a false dichotomy. Indeed, although I reinstated the original language, the word 'mixed' is unsuppported by the underlying citations. If media reaction has been 'mixed,' then the commentaries that say otherwise whould be added.--Janeyryan (talk) 11:14, 18 September 2008 (UTC)


 * That's the thing. Much of this material was never notable to begin with. Even if it was representative of coverage in 2005-2006 (unlikely as it was drafted by a COI editor), the tone of the coverage has changed, and it's become a high-profile issue.
 * Incidentally, there was quite a bit of discussion, and four editors agreed that the section should be trimmed if not rebooted. Cool Hand Luke 14:29, 18 September 2008 (UTC)


 * Please feel free to add back in the articles that you feel were excluded unjustly by some 'COI editor.' If there are no such articles that you can locate, please don't take out the articles you don't like. Your not liking articles, or four editors (including the CEO of a company suing alleged naked shorters) cannot unilaterally override WP:NPOV and remove sourced commentary from The New York Times, Wall Street Journal and other notable commentators. The participation of that CEO, very openly in this page urging the slanting of this article to fit his commerical interests, is the only 'COI' of which I am aware, and it is amusingly blatant and open. An article not adhering to your point of view, does not make them 'never notable to begin with.' The passage of an SEC regulation does not necessitate wiping out of notable opinions expressed prior to the issuance of that order. You say the 'tone of the coverage has changed.' Very well, please add in the commentaries devoted to this subject from notable publications that express opposing opinions. I searched and could not find them but I did find these, and added them.--Janeyryan (talk) 14:55, 18 September 2008 (UTC)


 * I don't want more opposing opinions. Just coverage that accurately reflects the state of the art. These articles give a skewed portrait, and most should be cut. Cool Hand Luke 15:19, 18 September 2008 (UTC)


 * No, you don't want to, you just want to remove opinions with which you disagree, Please provide evidence for your statement that they are 'skewed.' I've asked for this several times, and you have yet to substantiate your statement.--Janeyryan (talk) 15:56, 18 September 2008 (UTC)


 * This is the second time you've accused me of pushing my POV. Pray tell, what is my POV? I excised a section above that looked like it was written by naked short selling plaintiff's attorneys. I'm no pusher, and my long record on Wikipedia reflects it.
 * Sections should be removed if they're undue weight. Cool Hand Luke 02:46, 19 September 2008 (UTC)
 * I have to agree here with Cool Hand, they are undue and also really out of date. It's undue since we special out the media, and not academics or policy makers or business leaders. Any articles used there and are useful should be put in other sections. --Patrick (talk) 02:53, 19 September 2008 (UTC)

OK, I'm cutting it again. Consider that this has the approval of five editors now (six assuming Mackan79). Cool Hand Luke 05:10, 19 September 2008 (UTC)

New "reactions" section
This section pushes a POV. It's hard to say the reactions were anything but mixed, considering that the ABA, Financial Services Roundtable and the U.S. Chamber of Commerce all urged the SEC to extend the temporary order to cover more firms. Hillary Clinton seems to have criticized the SEC for ever lifting the restriction. These are not insignificant groups, and these are notable POVs, but apparently they have no weight against a couple of op-eds. Even if one imagines that op-ed writers are the only opinions that matter, it's easy to find editorials siding with them.

Who are you, Janeyryan? Cool Hand Luke 15:19, 18 September 2008 (UTC)


 * Please assume good faith and please address the content, not the contributor. I've tried to do the same with you, despite the lack of reciprocity, and even though you recused yourself from a related article for reasons that seemed a bit murky to me. I'm glad you found an op-ed that, albeit in passing, approved of the SEC action. I will add it to the article since you chose not to do so. As for the other groups you mention, I think you need to produce reliable sources such as you did with the Los Angeles Times editorial, and add them to the rticle. As I read WP:NPOV, it requires that these sources and articles be mentioned. Again, if there are other sources that need to be added, please list them. Thank you.--Janeyryan (talk) 15:45, 18 September 2008 (UTC)


 * Also, please be accurate in characterizing the article and the editing of the article. This is not a 'new' reactions section, but the old 'media reactions' section that you gutted. which I reinstated and updated. The business lobbying groups that you mention are not media organizations and their positions, if contained in reliable sources, belong elsewhere in the article. Media reaction was, at best, mixed. As I said earlier, that is not really precise, as media reaction appears to be predominently skeptical to claims of NSS and predominently hostile to the SEC emergency action.--Janeyryan (talk) 16:10, 18 September 2008 (UTC)


 * I'd like to make a few points:


 * 1) Someone has started to sign his contributions, "Patrick". Just so there be no mistake, that is not I. I sign mine "PatrickByrne".
 * 2) Janeyryan writes, "as media reaction appears to be predominently skeptical to claims of NSS and predominently hostile to the SEC emergency action." That is insane. A quick Google search will reveal hundreds of recent stories that are anything but "predominatly skeptical to claims of NSS and predominatly hostile to the SEC emergency action." For example, here is a Time Magazine article that appeared last week.
 * 3) I don't mean to be schoolmarmish, but the construction of the "Media Coverage" section is not only poor, but it remains poor in precisely the same way the previous version was poor. The rest of the article (for the matter, most of the rest of Wikipedia) manages to be written in direct, clear English. Why must this section, which should be simple to write, so opaque? The logical way to construct it is (being charitable to the NSS-deniers), to say: There is controversy, here is what one side says, here is what the other side says. Instead we find:
 * "Reporting by major media outlets has been mixed. While concern expressed by the regulator has been echoed by journalists, some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings. Others have discussed naked short selling as a confusing or bizarre form of trading."


 * Once again, the NSS-critics get short thrift ("While concern expressed by the regulator has been echoed by journalists"). NSS-deriders get a more extensive statement ("some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings"). And then there is "Others have discussed naked short selling as a confusing or bizarre form of trading", which is simply inexplicable.


 * Then rather than have one paragraph of NSS-denials, and one of NSS-criticisms, they are morphed into one paragraph which highlights the denials and makes the criticisms unclear:
 * "Reviewing the SEC's July 2008 emergency order, Barron's said in an editorial: 'Rather than fixing any of the real problems with the agency and its mission, Cox and his fellow commissioners waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there's no dead bug.' Jenkins of the Wall Street Journal said the order was 'an exercise in symbolic confidence-building' and that naked shorting involved technical concerns except for subscribers to a 'devil theory'. The Economist said the SEC had 'picked the wrong target', mentioning a study by a Swiss academician who found that trading in the 19 financial stocks became less efficient.' The Washington Post expressed approval of the SEC's decision to address a 'frenetic shadow world of postponed promises, borrowed time, obscured paperwork and nail-biting price-watching, usually compressed into a few high-tension days swirling around the decline of a company.' The Los Angeles Times called the practice of naked short selling 'hard to defend,' and stated that it was past time the SEC became active in addressing market manipulation."


 * Again, the NSS-criticism expresses none of the substance of the criticisms, and comes buried at the end of a more extensive statement of the position of the deniers. Why not have one paragraph that begins, "Some have argued that NSS is not a significant problem in US markets. For example...." And then have another paragraph that begins, "Others have argued that NSS is a significant problem in US market. For example... " PatrickByrne (talk) 13:02, 1 October 2008 (UTC)

Close-out requirement
Does anyone know how Reg SHO affected the "T+3 delivery" requirement from the 1934 act, or how those interact in regard to the "close out" requirement? I would say that Reg SHO further limited the delivery requirement, but I'm not sure if that is exactly right. Mackan79 (talk) 22:08, 18 September 2008 (UTC)
 * I have not seen any coverage that goes into that level of detail. By the way, I take strong issue with the manner in which you have pared down the aforementioned media section, retaining a non notable chap named 'Keiser' from Al Jazeera while deleting notable sources. No rime or reason to it, and will be reinstated. Paring down the section is one thing, but do not omit notable sources without justification.--Janeyryan (talk) 22:14, 18 September 2008 (UTC)
 * I don't know what goes into that level of detail, but I'm sure it would be said somewhere, whether Reg SHO created the close out requirement or only adjusted it. I think you mistake the notability policies, though.  Nowhere does WP:Notability state that any source of a basic level of notability must be included in any part of any article where it may be relevant.  See WP:Undue, in terms of balancing the detail given to each view.  Currently, this section begins by stating generally that some commentators see criticism of NSS as exaggerated.  It then discusses various such views at the New York Times.  To then start a third paragraph adding another individual who has "derided" the allegations is just poor writing, fails NPOV, and doesn't serve the article.  It's also unclear to me that Weiss' views merit inclusion in this article, considering his views are already well-represented by better known sources. Mackan79 (talk) 01:23, 19 September 2008 (UTC)
 * I don't see any duplication at all in that section, least of all the Business Week article by Weiss. That referred to aspects of this issue not mentioned elsewhere. The Weiss reference is problematic because, unless you look at the footnote, it is not clear that this article appeared in Business Week. It needs to be mentioned that this is a Busiweek commentary, for the contrary imnpression is given.
 * Generally speaking, in order to fail NPOV and UNDUE, the views in this section would have to be unrepresentative. For the umpteenth time, let's see evidence of that. If that is the gist of the media reaction, then that is that. UNDUE does not require false balance, particularly when there is nothing much to balance out. Indeed, removing viewpoints in an effort to achieve a false 'balance' would violate NPOV as I read it.--Janeyryan (talk) 02:35, 19 September 2008 (UTC)
 * The problem is we have a section which begins by saying coverage has been mixed, then outlines the two views, and then provides a long list of people expressing one view point. If coverage is overwhelmingly that NSS is no big deal, then we should simply say that, end of story.  If coverage is mixed, then we should cover each side comparably.  It appears you're saying the answer is to provide much more detail about the pro-regulation side, but others including myself aren't agreeing; this is simply over-kill on the anti-regulation side regardless, exemplified by the third paragraph you replaced which begins as one more writer who has "ridiculed" criticism of NSS.
 * The issue with the Weiss material is partly this, and partly relates to PatrickFlaherty's point above that this whole section is somewhat suspect. If media attention is important, it's important for the general assessments, not for their detailed explanations of naked short selling, which should as Patrick points out be included in the relevant sections of this article.  Additionally, to cover Weiss is problematic both because of the controversies on Wikipedia, and because Weiss is controversial on this issue. Considering these points and the pile-on problem we have already is why I removed the portion relating to him. Mackan79 (talk) 05:14, 19 September 2008 (UTC)
 * This is well said. The Jenkins article is already cited, incidentally, sans rhetoric. Cool Hand Luke 05:35, 19 September 2008 (UTC)
 * I have left a warning on Janeyryan´s page.
 * Also: In the assessment from last year (see: Assessment explanation) of this article, it was especially mentioned that "some parts are just collections of quotes". (It also mentioned "over-long and over-detailed discussion of the controversy, with too much focus on specific cases" and "it misses any discussion of the economics of short selling"). That assessment has, AFAIK, never really been followed-up. Regards, Huldra (talk) 06:19, 19 September 2008 (UTC)

One study
I read through this paper as a foray into the academic views. Basic points I gleaned: Has anyone linked other papers available on line? Maybe it would help to get them out here. Mackan79 (talk) 06:47, 19 September 2008 (UTC)
 * Argues that naked shorting is economically similar to regular shorting and probably beneficial to the market.
 * Argues that the primary difference is to reorganize the parties, turning the buyer into a lender instead of having a third party lender.
 * Says the practice is most common when lending fees are high, and argues that the inversion of the parties increases efficiency by allowing non-owners to provide additional competition with owner-lenders in the lending market.
 * Analogizes sale of unowned shares to a bank providing depositors with a "claim" to the amount deposited, rather than literally holding custody of that physical currency on a depositor's behalf.
 * Lists the three requirements for a broker/dealer to accept a short sale from Reg SHO as 1. having borrowed or arranged to borrow, or 2. reasonably believes it can borrow, and in either case 3. has documented compliance with one of these.
 * Provides counter-argument that NSS can create additional volatility in stock prices.
 * Explains the DTCC clearing process in some detail.


 * Hmm, yes it's published academically. I'm a little wary of the source because CompassLexecon should probably be treated like a think tank in this context. Basically, they're law and economics theorists best known for providing expert testimony, typically in defense of corporate clients. They would tend to have the reverse perspective as plaintiffs' attorneys (such as the ones suing for Overstock.com or Taser). But with the institution of the author disclosed, it's a fine source.
 * Most sources seem agree that naked short selling happens most commonly when borrowing costs are high. That is, naked short selling is often beneficial for liquidity.
 * The SHO requirements have been changed considerably. Cool Hand Luke 07:11, 19 September 2008 (UTC)


 * Interesting, and I think that's fine; I expected even the academic sources will tend to come at this with a point of view. I'm just curious what we have. Some of the material could probably be helpful in either case. Mackan79 (talk) 07:24, 19 September 2008 (UTC)

Well, I went looking for the studies that RelataR menioned (see earlier on this page). In addition to the one that Mackan mentions (Culp and Heaton), I found:
 * Boni, Leslie (Anderson SoM): Strategic delivery failures in U.S. equity markets, JFinMar 9:1 "We argue that long-lived (“persistent”) fails are more likely the result of strategic fails rather than inadvertent delivery errors or delays. "  "...when stocks are expensive to borrow...strategic fails (i.e., naked short sales)" ......."It is the first paper to our knowledge that documents the pervasiveness of delivery failures (i.e., naked short sales) for the entire cross-section of U.S. equities".........See also: http://sec.gov/rules/final/34-50103.htm 2004


 * Angel, Christophe and Ferri (Georgetown and GMU): A Short look at Bear Raids   ..this should rather be added to the Uptick rule, me thinks.

Regards, Huldra (talk) 07:15, 19 September 2008 (UTC)
 * Knepper, Zach (Berkeley): Future-Priced Convertible Securities & The Outlook For “Death-Spiral” Securities-Fraud Litigation .......... "this paper will argue at some length that naked short selling should be declared to be market manipulation if (more likely, when) this issue arises in a death spiral action".....

Thanks guys. A review of Leslie Boni (2004): Of course, this leaves out many of the complexities, and tries to stick to points that may be useful here. Mackan79 (talk) 08:34, 19 September 2008 (UTC)
 * Discusses "strategic delivery failures," credits introduction of concept in equity markets to Evans, Geczy, Musto, and Reed (2003).
 * Clarifies that "fail to deliver" is assigned after 3 days.
 * Finds increase FTD's where borrowing costs are high, along with where shares are illiquid and where options are listed.
 * Argues that long-lived or persistent fails are more likely intentional.
 * Notes NYSE and NASDAQ requirements for delivery pre Reg SHO.
 * Quotes Knight Trading Group as saying that market makers may take "months" to cover short positions in illiquid stocks.
 * Predicts that Reg SHO will reduce liquidity particularly in stocks that are expensive to borrow.

Angel and Ferri is indeed more about the uptick rule (and a draft paper), but a couple of relevant points: --Mackan79 (talk) 19:26, 20 September 2008 (UTC)
 * Regarding naked shorts, states that the seller “might expect to cover the shares later in the day, borrow the shares later, or else rely upon the leniency of the settlement system for failures to deliver.”
 * States that in a “few extreme cases," reluctance from brokerage firms to force buy ins “has led to short positions outstanding far greater than the number of shares issued.”

And here is Knepper: Reading through these has definitely been informative. I'll try to incorporate some of it as I have time. Mackan79 (talk) 06:30, 21 September 2008 (UTC)
 * Argues that it is unclear whether courts would find NSS to be market manipulation, but that they should, primarily arguing that it is manipulative to sell short in violation of the exchange rules because this “inject[s] false information into the market place.”
 * Notes that the lender’s incentive generally is the cash transferred by the borrower, usually 100% of the share price, giving the lender “free money.”
 * States that shares are borrowed only when the trade settles, "which can be up to five business days after execution."
 * Repeats that an FTD is still a valid trade, and only means that no payment will be made until the seller’s broker “acquires the securities, delivers them to the purchaser, and settles the trade.”
 * States that the NYSE rules mandate that all brokers locate stock before executing.
 * States that although naked short selling “implicitly violates a selling broker’s locate-and-delivery obligations” under the NYSE rules, NSS is not per se illegal, because sometimes shares are not available even when it is reasonably believed they will be.
 * Cites sources both arguing that NSS is per se illegal under the 1934 Act and arguing that it is not.
 * States that brokers who arrange a short sale do not target specific shares, but rely on lists that identify the availability of shares to borrow.
 * States that “there is ordinarily no limit on how long the short may remain unsettled,” and accordingly that “naked shorts may linger and accumulate at the securities clearing agencies.”

Mackan - You ask, "Has anyone linked other papers available on line? Maybe it would help to get them out here." As it happens, the paper you cite above (Culp and Heaton) appeared in Regulation Magazine, opposite a paper that presented a very different point of view about Naked Short Selling. (Full disclosure: the other Regulation paper was written by an LSE-trained economist, John Welborn, who is a former student of mine, and who has been my colleague in the fight to expose NSS.) In order to present the debate fairly, Regulation decided to publish both papers, back-to-back. While I applaud the decisions of you and other editors to move to serious sources (and away from the echo-chamber of New York financial journalism), glossing just one of those two Regulation Magazine papers creates, literally, a one-sided case. Regulation thought it most intellectually honest to present both sides of the debate - I respectfully suggest that in the interest of helping Wikipedia do the same, you should read the Welborn paper. It was, after all, published in the same issue of Regulation, back-to-back with the paper you cite. PatrickByrne (talk) 12:26, 1 October 2008 (UTC)


 * I think that's a good idea, but please keep in mind that it needs to be made palatable to a general readership. Much has happened on this subject in recent weeks so as to change the entire character of the subject matter.--Stetsonharry (talk) 21:42, 1 October 2008 (UTC)


 * Right, but if anything the events of the last few weeks have have shifted the center of gravity away from the academics who argued that this is a non-issue, and towards those argued that it was: after all the SEC created more emergency orders and bans in mid-September. This makes quoting the Culp and Heaton work, and not Welborn's, even more untenable. Why side just with an article that says something does not exist, when the federal government now takes extraordinary steps to stop it? PatrickByrne (talk) 04:25, 2 October 2008 (UTC)
 * Thanks Patrick, I wasn't aware of the dual publication. As I said earlier I'm also not great at predicting when I'll edit here, so all the better if anyone else wants to look through it to see what might be added.  Even the fact that they published it in this way could be interesting if it were included as context.  Mackan79 (talk) 08:15, 2 October 2008 (UTC)

Tone of discussion on this page
As a Wikipedian who has followed this article and the related Arbitration Committee case for some time, I have periodically reviewed the progress made on the article and the discussions on this page. Wearing my administrator hat, I am becoming concerned that the level of discourse is getting unduly person-oriented rather than content-oriented in recent days.

I can see that there is also a rather serious content discussion going on here. I encourage all editors to stay focused on the content issues and hammer things out, and to remember that consensus doesn't mean "everyone agrees". Given the rapidly changing situation with respect to NSS in the United States, perhaps the regular editors of this article might want to consider adding a "current events"-type template to the top of the article. At this point, much of the content is rather moot, given the emergency provisions that have come into effect. There is something to be said on the side of skeletonizing the article and starting again from scratch, with the focus on current information, and a section on historical perspectives (even though that history is very recent).

I'll continue to keep an eye. Risker (talk) 07:02, 19 September 2008 (UTC)
 * I think that at this point it is so obviously skewed you'd probably be better off junking it and starting again. I don't know if that answer counts as an "intense rant" per Janeyryan. Incidentally, I assume everyone here knows who that is (again), right? PatrickByrne (talk) 05:03, 22 September 2008 (UTC)

Proposal to skeletonize this article
There is something to be said on the side of skeletonizing the article and starting again from scratch, with the focus on current information, and a section on historical perspectives (even though that history is very recent). [Separated out from my comments immediately above.] Risker (talk) 13:20, 19 September 2008 (UTC)


 * Indeed. For the 18th, it's like 75% as much traffic as the article on Obama. I agree with skeletonizing. Cool Hand Luke 07:21, 19 September 2008 (UTC)


 * I agree about the tone, but I would like to see some even-handedness is that regard. This page, for example, should not be used for lengthy essays by the CEO of a company involved in litigaiton with naked shorters. Participation by that CEO is one thing, abuse of the talk pages for intense rants on the general subject is another.
 * I don't quite see the point of skeletonizing, unless there is something terribly wrong with the article as it is. It is certainly dated, but this is a subject and controversy that has been extant for some time.--Janeyryan (talk) 12:46, 19 September 2008 (UTC)
 * The point is that it is out of date and much of what is here is, for lack of a better term, of historical interest only. The US regulations have changed, essentially forbidding naked short selling, but one would hardly know that by this page. It is poorly focused - why exactly is there a huge section on "normal shorts" when that is not the subject here? - and presents much information suggesting that it remains an acceptable practice. To be blunt, it is a poor source of general or specific information for our readers, the people we are supposed to be informing. My opinion and suggestion to skeletonize and "reboot" the article is based on the quality of the article itself. I doubt any of us would find someone with real-world knowledge of this subject who would think this article in its current state is of much use to an average reader, and many who would think it misleading. That was the opinion I was given back in the spring by financial market professionals of my acquaintance, and the article isn't much better now than it was then. Several experienced WP editors who work in the financial markets in RL and with whom I have communicated, also agree that this article is of poor quality, but feel they have a real or potential COI in editing it. I can skeletonize it for people to start over, but otherwise I do not intend to edit this article.
 * As to what Janeyryan refers to as "intense rants", Byrne's posts are focused on the content of the article and do not serve to impugn the character of any of the participating editors. Some of his suggestions have been incorporated, and many others have not, which is typical for a consensually edited article. Unlike everyone else on this page, he is not permitted to edit the article directly so he has far less control over what is included than just about any other Wikipedia editor. As long as he (and other editors) stays more or less on topic, this is the proper place for him to discuss the content of the article and propose edits to it. Other editors have no obligation to include any of his suggestions, although I hope people will continue to engage in discussion of them even if it is to opine that his proposed additions or edits would not be helpful. I suggest that is the appropriate response to proposed edits from any editor. Risker (talk) 13:20, 19 September 2008 (UTC)
 * I would almost put a tag on it stating that the article is being changed by current events, but I didn't see one that seemed exactly right. I'll leave that up to others.  Mackan79 (talk) 16:54, 19 September 2008 (UTC)
 * I've put an template on the article for now, at least it acts as a bit of a caveat.  Risker (talk) 19:34, 20 September 2008 (UTC)
 * Risker - Thank you for your thoughtful comments. I will take them to heart. By the way, I came back tonight for the first time in some weeks, I think: the quality of the article is much, much improved. There are some minor cheap shots, but no matter: I really was not about trying to get it lopsided in favor of NSS activists. I just wanted it to state the simple truth, as it now seems to. PatrickByrne (talk) 20:54, 16 November 2008 (UTC)(talk) 08:47, 8 November 2008 (UTC)

Extent of naked shorting
If anyone has sources on the extent of naked shorting, I think the section could use the help. Currently we don't say much more than that the SEC downplays the extent of it, which at least historically seems accurate; many of their statements seem geared toward suggesting that it isn't a big deal (I'm also curious if those statements have noticeably changed, or if they continue to say the September action was just preventative). However, I notice the papers I read through discuss the theory and effects more than they discuss the extent. If anyone has more on this, I think we should try to expand it. Mackan79 (talk) 02:22, 23 September 2008 (UTC)
 * Mackan, That is the billion dollar question. This could be a relatively manageable problem, or it could be cataclysmic. I don't pretend to know. I do know that obtaining the data for just one piece of the system was exceptionally laborious (though it has recently gotten better), and for the rest of the system, essentially impossible. 67.166.120.86 (talk) 08:53, 8 November 2008 (UTC)

Status
Having gone through it in some detail, I think the article is much closer to where it needs to be. The text has almost entirely been updated, unbalanced and repetitive material has been removed, articles and studies have been added, and in general I think the article is much more helpful to readers. If those who've had concerns want to look through it again, I won't say it's "done" by any means, but I think it's now basically an acceptable article. I've mentioned a couple of other issues above, but if I make any additional changes, they'll probably be minor. Mackan79 (talk) 07:32, 24 September 2008 (UTC)


 * The article is much, much better. Thanks for all the good work.--Stetsonharry (talk) 13:02, 30 September 2008 (UTC)

Reg SHO
Re this change, do we know that Reg SHO is superseded in full? I'm not sure. I had changed the accompanying statements to the past tense, but left the requirements in present tense since I assumed it was still at least partially in effect. Possibly we'd need more precise language, like "created the requirement." Mackan79 (talk) 08:12, 24 September 2008 (UTC)
 * Ok, I´m not sure if the Reg SHO is superseded in full,- but parts of it is certainly no longer relevant. E.g. the Sept. 17 regulation very specifically mentions that marked makers are no longer exempt. But please rearrange my edits as you please! (I am not a native English speaker, and I know my English has "room for improvement" to put it diplomatically ;-P)
 * And I think you have done a very nice job in a difficult area, Mackan! Regards, Huldra (talk) 08:35, 24 September 2008 (UTC)

Some scurrilous context from El Reg
The Register has a long article containing a lot of information regarding the actions of Patrick Byrne and Gary Weiss in relation to articles about Short Selling on Wikipedia cojoco (talk) 23:18, 1 October 2008 (UTC)


 * It's good to know that my suspicions, arduously laid out in a Wikipedia arbitration, were correct. It's also good to know that the arbitrators were correct to suspect gaming on this article. That said, this is an article about naked short selling. This is not an article about the Wikipedia article about naked short selling. Unless that topic is published beyond a specialty journal, I think it would be undue weight here. That's no knock to The Register or Cade Metz who I respect for covering such an esoteric topic. It's just beyond our scope at this time.


 * It's more directly relevant to some BLPs, but we should show restraint in adding this source on those, possibly waiting for independent confirmation. Cool Hand Luke 23:41, 1 October 2008 (UTC)


 * Incidentally, my understanding is that GW was not wed at that time, but was on a regular vacation he took to India, which was confirmed by his byline. But then, it doesn't really matter whether it was a wedding or not: he was in India. Cool Hand Luke 23:45, 1 October 2008 (UTC)
 * One thing the Register article alledges is that Weiss' manipulation of this article in Wikipedia discouraged financial publications from writing about the dangers of naked short selling, thus, contributing to the recent financial meltdown. I would say that this may relate to this article, especially if this angle gets picked up by any financial publications. Cla68 (talk) 02:10, 2 October 2008 (UTC)
 * If I read it carefully Metz never actually asserts this, but only quotes Byrne as such. Certainly to keep in mind though if there is further activity.  I have taken the liberty to add this as a media mention at the top of this talk page, assuming that is appropriate?  Joshdboz (talk) 02:26, 2 October 2008 (UTC)


 * I agree generally with you and Joshdboz. Could be an important story later, but CRYSTAL for now. Cool Hand Luke 03:16, 2 October 2008 (UTC) WP:CRYSTAL, sorry for my obnoxious labels. Cool Hand Luke 13:26, 2 October 2008 (UTC)


 * I agree. P.S. What is "crystal" in this context? --Stetsonharry (talk) 03:28, 2 October 2008 (UTC)


 * The register has another thing at http://www.theregister.co.uk/2008/06/24/byrne_back_conspiracy_theory_with_cash/ which is not about Weiss, but about a wikipedia and wall street conspiracy. Unfortunately, there's no mention of the current Wall Street conspiracy of how the US government wants to give $700 billion and likely trillions more not to stimulate the economy but to purely to inflate the salaries of rich CEOs who are friends of the Bush administration and both Obama and McCain support it (but not Ron Paul).  Are you ready for IPv6? (talk) 04:31, 2 October 2008 (UTC)


 * One of the allegations made in The Register article is that the very presence of the WikiPedia article on short selling, with its apparently biased content, made it very difficult for Patrick Byrne to make any headway in his pursuit of naked short sellers because of the credibility Wikipedia has achieved among many journalists. If this is accurate (and I don't know how to verify that it is), then the Wikipedia article itself has seemingly participated in the whole sorry affair and bears some of the responsibility.  If true, this fact should perhaps be noted in the Naked Short Selling article. cojoco (talk) 05:35, 2 October 2008 (UTC)


 * The Register is always the paper writing tons of stories on Wikipedia. I think they're by different people, too, but I don't look at the authors much.  I know Andrew Orl-something writes a lot on the subject.  Outside of the register, there's rarely that much coverage on all the details of wikipedia bickerings.  Are you ready for IPv6? (talk) 06:41, 2 October 2008 (UTC)


 * It's questionable whether the Register can really be considered 'press coverage,' particularly with articles such as this. While commentators disagree as to the extent of NSS and the wisdom of the SEC restrictions, neither the SEC nor anyone apart from a lunatic fringe are claiming that the liquidity crisis was in any way caused by NSS. Taking that one step further and claiming that Wikipedia somehow caused this crisis because Byrne's p.r. director did not have his way with an article, well, that puts it in the 'rubbish' class. I've taken the article out of the 'mentioned in media' header, as per policy on links to potentially defamatory material.--Janeyryan (talk) 12:25, 2 October 2008 (UTC)

<--(unindent) I have reverted your removal of the mention in the media header. Please do not do that again, Janeyryan. The Register is considered a reliable source for thousands of articles on Wikipedia, and this article is very specifically mentioned in it. That is exactly the appropriate use of that header. Risker (talk) 13:17, 2 October 2008 (UTC)


 * Risker is right. Note that neither WP:BLP nor WP:EL is BADSITES. (Since you claim this is your first account since the beginning of time, I should explain that BADSITES was a rejected proposal to ban links to certain sites&mdash;never clearly defined&mdash;that mention Wikipedia editors unfavorably.) Anyhow, it is coverage on the article itself, so should stay, even though we should not use it as a source on a BLP. Cool Hand Luke 13:26, 2 October 2008 (UTC)


 * I agree as well. Janeyryan, you will benefit from a thorough review of policy here, given that you are new. ++Lar: t/c 16:04, 2 October 2008 (UTC)


 * Janeryan, from your statement above I believe that you have misinterpreted two aspects of this discussion. Firstly, although I agree with you that The Register has little impact in the wider world, the point it was making was that the Wikipedia article on naked short selling had undue influence in the mainstream media, which, while debateable, seems to be a possibility.  Secondly, I do not understand why you are arguing against the hypothesis that NSS has precipitated the economic crisis: as far as I can see, nobody on The Register or this thread has actually suggested this.cojoco (talk) 20:04, 2 October 2008 (UTC)


 * That absurd claim was made in the secondary headline that was on the Register page at the top for some hours. CBDunkerson reacted with similar incredulity on that point in the discussion of the article in the Signpost page. It was to the effect that speculators were the cause of the late troubles, which is rubbish. Lar, your point on policy is well taken. I shall have chapter and verse at hand in the future, so that I might quote from same.--Janeyryan (talk) 23:09, 2 October 2008 (UTC)


 * You miss my point. You should review policy so that you are informed by it and can gently speak to those who are not. However you should not plan to "quote chapter and verse". We have enough rules lawyers already, thanks. ++Lar: t/c 23:26, 2 October 2008 (UTC)


 * Hi again, JaneRyan, I have looked really hard, but I cannot find the "absurd claim" of which you speak. I'd appreciate it if you could point to it, and perhaps include more links for people who are less experienced with Wikipeda?  Thanks! cojoco (talk) 23:43, 2 October 2008 (UTC)
 * That would be because the secondary head (which most people read even if not the entire article) was significantly shortened when the article was moved down the Reg main page. That had stated flat-out that 'manipulation' or 'speculators' had caused the current financial calamity. I can't quote it and you can't see it because it is not there anymore. However, the article itself is not much better. --Janeyryan (talk) 12:15, 3 October 2008 (UTC)

<--(unindent) I disagree with you, I found the main article to be quite entertaining and informative. As far as the secondary headline is concerned, perhaps you have not noticed that The Register's sensibilities are very tabloid, and the secondary head is often quite humorous and exaggerated. As there is no such allegation in the main article, I think you are drawing too long a bow. Let's concentrate on the meat of the allegation, not the fairy floss, which actually has very little to do with The Register: Did the (confirmed) manipulation of the Naked Short Selling article on Wikipedia influence the Media's portrayal of the issue, or not? If so, then this should be of real interest to all Wikipedia's users and editors. cojoco (talk) 23:14, 3 October 2008 (UTC)
 * A very interesting question. But also one that I suspect would be very hard to determine one way or the other. If it was determinable, what would be done with the answer? I think perhaps it's unfortunately a question to let go, absent clear evidence that there was significant influence. Regrettably. ++Lar: t/c 16:40, 5 October 2008 (UTC)


 * Oh, I just want to clarify something. After doing a lot of reading, it seems that there are a lot of people around who do believe that NSS precipitated the collapse of at least Bear Stearns and Lehman Brothers, and, if this is true, then NSS really might have something to do with the recent turbulence.  So, The Register's "absurd claim" may have had a grain of truth, short-lived as it was. cojoco (talk) 11:19, 9 November 2008 (UTC)

International section?
Question, I saw this link elsewhere, on Australia's ASX exchange recommending that the ban on naked short selling be made permanent, or at least indefinite.. Does any one know of any other exchanges (I'm thinking specifically in Europe) that has a restriction/ban of naked short sales, or is there enough information to support an International section? (see for the link, thanks to Piperdown on WR for pointing this out) SirFozzie (talk) 19:51, 3 October 2008 (UTC)


 * Yeah, I mentioned above that the ASX was considering such a move. It appears to have been a major story there all year. Cool Hand Luke 06:45, 4 October 2008 (UTC)


 * Netherlands and Belgium banned naked shorting, according to the main article on short selling. That sounds vaguely familiar to me but I can't confirm that it's true.--JohnnyB256 (talk) 12:40, 4 October 2008 (UTC)


 * Update: Netherlands .. looking for info on Belgium (so far, not seen anythign that says specifically that they banned the practice. SirFozzie (talk) 19:12, 5 October 2008 (UTC)


 * "...In Switzerland the bourse and regulators reminded investors that naked short-selling was not allowed on the Zurich-based SWX exchange."(More countries put bans on short selling September 19, 2008 IHT)


 * "Australia slapped a ban on naked short sales, effective on Monday." (More countries put bans on short selling September 19, 2008 IHT) (More regulators move to curb short-selling by Matthew Saltmarsh    September 21, 2008 IHT),    Regards,   Huldra (talk) 03:12, 10 October 2008 (UTC)

Thanks Huldra, that helps. Would any one object to the following being added to the article?

Several nations have either partially or fully restricted the practice of naked short selling of shares. They include Australia, the Netherlands , and Switzerland.

Of course, if there's further examples, we can add them in. SirFozzie (talk) 05:36, 10 October 2008 (UTC)
 * I can get you a much better reference for Ausralia. Ottre 05:46, 10 October 2008 (UTC)
 * If you can, that would be much appreciated :) SirFozzie (talk) 05:53, 10 October 2008 (UTC)

Intro paragraphs
Regarding changes to the lead, I don't think it's a good idea to simplify things so far as to render them inaccurate. The structure of the current lead is to explain naked short selling as a subtopic of short selling. Of course one can ignore that and just explain what happens in a naked short, but I don't think that helps the reader. For instance, a reader probably shouldn't think in general that "selling something you don't have" is naked short selling; it's only naked short selling to the extent this is done with pretensions of being a short sale, and also where the person hasn't made efforts to locate the shares. Simplifying is good, but I think this glossed over a good deal too much. Mackan79 (talk) 10:08, 5 October 2008 (UTC)
 * I agree as far as that goes, but a broader problem is a lack of balance and a kind of general naivete. I added a sentence in the lead but I think you need more work to achieve balance in this article.--JohnnyB256 (talk) 12:12, 5 October 2008 (UTC)
 * Thanks, but I can't agree with the sentence you added. Please see the points I raised below in the section on Risker's protection if you'd like to respond.  Mackan79 (talk) 08:18, 7 October 2008 (UTC)

Patrick Byrne, An Involved Party, Comments
Out of respect to my fellow Wikipedians, I have decided to draw my more lengthy contributions together into one area. This should deflate the concerns of those who have been my opponents on this page (or he who has been). I understand one could go further and say, because I am an involved party I should have no presence here. To which I would respectfully respond, it has become clear to all that the other side has not been held to the same standard. Lengthy has been the Wikipedia war on that issue, and it seems to have been resolved to the point that there is no serious disagreement about attempts to hijack the discourse. As is described in a section above, it has become a feature story in the press. So while I am not claiming any special right for myself by posting here, I do respectfully suggest, given the extraordinary history of this article, and its importance, I should be allowed to make my voice heard on this discussion page. That I have erased many of my (admittedly frustrated) posts from earlier days, brought them into this one section, and then will confine future comments to this section, is intended as an indication of good sportsmanship.

In short, we have won the battle to convince the world that a certain journalist was manipulating this page, and now I assume he will remain gone (but that if any new strangers show up spewing the angry non sequiturs we have all come to recognize, the rest of this community will take care of him). In return, I will (with the possible exception of brief ripostes above) confine future comments on this issue to this section, to make ongoing notes about this as it evolves, and to dialogue with any that wish. This should reduce such concerns as remain concerning my participation in this discussion page.

Again, I hope the community sees this move as I intended: an olive branch, unrequested but delivered in good faith.

From Under the Cone of Silence

 * Apparently a cone of silence exists around any suggestion I make, no matter how straightforward and even non-controversial it would be were another to make it. That said, I am going to clear up a few points in a way that none should object to, unless it really is their goal to keep this article as muddled as possible:


 * 1) "Naked short selling" is not a term used solely in the US. Suggestion: consider the possibility that the article would be less confusing were it structured to be about the US, and then, mention how other countries deal with it.
 * 2) I agree (for once) with the skeptic. The statement that naked short selling is illegal when it drives stock prices down is false. It may be more accurate to say that naked shorting is illegal when it is done with the intent of driving stock prices down.  It would be even more precise to say, it is illegal when one short-sells stock without having good faith reasonable grounds to believe that one has arranged a locate on the stock one is selling.
 * 3) I agree that this article gets way to contentious about whether it is going on, and whether it does damage, before it just lays out what the heck it is. I have made suggestion after suggestion of combing all the tendentious portions to the bottom. That way, even those who want to continue apologizing for and denying this problem could still be satisfied that their views were retained in the article, but theirs (and the opposing viewpoints) would be contained, rather than having one side's slant sprinkled liberally throughout the article.
 * 4) As it happens, I believe that the quotes are anything but even-handed. A string of outdated quotes from NSS-deriders are included, but from those who foresaw that this was a serious problem, all that is mentioned is that "In March 2007, Bloomberg Television featured a special on naked short selling, 'Phantom Shares.'  In May 2007, Max Keiser reported on naked short selling as part of a report on Al Jazeera's People and Power show." That is bias.
 * 5) Does it seem odd that this article includes the views of Gary Weiss (who is not currently employed with any publication and whose conflicts have been explored within this website), yet it omits the views of people such as, say, Treasury Sectretary Paulson: "“Naked short selling is wrong anywhere. Any investor, before they sell short, should line up the stock”? Or any quotes from the dozens of articles that are coming out daily?PatrickByrne (talk) 23:52, 16 September 2008 (UTC)


 * The media coverage section continues to be painfully outdated. Might be best to scrap it and start over. Cool Hand Luke 14:13, 17 September 2008 (UTC)
 * Luke - We agree.PatrickByrne (talk) 00:37, 18 September 2008 (UTC)
 * Cool Hand: could you start, by just cutting it down to a minimum? I was thinking about possibly just stating the opinions of the pro-camp,..and then list the names /articles of the commentators/journalists ONLY in the footnotes.  Huldra (talk) 01:17, 18 September 2008 (UTC)
 * Ok, I'll spend some time on it. I'll also try to find a source indicating the uptick in mainstream coverage since the failure of Bear Stearns. Cool Hand Luke 01:55, 18 September 2008 (UTC)
 * Hmm. Needs more work. It looks like Australia's ASX is considering changing their rules on short sells, including naked shorts. Cool Hand Luke 03:01, 18 September 2008 (UTC)

I also found three stories about reactions to the July temporary regulation.   This isn't media editorializing, but coverage about the market player's reactions to the July order. There's a lot of similar stories about regulation SHO. Maybe there should be a section about the critical response to these regulations? Cool Hand Luke 03:01, 18 September 2008 (UTC)

The Entarte Kunst Posts
Some time ago I became convinced there were news stories that were being unjustly ignored. I was reminded of the Nazi term "degenerate art" (entarte kunst) so I posted them as such.

Ruh-roh. Time to add The Economist to the list of entarte Kunst

The Economist gets added to the list of verbotten literature, along with The Register, The Washington Post and about 100 other US dailies which have reported on NSS:

It is impossible to know how big this problem is, but regulators accept it exists. The American Stock Exchange fined two market-makers for precisely this violation in July 2007. A month later the SEC proposed limiting or eliminating the exemption, but momentum stalled in the face of opposition from banks and exchanges.

The anti-short lobby, emboldened by the July ban, is again pushing for an end to the market-makers’ exemption. It has even grander ambitions. A group called American Entrepreneurs for Securities Reform has launched a ballot initiative in South Dakota that, if passed in November, would ban all naked shorting in the state, and force all brokers registered there to comply across the United States.

Opponents worry that the language is vague enough to outlaw all short-selling, though the initiative’s backers deny this is their intention. They have threatened action in a further 18 states if the SEC ban is not permanently extended to all shares this year.

How much does all this matter? Deliberate naked shorting has no place in a well-run market...

Does the fact that the press is doing stories on the bias of this page, along with the bizarre set of rules under which it operates, distinct from the other 2 million English-language Wikipedia pages, seem odd to anyone? Because it seems odd to me. Not as odd as the fact that, on an encyclopedia that everyone can edit it, everyone chooses not to raise a finger to stop a cover-up that essentially everyone sees, but odd still, just the same. PatrickByrne (talk) 03:54, 18 August 2008 (UTC)

Ruh-roh. More entarte Kunst:

Naked shorting's early critic starts to see some vindication Byrne's Battle Helps Bring Curbs on Naked Short-Selling Practices By Steven Oberbeck The Salt Lake Tribune http://www.sltrib.com/ci_10079510 Saturday, August 2, 2008 Over the past several years, Patrick Byrne's campaign to clean up Wall Street and end a practice that has destroyed companies and cost unwary investors billions of dollars generated plenty of publicity for him, mostly the wrong kind. Critics labeled him nuts, a conspiracy theorist, a complete wack job. Byrne, the chief executive of the Utah-based discount online retailer Overstock.com, even found himself tagged a member of the "tin-foil hat" brigade, a reference to the flying saucer fanatics of the 1950s who adorned their heads with aluminium to ward off, or enhance, thoughts from aliens in outer space. These days, when people talk of Byrne, the word "vindication" comes up a lot. "You can always tell who the pioneers are -- they're the ones with all the arrows sticking out of their backs," said James Angel, a finance professor at Georgetown University. "You really can't understate what Byrne has accomplished."PatrickByrne (talk) 17:23, 1 September 2008 (UTC)

And now more:

"Experts: 'Naked' short-selling impacted Colonial stock - Birmingham Business Journal - by Crystal Jarvis Staff"

"The huge swell of activity surrounding Colonial BancGroup’s common stock is evidence that the company fell prey to “naked” short sellers, experts say." —Preceding unsigned comment added by PatrickByrne (talk • contribs) 06:32, 4 September 2008 (UTC)

More entarte Kunst, this time from Associated Press: "Naked short-selling blamed in Wall St crisis" 11:00AM Tuesday Sep 16, 2008 WASHINGTON - With Wall Street engulfed in crisis, the Securities and Exchange Commission is planning measures to rein in aggressive forms of short-selling that were blamed in part for the demise of Lehman Brothers and which some fear could be turned against other vulnerable companies. During emergency meetings between federal officials and investment bank executives over the weekend, SEC Chairman Christopher Cox indicated to the bankers that the agency plans in a few days to impose new permanent protections against abusive "naked" short-selling, a person familiar with the matter said Monday.PatrickByrne (talk) 04:14, 16 September 2008 (UTC)

Since the story is out there now everywhere from Time Magazine to today's William Safire piece in the New York Times, I am assuming that the days of entarte kunst are over here.PatrickByrne (talk) 17:41, 5 October 2008 (UTC)

What is still wrong with this article as of October 9, 2008
The American Bankers' Association, the US Chamber of Commerce, the CEOs of Goldman Sachs, Morgan Stanley, JP Morgan, and Lehman, politicians John McCain, Hillary Clinton, Barack Obama, countless congressional represenatives and senators, the Chairman of the SEC, the Secretary of the Treasury, and so on and so forth, have implicated naked short selling in the hobbling of the American financial system. Yet the article is replete with:

Such stale chestnuts such as "However, the SEC and others have also defended the practice in limited form as beneficial for market liquidity.... commentators contend that naked shorting is more of a potential than a real problem, and have criticized the SEC for dealing with an issue that is tangential at best."

Such pettifoggery as: "However, the SEC has disclaimed the existence of counterfeit shares and stated that naked short selling would not increase a company's outstanding shares."

Non sequiturs and propaganda as: "Short seller David Rocker contended that failure to deliver securities 'can be done for manipulative purposes to create the impression that the stock is a tight borrow,' although he said that this should be seen as a failure to deliver 'longs" rather than 'shorts.'"

In a section called, "Studies", more space is allocated to mention of results from two off-topic studies (one on failures in the IPO market, the other on the Canadian market), than is given to describing the only study yet to appear on the true extent of naked shorting (Leslie Boni's), which would chill your spine.

In a section called, "Media Coverage", we see this gem: "Reporting by major media outlets has been mixed. While concern expressed by the regulator has been echoed by journalists, some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings. Others have discussed naked short selling as a confusing or bizarre form of trading." In other words, in a 62-word statement, precisely 10 words describe the concern. This, while (again) the American Bankers' Association, the US Chamber of Commerce, the CEOs of Goldman Sachs, Morgan Stanley, JP Morgan, and Lehman, politicians John McCain, Hillary Clinton, Barack Obama, countless congressional represenatives and senators, the Chairman of the SEC, the Secretary of the Treasury, and so on and so forth, say that naked short selling is wrong and is entwined in the takedown of the American financial system.

What is remarkable about Wikipedia is the speed with which it quickly updates to reflect the world around us. Yet on this one subject, great daylight appears between the current state of affairs and the page in question. And.... it happens to be a page exploring a massive financial crime from which some are profiting as long as it remains downplayed. I wonder if there is any connection. PatrickByrne (talk) 06:49, 10 October 2008 (UTC)

Full protection of article - 6 October 2008 - for one week
I note multiple reverts occurring with respect to the lead of the article; it is clear there is a content dispute happening here. I request that all editors involved please discuss the proposed changes here. I hope to see some consensus on what can be improved from the (undoubtedly) wrong version that is currently displayed. Longtime editors of this article are reminded that sometimes a new editor can bring useful and fresh ideas to an article; editors new to this article are reminded of the editing sanctions placed on this article by Wikipedia's Arbitration Committee (see link at the top of the page). I will continue to follow; once it appears there is a consensus version, I or any other administrator can unprotect. Risker (talk) 02:08, 6 October 2008 (UTC)
 * Thanks, Risker, for stepping in. I think the large change is pretty clearly not an improvement for reasons listed above (though I grant it was well-intentioned and your point about new editors).  Less importantly, I'm not sure that JohnnyB256's added sentence helps either.  The sentence ends with hyperbole ("at best"), and raises an issue with two sides (whether the regulations are a good idea) but only from a critical perspective.  If we were going to address commentary on the regulation in the lead (not really necessary in my view), this could be done without emphasizing one view or the other. Mackan79 (talk) 06:30, 6 October 2008 (UTC)
 * Characterising four edits by four separate editors that were very cordial in their elucidative edit summaries (one even apologised for reverting!) as an edit war seems to me to be an overstatement. The most they reverted was once. Even if they had been two editors reverting rather than four (i.e. the two for the change were one entity and the two against the change were another entity) the most times they would have reverted would have been twice. No policies or committee sanctions  were broken and there was no demonstration of bad faith. Based on the evidence, full page protection was premature. It's possible it may have been needed later but to protect now requires a presumption of future (or past) bad faith editing Ha! (talk) 13:03, 6 October 2008 (UTC)
 * Hello Ha!. There has been past bad faith editing of this article, hence the Arbitration Committee sanctions. Four reverts of the same content in 24 hours, without any discussion on the talk page of the article, is a sign of an incipient edit war, if not a true edit war. The page has recently been the subject of considerable media attention, had been slashdotted within the same period, and is a high traffic article. I considered all of these factors, as well as a few others, in determining that a brief period of full protection would be appropriate. Perhaps you would like to share your thoughts on the content proposed by the other editors?  Do you think it is an improvement in the lead of the article? Is there a middle ground between the current lead and that proposed by the editors new to the page?  It would be good to have the perspectives of editors who have not worked on this article to find the best balance.  Risker (talk) 13:29, 6 October 2008 (UTC)
 * In the interests of the correct representation of facts rather than a wish to engage in an argument I'll make a small correction: there were three reverts of the same content, not four Ha! (talk) 18:24, 6 October 2008 (UTC)

Claim by former Lehman Brothers CEO about NSS
(Former Lehman Brothers CEO Richard) Fuld points the finger at a host of other factors that have dogged the finance industry, including "naked short selling, which I believe contributed to both the collapse of Bear Stearns and Lehman Brothers." . Not sure I believe him, mind you, he sounds like a man trying to grab any life raft before he goes under, but definitely sounds like this needs to go in to the article, once consensus is reached, or when protection expires.

Perhaps such a section can be put in on the "Recent Developments" section. Suggested text would be. "In hearings on the 2008 financial crisis before the House Committee on Oversight and Government Reform, former Lehman Brothers CEO Richard Fuld said that naked short selling had contributed to the collapse of Lehamn Brothers and Bear Sterns. "

Any problems with that section? SirFozzie (talk) 17:10, 6 October 2008 (UTC)
 * Yes, this was also something I'd come across and intended to source. I think the proposal is good. Mackan79 (talk) 08:15, 7 October 2008 (UTC)
 * If we can get consensus for this, anyone want to submit an editprotected request? SirFozzie (talk) 22:53, 7 October 2008 (UTC)
 * Looks good to me. If it were much more than this modest statement, I would be concerned about undue weight, but I imagine this story might develop over time. For now, this is enough. Cool Hand Luke 22:58, 7 October 2008 (UTC)


 * A link to his testimony is here . Note that he's pretty clear he's referring to naked short selling along with market manipulation. He's quite expansive on that second part (see the 25th paragraph; "followed by false rumors", "spread rumors and false information", naked short sellers pulling business and encouraging others to pull business, "rumor mongers", "unsubstantiated rumors", "market manipulation") so it might be worth including that to genuinely reflect his views. If, as you say, you think there's a good chance he's just using shorts as a life line to apportion blame it might be worth checking if there's a reliable source that also has those same doubts about his motives so a balancing opinion can be added. Ha! (talk) 07:00, 8 October 2008 (UTC)
 * We do state that objection generally, although I wouldn't oppose some additional response to this (equally appropriate would be anything suggesting he's incorrect). Other clarifications could be helpful, it's just hard to say in the abstract.  But I think SirFozzie's proposal is a good fit, and probably the most relevant point for the recent developments section. Mackan79 (talk) 08:52, 8 October 2008 (UTC)
 * Only thing I can find so far (and I'm shocked, or maybe I've become a touch too cynical these days), is In a session on the collapse of Lehman Brothers before the Committee on Oversight and Government Reform, Chairman Henry Waxman said the committee received thousands of pages of internal documents from Lehman and these documents portray a company in which there was “no accountability for failure.  which I don't think is quite a countervailing view. Despite my personal view on it, I think that if we can't find anything to support my suspicions, we go with what we got. SirFozzie (talk) 19:04, 8 October 2008 (UTC)
 * There are some other views
 * "Lehman, once the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create. The 158-year-old company collapsed after concern about losses from its mortgage portfolio spooked investors and creditors" ... "Fuld wrote, “The naked shorts and rumor mongers succeeded in bringing down Bear Stearns. And I believe that unsubstantiated rumors in the marketplace caused significant harm to Lehman Brothers.” When Fuld was questioned about the shorts’ connection to Goldman, he grumbled that he had no evidence but didn’t sound convinced. It isn’t clear, though, how Fuld rationalized that with the appearance that the shorts were attacking Goldman, too"
 * "Lehman executives understood the seriousness of the firm's dire financial state but "didn't act fast enough" to prevent the collapse, Waxman said"
 * He blamed the short-sellers. He blamed the government, as well as what he characterized as an “extraordinary run on the bank.” But the chief executive of Lehman Brothers Holdings, the bankrupt remnant of a once-great investment house, never really blamed himself. 
 * Blaming short-sellers, meanwhile, is the icing on Fuld's cake of excuses. David Einhorn, one public and highly analytical critic of Lehman's book-keeping, appears to have been vindicated – yet Fuld is still banging on about "false rumours"
 * I noticed there's a problem with using the money.cnn.com source to reference the statement "Fuld said that naked short selling had contributed to the collapse of Lehamn Brothers and Bear Sterns": that particular source doesn't say that. The most the source says (in reference to what Fuld said about naked short selling) is "Fuld pointed the finger at a host of other factors, including so-called naked short selling, that have dogged the finance industry". His testimony did say naked shorts contributed so it should be easy to include other sources that reflect that testimony, but as it stands that particular source doesn't back up the text it's next to.
 * You could try an expansion that includes some more facts; that he blamed many factors (he blamed a lot; rumors, widening credit default swap spreads, naked short attacks, credit agency downgrades, a loss of confidence by clients and counterparties, strategic buyers sitting on the sidelines waiting for an assisted deal, the lack of a buy out), that a primary blame was confidence and that naked short selling attacks were in the context of rumours and market manipulation
 * In hearings on the 2008 financial crisis before the House Committee on Oversight and Government Reform, former Lehman Brothers CEO Richard Fuld said a host of factors including a crisis of confidence and naked short selling attacks followed by false rumors contributed to both the collapse of Bear Stearns and Lehman Brothers 
 * Ha! (talk) 23:13, 8 October 2008 (UTC)
 * This works for me.. good rewrite. SirFozzie (talk) 05:54, 10 October 2008 (UTC)

And he was widely derided for listing that host of factors, which did not include anything he did. I think that has to be mentioned or it is going to sound naive.--JohnnyB256 (talk) 02:51, 11 October 2008 (UTC)

Questions
I'm not familiar with this area and there's a point I'm struggling to understand: in a standard short selling, the short seller borrows shares, then sells them, then later buys new shares to return to the lender. But if they haven't borrowed the shares, how can they sell them? Do they promise to deliver them at a later time? And when they do eventually deliver them, where do they come from? Do they borrow them, or buy them? That is, is there still a lender involved, or do they actually hope for the share price to fall during the transaction time itself? Dcoetzee 01:12, 14 October 2008 (UTC)


 * The essential characteristic of naked short selling is that they don't borrow shares. Basically, they're selling a promise to someday deliver the share, but the buyer doesn't really have a share; for that reason the buyer is actually equivalent to the lender. When the short seller eventual delivers the shares, they have to buy them off the open market. If they're just trying to dispose of their failures to deliver (under Regulation SHO), they might borrow the shares, and later close the position like an ordinary short.
 * Ideally, the buyer never realizes that they don't own the shares. The DTCC is the counterparty to all transactions, so they're all opaque from the perspective of buyers. Because the shares traded are really entitlements to securities, the number of shares in circulation will behave as if they're inflated. This would drive the price of the security down faster than with ordinary short selling by inflating the apparent supply, but unless there's an actual movement in demand, the price would theoretically rise again when the position is closed out. Cool Hand Luke 02:13, 14 October 2008 (UTC)


 * Yes, but ... If Alice sells 100 shares "naked short" to Bob, and Bob later sells 100 shares "naked short" back to Alice, then their respective short positions can "net" or "clear" at the DTCC, so that neither must actually borrow actual stock to close out their positions. Individuals (Alice Jones and Bob Smith) are unlikely to do this, but the number of large brokerages is small, and their positions often do clear against each other.  When they do, observe that two short sales have occurred without the corresponding purchases which would theoretically make the price rise again.  Thus, the share price falls.  This is actually the heart of the complaint against naked shorting, as I understand it.  (I could be wrong.)  And this is how "fails to deliver" can float around for years without anyone complaining that they don't have their stock.  76.238.142.66 (talk) 22:28, 29 April 2009 (UTC)

Link from anon
An anonymous editor has added this external link. Could one of the regular editors, or someone knowledgeable about the subject, please review to determine appropriateness? Thanks. Risker (talk) 17:27, 15 October 2008 (UTC)


 * Speaking as an interested amateur, this new link, "Fails To Deliver", looks like a very useful site. It purports to plot short selling data directly from the SEC, and the generated charts may be used freely. The site is referenced in plenty of blogs and financial sites.  However, I couldn't find any information about ownership or reliability. cojoco (talk) 23:20, 15 October 2008 (UTC)
 * Perhaps it would be more appropriate at Short selling, the general article, rather than this one, which is about a small subset of short selling? Risker (talk) 23:24, 15 October 2008 (UTC)
 * Sorry, my explanation of the website was inadequate, and the external link title perhaps incorrect. The charts do not plot short sales but "failures to deliver", which occur when a naked short sale has taken place but the stock not obtained before settlement, which on Nasdaq should be within 3 days after the transaction has occurred.  I don't know of any other reasons for "failure to deliver" than naked short selling. cojoco (talk) 00:16, 16 October 2008 (UTC)
 * I believe they say it can happen for technical reasons, or where a person reasonably believes there will be a stock but there turns out not to be. Some of the articles discuss lists of readily borrowable stocks, which are used to comply with the regulations, but which don't always end up being 100% fool proof.  Accordingly, this is one of the debated issues, about how many of the failures are naked short sales (e.g., intentional or "strategic failures to deliver"), and how good or bad a measure FTDs are for naked short selling.  But, without having evaluated the website, that issue is pretty central to the topic of this article. Mackan79 (talk) 00:28, 16 October 2008 (UTC)
 * I don't believe that the definition of "Naked Short Sale" is so complicated: if you do not own and have not contractually arranged to borrow the stock before you sell it, then it is a Naked Short Sale by definition. Any issues of motivation or strategy are independent of this definition. A more interesting question is that what proportion of Naked Short Sales result in a failure to deliver? cojoco (talk) 01:02, 16 October 2008 (UTC)
 * That's an interesting question -- my impression is actually that the definition is a little fluid, in whether it means "strategic" fails to deliver, or any sale where Reg SHO wasn't followed, or something else. However, the requirements under Reg SHO aren't that simple either, in whether one had to "locate" the shares.  I believe there was a third option where you could simply affirm that the shares were readily available to borrow, without actually making a contractual arrangement.  This is where the lists of readily borrowable shares came in.  My understanding, accordingly, is that selling by these lists wouldn't be naked short selling even though the contract didn't happen.  As to your last question, yes, I don't think that is known either, as possibly one could sell without "locating," but then end up being able to borrow the shares after all.  I think what's assumed, basically, is that there must be some correlation between the numbers. Mackan79 (talk) 01:46, 16 October 2008 (UTC)

I think the link is a tempest in a teapot. More troublesome is the general naive tone of this article and a lack of skeptical voices on the general subject, which have been loud. If indeed neutrality is the aim of Wikipedia, you need that and you don't have it here. I sought to add a sentence reflecting that but it was removed. There was also a section alleging a "connection" to the 2008 crisis, but then when reading it we see that it was part of an arsenal of excuses deployed by Dick Fuld. I think what you have here is an article that while it pleases your contributor Mr. Byrne is misleading to readers and skewed.--JohnnyB256 (talk) 13:09, 18 October 2008 (UTC)
 * I don't see that it pleases Mr. Byrne; you might read his comments above. On the other hand, your additions that I have seen are marked by unencyclopedic hyperbole.  Please note that to say critics call it this or that "at best," or saying that someone has been "derided," or picking out sensationalist quotes is not the general approach to WP:NPOV. Mackan79 (talk) 18:35, 18 October 2008 (UTC)
 * While this link discussion has certainly been in a teapot, it's definitely never been a tempest! Because Naked Short Selling has been in the news, I think that there are many people (including myself) who are keen on learning something about it.  Looking at the trading volumes revealed by this site shows that the number of "fails to deliver" must affect some stock prices dramatically.  For example, looking at that perennial favourite, OSTK, there were 3.9 MILLION failures to deliver on 20/3/2006, representing about $14M.  With an average trading volume (now) of 290,000 shares, and the fact that the "fails to deliver" may only be a fraction of the total short selling, the short selling might well have dwarfed legitimate trades (although the volumes reported by Google are a bit confusing).  I also thought we were past the point where anybody still believes Patrick Byrne to be some kind of loony-tunes, as much of what he has said in the past appears to have been amply confirmed: "pleasing Mr. Byrne" may be no bad thing. cojoco (talk) 00:26, 19 October 2008 (UTC)
 * Well, economists would say that short sales are legitimate trades. It conveys the information known about a security. Naked short selling is (arguably) different because it inflates the apparent number of shares outstanding, so could hypothetically flood a market with more shares than actually exist, potentially dramatically decreasing the price in the short run. Some commentators have suggested that this could be lethal to institutions like banks that depend on some amount of goodwill. Cool Hand Luke 14:52, 23 October 2008 (UTC)

Write this article as you wish, I see that efforts to introduce balance into here are going to be pretty useless. But you should know that the article is naive in tone, especially toward the beginning where it provides a one-sided treatment. Mr. Byrne no doubt is pleased that his pet crusade is given one-sided treatment, but you are doing a disservice to your readers. Cojoco, absolutely no independent observer believes that his lengthy railing against this issue has had any connection to the current tempestuous times in the markets. Chairman Cox himself stated that the measures against naked shorting were intended to be preventative and that it had not been a factor in the current crisis. --JohnnyB256 (talk) 14:38, 19 October 2008 (UTC)
 * I've been keeping an eye on this page for the last few weeks, and nobody here has suggested that naked short selling has been a major cause of the current financial crisis. However, there is plenty of evidence that naked short selling sometimes occurs in huge volumes and a prima facie case that it is used for price manipulation.  That in itself makes it an interesting topic, as the presence of Market manipulation indicates Market failure, and in any well-regulated market, gross market manipulation should be regarded as a crime on a par with fraud.  Could you please be more constructive in your comments?  Why is the article "naive in tone" and "one-sided?"  Why do you say that attempts to produce balance "are going to be pretty useless" ? cojoco (talk) 16:02, 19 October 2008 (UTC)

Because it seems that when I want to introduce balance or factual content it is immediately removed on one pretext or another. I will try to produce a more specific critique but I only go to this website periodically.--JohnnyB256 (talk) 16:20, 19 October 2008 (UTC)
 * OK, but is it fair to assume you understand that it looks as though you are just fighting to get back to a ridiculously one-sided treatment that you call "fair"? 67.166.120.86 (talk) 05:26, 9 November 2008 (UTC)

Attempts to verify the lead
Earlier today, I tagged parts of the lead. I should perhaps justify the cluttering. The first paragraph seems standard, except I could not find something backing up the sentence "However, the transaction generally remains open until the shares are acquired by the seller or the seller's broker, allowing a trade to occur when the order is filled." I asked for page number to be supplied so I can focus see the page, where something to that effect is stated.

The rest of the tags are more standard, well, google no longer hosts the AP piece. I believe the Washington Post is hosting a short version of that same thing. Finally, the last paragraph doesn't seem at all in tune with what the cited sources there are saying. I don't really dispute these statements, I'm not an expert on this topic, but if we want to say that the SEC "defended the practice in limited form as beneficial for market liquidity", we should really should have a source saying just that. Vesal (talk) 18:35, 18 October 2008 (UTC)


 * Mostly resolved, but I still wonder about the sentence that the SEC defended naked short selling. Maybe it would be more accurate to say something like "Naked Short Selling is a risky variation of short selling, a practice widely accepted as beneficial for market liquidity and price regulation." That I can find sources for, e.g. this, but I where do the SEC explicitly defend Naked short selling? Vesal (talk) 19:19, 18 October 2008 (UTC)
 * You may have a point there, I'm not totally sure whether this could be sourced better. I would caution against saying it's widely agreed to be beneficial, however, even for specific reasons.  I'm also not sure it's just a "risky" variation, or that that is one of the defining characteristics.  Risky maybe in a legal sense, but it isn't economically riskier than ordinary short selling (and of course critics would tend to say it's less risky, and that's the problem).  I'm also not sure I understand the issue about whether the SEC didn't defend the practice in limited form, though.  For instance, see the Key Points document that's been discussed above:
 * Naked short selling is not necessarily a violation of the federal securities laws or the Commission's rules. Indeed, in certain circumstances, naked short selling contributes to market liquidity. For example, broker-dealers that make a market in a security4 generally stand ready to buy and sell the security on a regular and continuous basis at a publicly quoted price, even when there are no other buyers or sellers.
 * I'd think that this supports the statement. Mackan79 (talk) 06:33, 19 October 2008 (UTC)

Thank you for clearing everything up. This document does indeed say precisely what it was looking for. We seem to have different views on the placement of footnotes though. It is true that the lead can contain fewer citation by virtue of being a general overview, leaving specific claims to be backed up in the body of the article. However, when the lead does make a specific claim about a specific organization, the same standards of citation apply as in the body. See WP:LEADCITE for details.

The other point is the scope of citations. Normally, a footnote at the end of a paragraph/sentence/clause should cover the entire paragraph/sentence/clause, unless there are footnotes within the syntactic unit. Paragraphs can be re-organized (moving unsupported sentences to after the citation), and footnotes can be injected to limit the scope of following footnotes. Unfortunately, no such conventions are standardized on Wikipedia. Instead, people tend to add footnotes to each sentence of a paragraph, see this ridiculous example ...

To get back to this article, the solution is simple, I will use the "key issues" document to back up this statement. Thanks, Vesal (talk) 09:04, 19 October 2008 (UTC)


 * I'd challenge Mackan79's assertion that Naked Short Selling "isn't economically riskier than ordinary short selling". A lot of statements about short selling make the implicit assumption that short selling is only a small fraction of the trading in a stock.  However, it is clear that some stocks are short-sold in very high volumes, with transaction volumes much greater than trading with actual shares.  This has to distort the market price substantially, and if there are no ramifications for failure to deliver (I don't know, are there?) then there must be a strong temptation at least to use naked short selling for market manipulation.  I am sure that you guys have gone over this ground many many times, but surely there is plenty of evidence now that it has been used for manipulation, which is certainly deceptive, and therefore "risky". cojoco (talk) 10:46, 19 October 2008 (UTC)


 * The best way to address this is by providing a specific example of naked shorting and describing the risk involved. Good luck finding one. My point previously is that the prevalence of naked shorting is hotly in dispute. This is nowhere reflected early in the article. Instead it is accepted as a given and now you are arguing over how risky it is. If you want the article to be useful and not misleading, you need to reflect the sentiment that its significance has been overstated.--JohnnyB256 (talk) 14:59, 19 October 2008 (UTC)


 * It is obvious that the ability to trade a volume of shares substantially larger than normal, without any ability to settle the transaction, and with no consequences, is an invitation to manipulate the market. It is also obvious (from failstodeliver) that such large volumes of trading have occurred, which I think contradicts your statement that "the prevalence of naked shorting is hotly in dispute".  As Market manipulation is itself a crime, any successful method for market manipulation is interesting in itself, especially if there have been no convictions and no substantial effort to mitigate its consequences.  It is interesting that that bugbear of the 80's, Insider_trading, has been rated as "Top Importance" on the importance scale; while I doubt that Naked Short Selling will ever acquire the same cachet, it is interesting for the same reasons. cojoco (talk) 16:27, 19 October 2008 (UTC)


 * Fails data are similar to the quantitative data (pre deal runups) that found there was rampant insider trading. I am with you on the disturbing nature of that data. Where I part company is that there have been only few and far between documented instances of naked shorting. That gets back to the breathless and naive tone of the article that I mentioned earlier, and a failure to point out the substantial body of opinion which holds that prevalence is lacking, whatever the theoretical implications of the fails data. If you need to flesh out your thesis, you need to show me some solid examples of manipulative naked shorting, as prosecuted by the SEC or criminal authorities.--JohnnyB256 (talk) 16:34, 19 October 2008 (UTC)


 * Fair enough. With the turmoil occurring right now, I suppose that it is possible that such prosecutions will occur in the foreseeable future. However, given the failure of the current regulatory environment to prevent the sub-prime meltdown, I personally don't believe that there is the will to prosecute, even if the abuse was rampant. cojoco (talk) 16:46, 19 October 2008 (UTC)


 * I've been reading the SEC documents, and their fails-to-deliver data is aggregated, being an accumulation of trades which are not yet settled. The graph goes up where un-covered short selling is occurring, and down as these trades are finally settled.  Under the regulations, nothing much seems to happen to the dealer until 13 days past settlement, at which point they must actually borrow securities before short selling again.  —Preceding unsigned comment added by Cojoco (talk • contribs) 20:33, 4 November 2008 (UTC)

Marcy Gordon and variations
Her AP piece "SEC adopts rules against naked short-selling" from September 18 is the source of footnotes 2, 6, and 7. Collapsing these would reduce the number of redundant footnotes in the lead, but which one to keep. Any ideas on this? Vesal (talk) 09:18, 19 October 2008 (UTC)

Since when is a blog by Donald Luskin ("poor and stupid") considered a good source? Yet in another article on a related subject I was told that a New York Times columnist's blog is not a good source, adds excess weight or some other such reason--JohnnyB256 (talk) 14:56, 19 October 2008 (UTC)

definitions
This article says:

Naked short selling, or naked shorting, is the practice of selling a stock short, without first borrowing the shares or ensuring that the shares can be borrowed as is done in a conventional short sale.

I do not understand this. Ordinary shorting comes when Alice borrows Bob's stock, sells it, pockets the money, and hopes to make Bob whole for less down the road. If Alice doesn't get Bob's stock in the first place, what is she selling? To whom? Where does she get the money that is the foundation of the idea??? —Preceding unsigned comment added by Fhapgood (talk • contribs) 02:48, 23 October 2008 (UTC)
 * See my question above on the same topic. I think it could be clarified. If I understand correctly, when the price is high you sell securities you don't have, promising to deliver them later; then obtain them later when the price has fallen and deliver them. Dcoetzee 03:37, 23 October 2008 (UTC)

I believe the reason that this is confusing for so many people is that electronic trading is a lot more complicated than people expect. Here's a summary of my beliefs about the mechanics of the situation, which I hope can be clarified by someone with more information. Of course, the details will differ from market to market: This is my understanding of how the market works, but I mostly have experience with the ASX and SEHK markets, which are fully electronic. I'm not really sure how the US markets work.
 * Trades can occur in at least two ways:
 * On-market trades occur automatically between two individuals unknown to each other on an electronic trading system. While the trade appears to occur instantaneously, the paperwork may take up to three days to be finalized.
 * Off-market trades occur between two individuals by private arrangement. Presumably there is no delay in assigning ownership if the parties so agree.
 * A broker does not need to have any proof of ownership to enter a trade into an electronic trading system
 * A non-naked short sale occurs thus:
 * A broker organizes to borrow some shares from a buddy in the near future
 * The broker "sells" these shares (which they do not yet own) on the electronic trading system
 * The broker borrows the shares off-market, as previously arranged with their buddy, while paying some "rental" cost to the original owner
 * These shares are transferred the buyer at settlement time (T+3)
 * The broker arranges to buy some shares in the future to pay them back to the original owner
 * The broker gives these shares to the original owner
 * A naked short sale may occur thus:
 * A broker decides that a stock is likely to fall in price, or, if malicious, decides to push the price down
 * The broker sells shares they do not own
 * The broker may be able to buy these shares off-market from another buddy before T+3 is up, so that the settlement occurs properly and the trade appears normal
 * If they cannot, or if the broker was attempting price manipulation, the settlement will not occur before T+3, and presumably the buyer is left without their shares ("failure to deliver")

Some explanation of these mechanics would be very useful for the lay reader. cojoco (talk) 05:23, 23 October 2008 (UTC)

There are also some questions in my mind:

cojoco (talk) 05:51, 23 October 2008 (UTC)
 * After a "fail to deliver", would money eventually be refunded from the unsuccessful seller to the unsuccessful buyer?
 * Were there any negative consequences for the seller after an unsuccessful naked short sale?
 * May off-market trades be settled more quickly than T+3 to allow on-time settlement after a short sale?
 * When examining historical trading volumes for stocks (such as OSTK) which were shorted a lot, it appears that the trading volume on heavy short-selling days was lower than the reported number of trades which failed to deliver.  Were these "failed to deliver" trades removed from the historical record?


 * I will try to answer:

The SEC frequently asked questions for Reg SHO provide good objective information on the mechanics of naked shorting and I'd suggest you read it for a good overview.--JohnnyB256 (talk) 01:27, 2 November 2008 (UTC)
 * Refund. No, because failure to deliver shares does not mean that a legal trade did not take place. The buyer does not know that a fail took place and it does affect his ability to buy or sell the shares.
 * Consequences. Do not know what you mean by "unsuccesssful." Under the new interim rules, delivery by T+3 is mandatory.
 * Off market. ??? There seem to be some underlying assumptions here that I do not understand. What do you mean by an "off market trade"?
 * Several assumptions being made here athat are not correct. There is no way of knowing which days were "heavy short selling days" and which were not heavy. Fails to deliver are not reflected in trading volume.


 * Thanks for your efforts to answer the questions. Unfortunately, this always leads to more questions!
 * There is some inconsistency: You say that a failure to deliver shares does not mean that a legal trade did not take place, and the buyer cannot tell that a fail took place. If this is true, then presumably the buyer could on-sell these shares which they don't have, which contradicts the SEC's claim that short sales do not create counterfeit shares.
 * About consequences: you say that under the new rules, T+3 delivery is mandatory, which is all well and good. However, that does not answer the question: it is clear that many shares have been traded which did not achieve T+3 delivery: what were the consequences of non-delivery back then?
 * According to the markets with which I am familiar, when shares are traded electronically it is usually the case that neither party knows each other, and settlement occurs at T+3. After short selling occurs, I imagine that it is desirable to obtain shares faster than T+3 to ensure settlement of the short sale in time for T+3.  As I imagine that any "on-market" trade on the electronic market will settle too late, is it necessary to buy replacement shares "off-market", with a shorter settlement period?  Or was it simply acceptable to delay settlement beyond T+3 as a matter of course?
 * If you assume that most "fails to deliver" are caused by naked short sales (and how else do you explain millions of fails to deliver in a single day?), then by examining the graphs from failstodeliever.com it is extremely clear which days were "heavy short selling days". Or are you arguing about the definition of "Heavy"?
 * Thanks for the pointer to the FAQ: It's not designed for the lay reader. I will attempt to read it more deeply when I have time. cojoco (talk) 04:59, 4 November 2008 (UTC)

Illustration
I notice that a large illustration was added at some point. It doesn't say much, and does not show that in NSS a crucial step (the borrow) is eliminated. Instead there is reference to a "promise." That is also correct with regular shorting except that the promise is fulfilled. I'd suggest ditching this illustration.--JohnnyB256 (talk) 10:53, 26 October 2008 (UTC)
 * I'm afraid I agree, it's hard to see how someone who hasn't figured out the concept would get it from this chart as it is. I was pretty sure I understood the concept, but actually I don't get the chart either, as it also seems to say that shares necessarily go from Market to Seller in NSS, when that's not necessarily the case.  I think the chart needs a fair deal more work before it would be useful. Mackan79 (talk) 11:13, 26 October 2008 (UTC)
 * I agree, the diagram doesn't seem to aid understanding. As I understand the market, it is necessary to perform off-market trading to buy stock to fulfill a short sale within the T+3 settlement period.  Can anyone confirm or deny this?  I think that it's a necessary part of understanding the whole process. cojoco (talk) 11:08, 27 October 2008 (UTC)
 * I'm not surprised it's not useful, considering that I created the diagram and I don't really understand naked short selling. I've asked for clarification a few times, but based on the article and discussions here I still don't really understand it. If someone could better explain it to me, perhaps I could try to create a more useful diagram. :JohnnyB256 seems to be saying that it's important to describe the omission of the borrowing step explicitly, rather than just omitting it. Mackan79: if the shares don't go from market to seller, where do they come from? Cojoco seems to suggest they come from off-market trades. I think clarifying this would help to clarify the concept for newbies like me who might be reading this article. Dcoetzee 23:55, 1 November 2008 (UTC)
 * Yes, omission of the borrowing step is the central issue in naked shorting. So is delivery, but less so. I will explain: In ordinary shorting, a share is borrowed and then sold. In naked shorting, the seller omits the borrowing step, and then fails to deliver the shares. What complicates the picture is that most fails originate from ordinary trades in which delivery is not made. Market makers often sell shares without borrowing to meet demand. That is legal. What is illegal is to sell shares without borrowing to bet on a market decline. In both situations the shares are in effect "IOUs," but from the standpoint of the buyer they are the same as regular shares. It's a complex and murky issue. We just had temporary regulations portrayed in this article as permanent. That is how complicated. It does not lend itself well to an illustration, but I commend you for trying. No disrespect intended in my criticism. --JohnnyB256 (talk) 01:20, 2 November 2008 (UTC)
 * Okay, so the seller sells shares, then fails to deliver. The buyer gets "IOUs" for shares that look just like normal shares to the buyer, and pays the seller. Later after the price falls the seller has to buy shares to fulfill this debt, right? How does that part work? Dcoetzee 20:14, 2 November 2008 (UTC)
 * The SEC has explicitly stated that short selling does not create "counterfeit" shares. You say that the buyer cannot distinguish these shares from normal shares.  What about statements from the Share Registry?  What about dividends?  What about voting rights? So far, none of this makes very much sense at all.  I'm beginning to wonder if there's anyone here who knows anything about short selling other than what they read on the news. cojoco (talk) 11:12, 4 November 2008 (UTC)

Lead
The lead is one sided and naive by not including ANY reference to critics who contend that naked shorting is not a significant factor in the markets, and that it is being targeted by regulators as a kind of red herring. I think that your own rules, under the NPOV policy and the policy on leads that I have also examined, require that this POV be placed in the lead, and not buried in the "media reaction" section. This is but a sampling of skepticism on this subject that stretches back some years and has been expressed by numerous distinguished market observers. There also needs to be more content establishing that the blame-casting by Fuld was widely derided, not just on the shorting business but generally. --JohnnyB256 (talk) 12:49, 1 November 2008 (UTC)
 * The POV is noted in the initial statement that the SEC has denied claims that it is widespread. We could say "SEC and other commentators," but I wouldn't see this as necessary or better.  The sentence you added simply repeats this, and as I said above, makes a one-sided argument where it isn't necessary; it would be simple here simply to note that commentators dispute the prevalence of the practice and whether the regulations were needed, without presenting it as an argument of just one side.  Regardless, I don't see why either point needs further discussion in the lead. Mackan79 (talk) 04:45, 2 November 2008 (UTC)
 * As it reads now, it seems as if the SEC is just denying the claims that regulations are poorly enforced, and says that commentators say that NSS helps liquidity. This minimizes and misstates the more prominent argument, noted in the citations, that this is a technical issue and not a substantive one in the markets. This sentence needs to be strengthened. I will add to the sentence what you arbitrarily removed. Yes, it is an argument of just one side and that is precisely the point! It is an opposing view, a major one, and omitting it violates NPOV. As it reads now it totally one-sided and omits a major viewpoint. On this I cite WP:LEAD and WP:NPOV. WP: LEAD: "summarize the most important points—including any notable controversies that may exist." WP:NPOV: "NPOV weights viewpoints in proportion to their prominence."The fact that you disagree with this viewpoint does not make it unworthy of inclusion. --JohnnyB256 (talk) 12:43, 2 November 2008 (UTC)
 * There are many notable viewpoints that are not discussed in the lead. One of the contrary views not discussed is the one that naked short selling has or could play a significant role in current or future financial meltdowns.  However, the main views are covered.  Looking at your changes, they also remain redundant.  I'm not sure why you are focusing just on the argument that it is "poorly enforced"; the other argument was specifically that it is widespread, and that the SEC has denied this.  Again, you are also presenting as an argument that the regulations were not necessary, when there is no reason to present this as an argument of one side.


 * Aside from this, I've just looked over your other changes to the lead, and do not see how they are an improvement. You've made it much choppier and less coherent, picking out specific points in the regulations  for reasons that are unclear to me.  Based on this, and not seeing that there was anything wrong with the previous version, I am going to replace it.  If you think there need to be changes to the lead, please discuss it and get consensus here.  Also, please don't make accusations about my "viewpoints," as I have not shared them here, since they are not relevant.  Mackan79 (talk) 04:32, 3 November 2008 (UTC)


 * You say 'the other argument was specifically that it is widespread, and that the SEC has denied this.' No, the 'other argument'  is quite more than that. The other side of the argument is that it is not an issue at all, that it is essentially a red herring. The previous language is POV by failing to fully and accurately state the other side of the argument. In addition to doing that, you removed  sentences indicating that some of the changes were temporary and some not. I've put it back. --Janeyryan (talk) 13:42, 3 November 2008 (UTC)

Temporary vs. permanent: Another issue I've corrected is exactly what is temporary and what is permanent in the SEC rulemaking. Some rules were made permanent (options market making and antifraud) butthe really imporant one, the T+3 rule, is temporary. This recent article in Traders Magazine gives the details on the temporary status of T+3: http://www.tradersmagazine.com/news/102374-1.html. There was the same issue in the Japanese section. Editors: in dealing with this complex issue I think you need to show care in distinguishing between temporary and permanent rules. Until I caught it there was a misleading if not inaccurate picture being given to your readers.--JohnnyB256 (talk) 14:41, 1 November 2008 (UTC)

What's the point of protecting the article if Janeryan and JohnnyB256 can arbitrarily modify it without discussion? --66.135.235.254 (talk) 23:34, 3 November 2008 (UTC)

Litigation section
Another, disgraceful problem that I just stumbled on. It is stated flat out that "while there is no dispute that illegal naked shorting happens, there is a fight as to the extent to which DTCC is responsible." The footnote cites a law journal study authored by a "JP Whalen et al." But when you go to the actual study, you see that this study is authored by James W. Christian, Robert Shapiro and, last but not least, our Mr. Whalen. So to say it is Whalen et al conceals the two primary authors of the study. That is significant because the principal authors of the study wst a lawyer suing the DTCC (James W. "Wes" Christian) and a consultant to Christian (Shapiro). See http://www.dtcc.com/news/press/releases/2006/shapiro.php and http://www.marketwatch.com/news/story/naked-short-selling-center-looming/story.aspx?guid={4B3FE0D6-1EFF-4986-83B3-54F21475CA1C} See also the fine print in the study above the bio of Wes Christian, and Shapiro's description of his consulting work in his bio and his referring to Christian as a "colleague." I have placed text in the article to point out that this "no dispute" statement was made by people engaged in litigation against the DTCC, but I think this statement and study should simply be removed. The fact that this study is included, without describing the litigation involvement of the principal authorship of the study, is indicative to me of the serious bias problems of this article, from the lead on down. I wish the people controlling this article will please have pity on your readers and please don't shortchange them in this manner.--JohnnyB256 (talk) 13:26, 2 November 2008 (UTC)


 * The introductory sentence at issue is unencyclopedic and should go. The citation was pinned on by an IP, in an act of mischief that was uncaught for many months.. --Janeyryan (talk) 21:54, 2 November 2008 (UTC)
 * I don't know if the source should have been added, but it appears that the sentence was there before. Is the sentence itself disputed?  I wasn't aware people dispute that there is ever illegal naked short selling.  The SEC often talks about illegal naked short selling, which is why I've considered the disagreement to be more over when it is or isn't illegal. Mackan79 (talk) 04:48, 3 November 2008 (UTC)


 * I'm perplexed, to say the least, that you changed back the citation in a way that misidentified its authorship. The issue is moot as the beginning sentence does not add anything at all, as it is not written in a neutral encyclopedic style, so I've taken it out. If you want to add a neutral sentence please do so, but please don't edit war by using the rollback tool. I've also identified Shapiro further in the story as a litigation consultant to the industry, adding the source thankfully found by JohnnyB256. To simply identify him as a 'former undersecretary of commerce' without describing his present role as a litigation consultant is simply inaccurate. --Janeyryan (talk) 13:08, 3 November 2008 (UTC)

ooops, I hadn't noticed that the discussion had moved to the "Litigation Section (redux)" section below. Sorry, I moved my comment there. --Enric Naval (talk) 15:17, 8 November 2008 (UTC)

Why is the Talk Page protected, and the Article not?
I just noticed the Naked Short Selling article had some stuff deleted on it by a brand-new user, Refuse the Line, because the article itself is not protected. However, this talk page appears to be so. Why isn't the article itself protected too? Thank you! cojoco (talk) 01:07, 3 November 2008 (UTC)


 * The article was previously semi, but that fell off a month ago after the full block expired. In my opinion, it should be re-protected to semi. In the meantime, I'll remove the protection from this talk page. Cool Hand Luke 01:10, 3 November 2008 (UTC)


 * Good point, Cojoco. I will institute semi-protection.  Risker (talk) 01:11, 3 November 2008 (UTC)

Editing and article probation
I am concerned that the edits by and  do not comply with conditions A and C of the the current probation on this page.
 * Condition A: First, both accounts are newly created and have quickly found these articles.  Janeyryan has less than 250 edits, but these are almost entirely among Wikipedia controversies.  This suggests that it is not the user's "sole or main account" per condition A.  JohnnyB256 also has less than 250 edits; while these are focused on financial topics, they are also heavily within the area of this probation.


 * Condition C: Second, the accounts appear to be engaged in advocacy, contrary to condition C.  This includes JohnnyB256's unnecessary comments about Patrick Byrne. ("Mr. Byrne no doubt is pleased that his pet crusade is given one-sided treatment, but you are doing a disservice to your readers.") ("I think what you have here is an article that while it pleases your contributor Mr. Byrne is misleading to readers and skewed.")  It also includes unnecessary and similar comments by both accounts about other editors ("No, you don't want to, you just want to remove opinions with which you disagree.") ("The fact that you disagree with this viewpoint does not make it unworthy of inclusion.")  It has also included editing of the article. (in the last one, fine if you want to attribute a statement, but not to actively undermine its credibility; nevertheless the other account is now continuing in this same approach with Robert Shapiro.

The last edit, linked immediately above, leads me to raise this, as both Janeyryan and JohnnyB256 are now edit warring over the same material. The edit is problematic for several reasons: 1. It removes a sourced statement that the SEC has now prohibited the practice, and replaces it with a statement that the SEC has enacted a temporary rule about T+3; this ignores the major coverage of the issue, and was not supported in talk. 2. It removes the sourced context relating to the failure of Lehman Brothers. 3. It replaces this content with a reference to another point in the new regulations, different from the one relating to T+3, resulting in an inconsistent paragraph. 4. It replaces a redundant statement about some commentators viewing the practice as "insignificant" in the markets, despite disagreement in talk. 5. It adds a questionable statement to undermine Robert Shapiro, apparently on the premise that being a consultant represents a COI. 6. It again removes content relating to the DTCC's involvement in naked short selling, over disagreement in talk.

I have been attempting to assume good faith, but at this point it seems this needs some more eyes in order to get productive editing of the article back on track. Mackan79 (talk) 02:20, 4 November 2008 (UTC)


 * Janeyryan has said that this is his one and only account "since the dawn of time," so you're assuming bad faith here, Macken79. However, given that this is the account's first edit (topic: Wikipedia Review, complex formatting: perfect), I think some skepticism is warranted. After all, this page was freely edited by the sockpuppet User:Bassettcat until that user slipped up just once. I note that some of Janeyryan's first edits were reverting to Bassettcat's versions.


 * Given this history, I propose that we take this to WP:AE. I believe that our current controls make enforcing this arbitration mandate impossible. My suggestion is that all accounts created after the March 2008 Mantanmoreland Arbitration be banned from editing the mainspace of this article (and related articles) unless their identity can be positively established by a checkuser. Until then, they are free to use the talkpage, as are all other accounts, including our resident COI editors. Cool Hand Luke 02:35, 4 November 2008 (UTC)

You can do that, I imagine, or you can discuss the actual content of this article and how it should be improved. I am also struggling to assume good faith, but what I see are two editors on the opposing side of a content dispute, attempting to ban editors from an article who disagree with them.

My editos were aimed at correcting bad edits by Mackan79, in which he evidently used the rollback tool to turn good content into bad content. I objected to two edits by Mackan, who indeed engaged in edit warrring--not myself. In this edit Mackan79 changed correct content into incorrect content. The previous edit by JohnyB had made clear that some of the rules were temporary, not permanent. That is a significant fact. This was JohnnyB's language:

In the United States, naked short selling is covered by various SEC regulations, including a temporary rule issued September 2008, terminating July 31, 2009, that require delivery of shares within three days of a trade.

This was Mackan79's: In the United States, naked short selling is covered by various SEC regulations which, as of September 2008, prohibit the practice.

All reference to the temporary nature of these regulations were removed.

I read through Mackan79's comments above three times and I still do not understand how he justifies that edit. He also, in a subsequent edit, reverted Johnny's edit correcting the authorship of the Houston Law Review. JohnnyB's edit was correct. The two principal authors were an attorney representing litigants and a consultant to the attorney, as stated by reliable sources and the article themselves.

Again, I am confused by Mackan's defense of his edit except that he does not feel that thr ptofessional roles of these two persons is worth noting, to the point of changing the footnote to remove their authorship of the study even though they are the two principal authors of the study in question.--Janeyryan (talk) 02:57, 4 November 2008 (UTC)
 * Actually, I don't entirely disagree with these edits. The Shapiro bias is important to note. I just believe that&mdash;given the history of this article&mdash;we should introduce controls to prevent further abuse. Cool Hand Luke 03:17, 4 November 2008 (UTC)
 * In that case I am confused, as to why you would react to edits you agree with (or don't disagree with) by moving to an enforcement mechanism. IF these are constructive edits, then the editors making them should be encouraged and discouraged. I have actually avoided this article because of the hostile treatment I have somtimes received. If you agree with the edits, then I would encourage you to revert Mackan's recent edits, in which he again omitted reference to some of the rules being temporary, removed the reference to Shapiro as a consultant, and so forth. I am encouraged that he removed reference to the Houston Law Review article, but I feel that his other changes were not constructive.--Janeyryan (talk) 03:23, 4 November 2008 (UTC)
 * I sometimes also agree with Patrick Byrne's suggestions, but I'm adamantly opposed to him directly editing the article. The main problem with our controls is that this article continues to be a target for Mantanmoreland. We should ensure that's no longer the case in order to get our encyclopedia back. That was the point of the Mantanmoreland ArbCom. Compare WP:BATTLE&mdash;this article should not be a battleground for people to act out their off-wiki dispute. Cool Hand Luke 03:26, 4 November 2008 (UTC)
 * I don't feel that Patrick Byrne's status as CEO of Overstock, alone, disqualifies him from either contributing or editing this article. It is, rather, his behavior, his advocacy, which apparently would be a violation of the article probation. In another article that I occasionally look in on, COI also is an issue and it is used as a bludgeon in content disputes, as it sometimes is here. Rather than get caught up in worries about COI, or engage in witch hunts, I think it is more constructive and less stressful to concentrate on the content of edits. Were new editors not permitted to edit here, than JohnnyB's good edits would not have been made. My suggestion is that, if you agree with his edits, that you revert Mackan's recent changes which in my view made the article worse, not better.--Janeyryan (talk) 03:44, 4 November 2008 (UTC)


 * I take it, then, that you disagree with the frequent denouncements of Byrne that occur on this talk page?
 * I've restored the material that I think should be retained. Expert witnesses are often highly compensated, a fact that's universally explained to juries. There's no reason we shouldn't mention the potential bias here. However, I agree with Macken79's other edits. All editors are encouraged to make these kinds of suggestions; this is true even for articles that are fully protected, and there's no reason it shouldn't be true here. If Wikipedia ever gets around to implementing flagged revisions, the whole site will be something like this one day.
 * I just want to stop the direct POV-pushing editing that has occurred in the past. Mantanmoreland's self-restraint and our control structures appear to be incapable of keeping him from pushing his agenda here. If we take that option off the table, I imagine a environment where Bryne, Mantanmoreland, and others will be able to make constructive suggestions that will be incorporated into the article by impartial editors, sans POV. Cool Hand Luke 04:05, 4 November 2008 (UTC)

Edits in detail

 * Sorry, I did not see your comments above. I would encourage you to address the specific edits in detaila nd why you agree or disagree with them. Let's focus on one issue for now: why do you believe that the temporary nature of the NSS regulations should not be mentioned in the article?--Janeyryan (talk) 04:26, 4 November 2008 (UTC)

(unindent) That's also a good point. I don't think it needs to be mentioned in the lead (as it does now), but I didn't realize that it isn't currently mentioned in the body. The structure of this article bothers me. It's unintuitive. Cool Hand Luke 04:35, 4 November 2008 (UTC)


 * Regarding the Shapiro edit, the problem is the manner in which it was done. A statement had been in the article: "While there is no dispute that illegal naked shorting happens, there is a fight as to the extent to which DTCC is responsible."  At some point an anon IP added a ref for this point.  JohnnyB256 then changed it to state: "In a law journal article, an attorney and consultant to companies suing the DTCC stated that while there is no dispute that illegal naked shorting happens, there is a fight as to the extent to which DTCC is responsible."  As I said in undoing it, attributing is fine, but you don't attribute in a way that makes a joke out of the article.  This isn't an arguments section, but the litigation section, and if a point needs to be cited to "an attorney and consultant to companies suing the DTCC" then the point shouldn't be there at all.  In any case, from a brief look, Luke's version seems to be fine by me. Mackan79 (talk) 04:34, 4 November 2008 (UTC)
 * I agree, the intermediate version was unacceptable. If we have zero confidence in a proposition, we shouldn't cite it like that. In that sentence's case, you're right that no one seems to deny the existence of naked shorts. The dispute is about whether they're illegal and whether they're somehow pernicious in a way regular shorts are not. Cool Hand Luke 04:41, 4 November 2008 (UTC)
 * I actually tend to agree that it was not optimal to phrase it as JohnnyB did. I removed the sentence entirely, as I felt it added nothing and was unencyclopedic. and not phrased in a neutral fashion. What troubled me more was that the authorship of the article, falsely stated in the footnote, was made correct by JohnnyB (who you now wish to prevent from editing here), and made incorrect by Mackan. That is unacceptable editing and unjustifiable in my opinion.
 * The lead paragraphs remain unbalanced. Again, I have not seen any substantive discussion of the lead, which does appear to understand and mischaracerize the opposition to the anti-NSS point of view. One might quibble with the language, but the essential point is that the lead is unbalanced, as it fails to adequately state that that there is a substantial body of opinion which holds that NSS is essentially a non-issue from every perspective. That point of view is given short shrift in the lead paragraphs. That imbalances the entire article.--Janeyryan (talk) 04:52, 4 November 2008 (UTC)
 * Can you explain and give an example of the view that it is a nonissue from every angle? I don't disagree that this view exists, but I question that it needs to be included more than other views that aren't currently discussed in the lead, such as the one that it is a monumental issue.  For instance, we quote the DTCC's chief spokesman as saying "We're not saying there is no problem, but to suggest the sky is falling might be a bit overdone."  Thus, the view you're talking about seems to say that even he overestimates the problem.  Mackan79 (talk) 04:56, 4 November 2008 (UTC)
 * Yes, that is correct. The sources that took a stronger position have largely been banished from the article. I would have to dig back into previous versions and find them. However, I believe that position is made in two of the remaining sources still allowed; the Jenkins column and the Barron's editorial.--Janeyryan (talk) 05:09, 4 November 2008 (UTC)

Mackan79's proposal
My current approach is this: I don't know if this would require an arbitration enforcement or not, but I think it is a fair approach to the articles at this point. I can address the specific edits in further detail in a moment. Mackan79 (talk) 04:04, 4 November 2008 (UTC)
 * 1) Given that a.) these editors arrived not long ago to edit solely or primarily on Wikipedia controversies, b.) these editors appear to have some history with Wikipedia and are clearly promoting a viewpoint within this article, c.) the probation was clearly intended to stop editing of this nature, and d.) these editors seem to be familiar with the history of these articles, the editors should largely expect their approach to come under review.
 * 2) Given these same factors and particularly the aims of the probation, I do not feel that an equal deference can be given to their contested edits.
 * 3) Given these same factors and particularly the aims of the probation, editors who are new to the page should be asked to rely heavily on the talk page, and not join together in reverting other editors.


 * Your 'fair approach' would mean that you and like-minded editors who support your POV would control the article. No more need be said.


 * Cool Hand Luke, can you please explain your position on the edits to this article by Johnny B and myself? You returned the Shapiro language but are silent on the others. If you agree with other edits, then I think it behooves you to say so. Otherwise, I must assume you disagree with the edits. You hsbr said that you favor banning new editors on the basis of "BATTLE," but it seems to me that the actual effct would be to remove editors with whom you disagree. I see only one point of agreement. Are there more? I think it is important to share agreement to reach consensus. --Janeyryan (talk) 04:13, 4 November 2008 (UTC)
 * The effect is to prevent new accounts with no history from showing up, teaming up, and editing tendentiously, on an article that has previously been disrupted by a large number of sockpuppets. Can you suggest another way to prevent this? Mackan79 (talk) 04:18, 4 November 2008 (UTC)
 * That is how you see it. What I see is a content dispute and Arbitration Enforcement mechanisms being brandished to gain advantage.--Janeyryan (talk) 04:26, 4 November 2008 (UTC)


 * As above, I agreed with Macken79's other edits. Believe it or not, I don't have any strong POV here. I'd never heard of this topic until Durova, Alanyst, and others made some noise about Mantanmoreland being a sockpuppeteer. I tend to be an inquisitive person who tries to verify facts&mdash;that's part of the reason I joined Wikipedia&mdash;and I'm fairly proud of the joint work we put into that case. I do believe that Mantanmoreland used his accounts to shape articles after his chosen POV, obscuring his off-wiki conflicts of interest in the subjects. Unfortunately for you, you chose to establish your first and only account "since the dawn of time" not long after Mantanmoreland was discovered to be editing in violation of ArbCom's mandate.


 * I'm not trying to ban users of any particular POV. I would like both you and JohnnyB to stick around, just like I encourage Patrick Byrne to stick around. I note that I have forcefully urged him to stay off the mainpage of this and related topics&mdash;I'm not edit warrior on his "side" of the dispute. I think Macken79's proposed edit restrictions the best way to enforce ArbCom's article probation. This is a sincere belief unrelated to any POV I might have about the subject. We must take edit warring off the table so that Mantanmoreland, or any POV pushers in this field, no longer have incentives to create socks. Cool Hand Luke 04:28, 4 November 2008 (UTC)


 * sorry, but banning editors of a particular POV is precisely what you and Mackan are seeking to do. This is aimed at myself and JohnnyB.


 * Let's stop discussing me and you and 'Mantanmoreland' and resume discussing the article. OK? For one thing, it is absurd to in effect discuss, in the article pages, topic banning of editors who have done nothing wrong. Let's be frank: that is what you are proposing here. Secondly, the purpose of the article pages is to discuss the article, not the editors. I think that is unseemly and should not be permitted, no matter how strong or not strong your POV is on this issue.--Janeyryan (talk) 04:52, 4 November 2008 (UTC)


 * Nonsense. I've told Byrne not to edit the mainspace, and now I'm asking that you and all other new users don't either. Please understand that this is not a WP:BAN.
 * This article is under a special parole from an Arbitration decision, so unfortunately it is impossible to discuss without mentioning the Mantanmoreland ArbCom. I agree that WP:AE is a more appropriate forum, so perhaps we should take it there. Cool Hand Luke 04:57, 4 November 2008 (UTC) But before we do, I would appreciate if other editors weigh in. I don't want it to be a premature proposal. Cool Hand Luke 04:59, 4 November 2008 (UTC)
 * No, I object to further such discussion here as inappropriate use of article talk space.--Janeyryan (talk) 05:09, 4 November 2008 (UTC)
 * Fine with me. Other editors who frequent this page should weigh in. Cool Hand Luke 05:18, 4 November 2008 (UTC)
 * To weigh in on content, not on contributors. 'AE' should not be brandished as a bludgeon in a content dispute. There are other fora more appropriate and they should be used. There is enough to discuss here without getting into the tangled history of this and that.--Janeyryan (talk) 05:22, 4 November 2008 (UTC)


 * We're not talking about you (or at least I'm not). This isn't a proposal about contributors. It's about the article. We're proposing an editing restriction on the article akin to a kind of semi-protection specially tailored to the past abuse that has demonstrably occurred here. The talk page is an appropriate place to discuss such proposal. Cool Hand Luke 05:26, 4 November 2008 (UTC)
 * Oh please. This was commenced by Mackan79 after he edit warred with JohnnyB, and was aimed explicitly at myself and JohnnyB. Your constant references to Mantanmoreland and your removal of yourself from editing of the Gary Weiss article indicate to me that you have a strong POV on at least some aspects of this. I think you should cool off and desist, and take this to the appropriate forum, Arbitration Enforcement, if you feel so moved.--Janeyryan (talk) 05:34, 4 November 2008 (UTC)
 * I have a COI with regards to Gary Weiss, and I find it astonishing that you chastise me for removing myself from that topic. I don't have a view on naked short selling, so please don't "oh please" me. I'm not going to respond to further trolling, but others should weigh in on this proposal. Wikipedia is not supposed to be like a court; it should be a collaborative forum, so users should get to comment on good faith proposals to end an established pattern of abuse. Cool Hand Luke 05:47, 4 November 2008 (UTC)
 * Please don't engage in personal attacks. I am not 'trolling' and I don't think you are either. No, I think your recusal is a good thing. But if you have a COI you should disclose what it is, and perhaps your recusal should extend to other and related articles. What I object to is your implying that you are a neutral editor making a neutral proposal, when that simply is not so. You are an active and involved editor/talk page contributor in these articles. We have crossed swords in the past, and over very much the same kind of innuendo you are raising concerning my newness here. I am sorry that I am new, but I cannot help that. Even though new, I am familiar enough with article talk pages to know that it is not proper to discuss what is in effect a topic ban in article talk pages. Article talk space is to discuss the content of the article here, not whether me or another editor or a class of editors should or should not edit in the mainspace. That is plainly aimed at me and another editor, and I think it is not appropriate when there are so many other places you can take up the issue.--Janeyryan (talk) 06:18, 4 November 2008 (UTC)

The topic of discussion is whether Macken79's proposal above will improve the neutrality of this article over the long run. He proposes that we limit new editors' ability to edit the mainspace of this article. I posit that it will effectively remove the incentives for sockpuppetry that have demonstrably plagued this topic. Are there any comments or proposed refinements of this proposal? Cool Hand Luke 06:27, 4 November 2008 (UTC)
 * I proposed it in part, but partly also was suggesting an approach that may not need formal enforcement if it's accepted, and as long as people know what is going on. I'll repeat I find it concerning that Jayneyryan and JohnnyB256 have both recently shown up, shown significant investment in this issue, and specifically displayed a grudge with Patrick Byrne and his alleged control of the article.   I believe this is largely the type of editing that the probation was meant to end.  If the editing is collegial, however, and respects concepts such as gaining consensus for contested changes, then maybe we can still avoid further enforcement mechanisms and so on.  {Of course I'd also still welcome any other input or ideas from those who have been looking on, including Risker and others).  Mackan79 (talk) 08:41, 4 November 2008 (UTC)
 * There has been a lot of discussion on these pages about the minutiae of personalities, reports, opinions and soundbites from the organizations involved, but very little on explaining the mechanics of Naked Short Selling itself, which is after all what this article is supposed to be about. I feel like there is some kind of conspiracy of silence around here, as if describing how the process actually works will make the whole edifice collapse like a house of cards. cojoco (talk) 11:48, 4 November 2008 (UTC)
 * I agree. I've had trouble with the concept for a long time, and I'm sure I'm not alone. Occasionally I drift by to see if the explanation is clearer and I haven't seen any simplification. Sorry to not be more helpful myself in this article, but it is just too complicated.--Stetsonharry (talk) 12:37, 4 November 2008 (UTC)
 * Well, I've made my go at clarifying the lead, attempting to go beyond the usual line that naked shorting is when you sell short but don't borrow, and then because you don't have the shares you simply fail to deliver. We explain one reason that naked shorting can happen is because, even without borrowing ahead of time, a transaction can still take place either a.) within three days, or b.) even after the three day delivery requirement.  E.g., the seller "sells" a car Monday, gets it Tuesday, and delivers it Wednesday.  To me, this makes it about as clear as it can be that naked short selling can basically happen because selling a stock is a complicated and multi-day process, even when done right, thus creating the possibility for things to happen out of the order in which they were supposed to.  And of course then that this can have any number of consequences.


 * Some of the sources do suggest that you can't understand naked shorting without understanding the entire stock settling system, so that might be part of the frustration. I'm not sure, but compared to most of the articles I've seen I don't think this one is so bad.  Mackan79 (talk) 07:31, 5 November 2008 (UTC)
 * I agree, all of this is linked to settlement, and so many of the complexities are due to the fact that much of the US market is still manual. Still, that begs the question: Why??? Markets in much less advanced countries can perform fully electronically, from share registrar to trading system, and this greatly limits the scope for naked short selling shenanigans. I've been reading up on the SEC FAQ's, which are very helpful as far as they go, but it all still sounds very dodgy.  If my interpretation is correct there are (were) no consequences  for the dealer until T+16.  If you bought stock immediately before dividends were issued, would you miss out on them if the other side was a short sale and settlement did not occur between T+3 and T+16? If so, I think you'd be understandably miffed.  The SEC documents also mention that that some short sales are never delivered; what are the consequences for the poor buyer in this case? cojoco (talk) 10:30, 5 November 2008 (UTC)
 * There aren't any consequences for buyers when there is a failure to deliver. That is one of the many misconceptions that plague this complex issue. I'd suggest perusing the SEC "frequently asked questions" on Reg SHO, which I think is linked in the article somewhere. Dividend payments are not affected. In regular short sales, people whose shares are borrowed receive "substitute payments" that are the same as dividends. At one time sub payments received a different tax treatment. Offhand I don't know if that is still the case. JohnnyB256 (talk) 00:05, 28 December 2008 (UTC)

Arbitration enforcement request about Naked short selling
See Administrators' noticeboard/Arbitration enforcement. Cool Hand Luke 03:05, 6 November 2008 (UTC)

Litigation Section (redux)
I've changed the beginning of the second paragraph, which had rent to the effect that 'there is no denying illegal naked shorting exists'. I feel that this language is not neutral, somewhat argumentative and unencyclopedic, and on top of that is not true. Pretty much every aspect of this entire area is disputed, and hotly so. It is presumptuous to say that 'no one' believes X in relation to this subject. it is also unecessary to make that point and has really no bearing on the DTCC litigation. I changed that to read that the DTCC's role is disputed, which is on point, neutral and accurate. Comments?--Janeyryan (talk) 05:15, 4 November 2008 (UTC)
 * Good, I can agree. If there are other problems I think this is the more careful approach we need. Mackan79 (talk) 08:17, 4 November 2008 (UTC)
 * There is plenty of data out there which shows massive short selling, more than the usual daily volume, in some stocks. The fact that a regulator has not yet decided to prosecute, and that there is little concrete information from cite-worthy sources, does not alter the reality of massive price manipulation.  There is also plenty of evidence that there has been a group of editors here who have been attempting to downplay the role of naked short selling in price manipulation, but fortunately there is plenty of cite-worthy data to support this.  Because of the previous editing bias in this article, we should treat with extreme scrutiny any statements which downplay the illegality of market manipulation, and the role of naked short selling. cojoco (talk) 18:50, 4 November 2008 (UTC)


 * (moved from other section)Apart from the attribution thing, it turns out that the sentence was originally from the WSJ[, which was the first source on the article, so it doesn't come from a tainted source. I re-added the christian source (with the full author list) to support the sentence further, as, at first glance, it's a discussion of the responsability of DTCC, on a law journal (not the best of journals, but, meh). --[[User:Enric Naval|Enric Naval]] (talk) 23:08, 7 November 2008 (UTC)


 * P.D.: As Cojoco says, there is plenty of sources saying that illegal NSS exists. The statement is totally true and, most importantly, verifiable against multiple sources. And, of course, that illegal NSS exists is very relevant to the DTCC litigation: if there wasn't any illegal NSS then DTCC would be automatically cleared of any wrongdoing. --Enric Naval (talk) 15:17, 8 November 2008 (UTC)


 * I've added a statement to the introduction that abusive NSS is illegal, and this is I believe beyond dispute. The illegality of abusive NSS deserves to go in the introduction because it is, basically, why there has been so much discussion on this topic and why we are all here.  NSS is not some dusty academic concept: it has been blamed for driving many small companies into bankruptcy, and has been implicated in the Bear Stearns and Lehman Brothers collapses. cojoco (talk) 17:33, 8 November 2008 (UTC)

Two opposite POVs
While it will not be news to old-timers here, I've just discovered Patrick Byrne's sandbox article on Naked Short Selling. I find it fascinating comparing his version with the current one, as there can be very different POV. As just one example, compare and contrast these two statements, one from PB's article, and one from the current WP article:


 * PB: The SEC estimates about 1% of shares that change hands daily, or about $1 billion, are subject to delivery failures. The SEC views this $1 billion/day number as a serious enough matter to have made two separate efforts to restrict the practice.

with the same fact in the current article:


 * WP: An official of the SEC said that "While there may be instances of abusive short selling, 99% of all trades in dollar value settle on time without incident."

It is clear from reading the references that both are well-sourced and quoted accurately, and both contain an identical fact. However, each contains some opinion as well, and these are polar opposites. It does seem that many sources for this article take a specific POV. Patrick Byrne includes two sections in his sandbox article, one for critics of Naked Short Selling, and one for defenders. Because there are such strong POV kicking around, should we adopt this structure for contentious parts of the WP article too? cojoco (talk) 10:55, 8 November 2008 (UTC)


 * That leads to false dichotomies, like listing the SEC under both critics and supporters (lol). Positions change over time, and they have a context that affects them. We should list the reasons of why X is bad or good, not make a list of people that state a reason.


 * What I have learned from medicine articles is that, when there is a lot of people stating lots of contradictory reasons, you pick only the most reliable/notable sources instead of trying to represent every single opinion, and, specially, you go for high-quality meta-analysis that sum up the situation so we don't have to make WP:SYNTHesis of dozens of sources on our own. It's too easy to list a lot of primary sources and wind up with the wrong conclusions and give too undue weight to a reasoning because you picked the sources incorrectly (in this case, primary sources = journal articles). So you would pick the conclusions of the analysis of the most reliable guvernamental agency instead of trying to sort out a dozen journal articles. --Enric Naval (talk) 18:59, 8 November 2008 (UTC)


 * I do not believe that this is appropriate in this case. I am not sure that it would ever be a good idea to "pick the conclusions of the most reliable government agency"; that would rather be like using the FDA to guide the drafting of medical articles, and I would be very surprised if this were actually the case.  With the current administration's "hands-off" attitude to regulation, the SEC sources read as placatory.  Aside from this aspect, which is merely my own opinion, there are also many details about the mechanics of NSS which the SEC reports simply do not address, as they are not written for the lay reader, and they never detail specific incidents.  Finance is not a scientific discipline, there simply are not the primary sources available to pick a reliable version of events.  Most financial transactions are confidential, so it is very difficult for non-participants to get any idea of what is happening.  There are clearly vested interests in this case which have demonstrated that they are not above gaming Wikipedia to put their POV.  There is also anecdotal evidence that there has been a similar bias in the main-stream media.  For all of these reasons, I don't think that Wikipedia should choose a "party line".  Although I can see why it is important in Medical articles not to "wind up with the wrong conclusions", I cannot see why that applies here; we do not need to come up with any conclusions, do we? At this stage, this article seems more like ancient history than science! cojoco (talk) 22:17, 8 November 2008 (UTC)


 * I think the problem here is that some interested parties have a great deal on the line (in lawsuits, for example), but that this is an otherwise relatively esoteric subject. Because of this, the sources are rare and often partisan.
 * Of the independent agencies, the SEC probably has a good claim to being the most independent. Since sources are likely to be very partisan and scarce, the SEC's views are a good approximation of NPOV, in my opinion. Cool Hand Luke 22:28, 8 November 2008 (UTC)


 * Should have addressed Enric's first point: I agree that it's funny that the SEC is cited by both sides. As there seems to be consensus that the SEC's views are a good approximation of NPOV, perhaps we should ensure that when the SEC are quoted we cite the SEC, not the selective quotes used by the partipants?  However, I wouldn't want to see this article restricted to information out of SEC reports, as we'd end up with very dull reading, and completely miss the point. I agree that we should list the reasons why NSS is bad or good, but one of the entertaining aspects of this article is understanding the POV of the actual participants, and understanding where that POV is coming from.  Entertainment is not WP's only purpose, of course, but I think to understand NSS properly it is very important to include the controversies which surround it.  Does the fact that there are lawsuits relating to NSS affect WP's coverage of it? cojoco (talk) 23:05, 8 November 2008 (UTC)


 * I agree with Enric and Cool Hand Luke. The analogy to medicine is apt. My head is spinning trying to make sense of this,--Stetsonharry (talk) 17:08, 25 November 2008 (UTC)


 * I think it is amusing that people are advocating using the word of a government agency as the final arbiter, and using medicine as a possible analogy. All this whilst FDA scientists are revolting against their own corrupt management.  Government agencies are unfortunately not immune to lobbying and corruption.  There are clearly many points of view here, many from well-regarded sources, and many conflicts of interest.  To be comprehensive, this article MUST present all relevant points of view. cojoco (talk) 03:04, 26 November 2008 (UTC)


 * I just noticed this discussion, and I agree with Eric Naval. I think that would be the best approach to this subject. JohnnyB256 (talk) 00:19, 28 December 2008 (UTC)

Singapore
Nothing in the cited source appears to support the statement that Singapore is "not fully banning the practice of naked short selling". Is it just taken as implied that any penalty short of capital punishment is not a full ban, or is there something else supporting this?87.254.91.148 (talk) 19:47, 16 November 2008 (UTC)


 * I'm trying to avoid WP:OR here. The source says that the penalties for doing it are going up, but the source doesn't say that it's being banned (or even that a ban is continuing). That's why I tried to hedge my bets there. (that, combined with the special "buying-in" market for those who fail to deliver by the settlement date. SirFozzie (talk) 20:05, 16 November 2008 (UTC)
 * But you've categorically stated that they aren't "fully banning" it. How does that avoid OR? If all you know is that there are fines proposed then why say more than that there are fines proposed? 87.254.91.148 (talk) 20:10, 16 November 2008 (UTC)
 * Actually, could you clarify the distinction between there being a fine for doing something and it being banned? If something isn't banned then surely there wouldn't be fines, though there might be license fees or duty or something. Or is that where it becomes important to distinguish fully banned from non-fully banned? What is that distinction? 87.254.91.148 (talk) 21:24, 16 November 2008 (UTC)
 * I've re-written the section, detailing the penalties for naked short sales in Singapore. Tell me what you think. SirFozzie (talk) 22:26, 16 November 2008 (UTC)
 * Looks very good to me. Only reservation would be "(short sales that are not completed by the settlement date)" - the whole article is about naked short selling, if we're using the term to mean something different suddenly at that point then we should probably use a different term instead. If we're just using the same meaning as through the rest of the article then no need to stop and define it here. 87.254.91.148 (talk) 23:23, 16 November 2008 (UTC)
 * Ok, I'll monkey with that section. SirFozzie (talk) 23:47, 16 November 2008 (UTC)

Structure of the article
This article seems to be mostly about the US, which may be fair enough (maybe it even makes sense for the lede to dwell so much on one jurisdiction), but having the section on "Regulations outside of the United States" sandwiched in between "Regulations in the United States" and "Regulatory enforcement actions" (in the United States) is just awkward. Shouldn't regulatory enforcement be a subsection under regulations for the relevant jurisdiction? 87.254.91.148 (talk) 21:17, 16 November 2008 (UTC)
 * I think the section on regulatory enforcement actions should theoretically include enforcement actions in other countries as well. So if we had such a subsection for the U.S., then presumably we would need one for the other countries as well.  That may be why it is how it is, though I'm open to other approaches.  Mackan79 (talk) 21:20, 16 November 2008 (UTC)

Reference to Japan Times Online
The link from Reference 53 (Kyodo News and Bloomberg, "Government orders curbs on 'naked' short-selling of stocks", Japan Times, October 29, 2008, p. 1.) appears to have expired. I was hoping to be able to tell from it what it means for the Japanese Government to "move up" the short selling ban. Anyone know? If nobody else understands what this means then maybe that wording needs to be removed or amended. May well only be me who's unfamiliar with this phrase though. 87.254.91.148 (talk) 21:44, 16 November 2008 (UTC)
 * has a good thing of it. They had already planned to put a ban in on Naked Short Selling on the 4th of November, however, instability in the market meant that they needed to move up (move forward) the date the ban was effective to October 29th. Does this help? SirFozzie (talk) 22:17, 16 November 2008 (UTC)
 * Yes, thanks for that. I still don't think it's immediately apparent from the article, but maybe that's just me. Also in that paragraph "...will run from Nov. 4, 2008 to March 31, 2009...", maybe should be something like "...was introduced with effect from Nov. 4, 2008 and will run to March 31, 2009..."? Just to get the tenses right. Thanks again. 87.254.91.148 (talk) 23:28, 16 November 2008 (UTC)
 * Better? SirFozzie (talk) 23:50, 16 November 2008 (UTC)
 * Yep, thanks 87.254.91.148 (talk) 23:56, 16 November 2008 (UTC)

After the Vote
"A ballot initiative in South Dakota, one voted on in the Nov. 4 elections, would have ended naked short selling in that state. This measure, known as The South Dakota Small Investor Protection Act, was defeated. The Securities Industry and Financial Markets Association of Washington and New York, had vowed to take legal action if the measure had passed."

I'm wondering: does it still make sense to include SIFMA's "vow" here at all? It sounds like a bit of campaign rhetoric, and now that the campaigning is over and the vote has been taken, the specific claims that were made before the vote seem un-noteworthy. Our theory is that "this ain't paper," but bogging dowbn the flow of an article in endless pointless detail ain't narrative, either. --Christofurio (talk) 05:22, 21 November 2008 (UTC)
 * It's not rhetoric, it's a notable association making a notable statement on the sobject of the article --Enric Naval (talk) 22:16, 21 November 2008 (UTC)
 * Doesn't sounds especially notable to me. But I suppose "different strokes" and all that Gary Coleman stuff. --Christofurio (talk) 21:59, 27 December 2008 (UTC)
 * Meh, I'm not sure it matters much in the overall scheme of things. The article has more bothersome issues. JohnnyB256 (talk) 00:00, 28 December 2008 (UTC)

I applaud the improvements, but this just makes me scratch my head - Patrick Byrne
On Thursday, the former SEC Chairman Cox appeared on TV and gave this interview: http://www.cnbc.com/id/15840232?video=935343729&play=1

Interviewer:                Let’s talk shorts. Harvey Pitt is former SEC chairman and founder and CEO of Kalorama Partners. Harvey, great to have you with us....Chairman Pitt, do we need to bring back the Uptick Rule? Would that make a difference here at all?

Harvey Pitt:                I don’t believe so. The Uptick Rule was almost non-existence in terms of its detrimental affects. There’s a very simple solution and the SEC has it and they know what is. It’s very simply this. If you want to sell a stock short you have to have a legally and forcible right to produce that stock on settlement day. That’s all it takes. If the SEC does that people will not be able to sell short unless they have actually first located and gotten their stock.

Interviewer2:              In other words that would do away with naked shorting right?

Harvey Pitt:                Absolutely, and naked shorting is what’s causing a lot of the problems in the market.

Interviewer2:              Because nobody is forced to deliver. Nobody must deliver. Too much of that going on.

Harvey Pitt:                That’s been the real problem. People in affect are just gambling. They’re assuming the stock price will go down. They then spread false rumors to help the stock go down, but they have no skin in the game because they haven’t committed to produce the shares that they purportedly are selling.

''And on Friday afternoon (November 21), the SEC announced that tomorrow, Monday November 24, the current SEC Chair Cox is holding a hastily-called teleconference with his counterparts in various countries regarding naked shorting. Here is an article in the Financial Times describing it'': http://www.ft.com/cms/s/0/51fb73ba-b761-11dd-8e01-0000779fd18c.html

Regulators to discuss short selling rules

By Joanna Chung in New York

Published: November 21 2008 01:04 | Last updated: November 21 2008 01:04

Global securities regulators will gather on Monday to discuss rules on short selling and disclosure of credit derivatives, the head of the US Securities and Exchange Commission said on Thursday.

Christopher Cox, SEC chairman, said the meeting, to be held via teleconference, would address “urgent regulatory issues in the ongoing credit crisis.”

The announcement came during yet another tumultuous day of trading in global stock markets.

“In addressing turbulent market conditions, it is essential not only that regulators act against securities law violations, including abusive short selling, but also that there be close coordination among international markets to avoid regulatory gaps and unintended consequences,” Mr Cox said in a statement on Thursday.

The International Organization of Securities Commissions, which includes securities regulators from around the globe, will consider the effectiveness of their recent actions to reduce abusive short selling, without hurting legitimate shorting...

Mr Cox said regulators will explore “possible coordination” on rules relating to naked short sales – when shares are sold without being borrowed first– in particular with regard to position reporting and delivery and pre-borrowing requirements.

''So I'm sure I am being dense about it, but here goes: you have the former head of the SEC saying on CNBC, "naked shorting is what’s causing a lot of the problems in the market." And the FT, on "another tumultous day of trading in global stock markets," describes the current head of the SEC calling a next-day meeting of his worldwide counter-parties, the International Organization of Securities Commissions, in order to address "urgent regulatory issues in the ongoing credit crisis." The specific mission the Financial Times and Chairman Cox name is, "Mr. Cox said regulators will explore 'possible' coordination' on rules related to naked short sales."''

And in the face of these facts, the article still sticks to old (and often unintelligible) bromides that downplay this:

''Reporting by major media outlets has been mixed. While concern expressed by the regulator has been echoed by journalists, some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings. Others have discussed naked short selling as a confusing or bizarre form of trading...''

''Reviewing the SEC's July 2008 emergency order, Barron's said in an editorial: "Rather than fixing any of the real problems with the agency and its mission, Cox and his fellow commissioners waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there's no dead bug." Holman Jenkins of the Wall Street Journal said the order was "an exercise in symbolic confidence-building" and that naked shorting involved technical concerns except for subscribers to a "devil theory".''

''I am not sure what to say: people do understand that there is a global financial meltdown occurring, right? And they understand who Harvey Pitt is, and the fact that he has said Problem X "is what’s causing a lot of the problems in the market"? And now the current SEC Chairman, in response to our global "turbulent market conditions" (as he puts it) is hastily calling a teleconference of securities regulators around the world to discuss how they stop Problem X? Yet the current Wikipedia page suggests that the consensus is that there is no such thing as Problem X? Does that seem strange to anyone else here?'' 67.166.120.86 (talk) 08:33, 24 November 2008 (UTC)

Notice: probable restrictions in event of disruption
Following extensive discussion on a lengthy arbitration enforcement thread relating to the Mantanmoreland Arbitration case remedies, a plan of action to prevent sockpuppet disruption was created:

In the event of significant disruption:
 * The article will be full protected indefinitely
 * Only strictly non controversial edits may be made to the article, only with the assistance of outside administrators, after being requested with
 * The article will be copied to Naked short selling/sandbox.
 * Stable changes in the sandbox that are judged non controversial may be transferred with the above procedure.
 * A template similar to will be placed on the article.

On behalf of the involved admins,

--Tznkai (talk) 15:28, 24 November 2008 (UTC)
 * Put the sandbox at Talk:Naked short selling/sandbox so it's not in the main space. --Apoc2400 (talk) 16:43, 24 November 2008 (UTC)


 * That works, if necessary. I'd like to remind folks that the remedies have already been decided, and all that's being waited for is the reason to apply them. Hopefully everyone will keep this in mind. SirFozzie (talk) 19:42, 24 November 2008 (UTC)

"Global regulators focus on abusive short selling" - Reuters
Tonight brings this interesting article from Reuters, which opens:


 * "WASHINGTON, Nov 24 (Reuters) - Global securities regulators launched three task forces to study abusive short selling, unregulated financial products and unregulated financial entities such as hedge funds, the U.S. Securities and Exchange Commission said on Monday. "The working groups were established amid volatile market conditions and designed to support work of the world's 20 largest economies, which have already agreed to step up oversight of the troubled financial system. "One group will focus on aligning global regulators' approach to naked short selling, the SEC said."''

That would be the same naked shorting of which the current Wikipedia page says:


 * "However, the SEC and others have also defended the practice in limited form as beneficial for market liquidity" (citing an SEC statement posted in 2005);


 * "some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings" (Citing an April 2006 Wall Street Journal column);


 * "Others have discussed naked short selling as a confusing or bizarre form of trading." This attempt to downplay the issue is simply dishonest, citing as it does a September 22, 2008 Time Magazine article by Claire Suddath which is not, in fact, in the least equivocal. What she actually wrote is, "There's also something called naked short selling, which is a short sale that occurs before the seller has actually borrowed the stock. If the seller can't borrow the shares in time, it's called a 'failure to deliver' — a practice that has been illegal since the SEC was founded in 1934, although investors have long found a way around the ban. Some failures are accidents; a computer glitch here, an unexpected difficulty there. But many are done on purpose, when the seller has no intention of following through with the deal. This does reduce a stock's price — all these people are selling, but no one is buying because there's not actually anything to buy — and has been illegal since the SEC was founded in 1934, although investors have long been able to find ways around the ban. If short selling is the sale of something you don't own, naked short selling is the sale of something that may not even exist." How can that be accurately cited to downplay things by writing, "Others have discussed naked short selling as a confusing or bizarre form of trading"?

So, to perorate: we are in the midst of arguably the greatest financial crisis in history. A crime has been publicly implicated in that crisis by the former chairman of the SEC, the current chairman of the SEC, numerous commissioners, the former Chief economist of the SEC, numerous CEO's of major Wall Street banks, the public statements of the US Chamber of Commerce, the 8,500 member American Bankers Association, BIO (the association of biotechnology companies), presidential candidates McCain, Clinton, and Obama, Alan Greenspan, an Emmy-nominated Bloomberg documentary, and thousands of news stories. Now, securities regulators from the G-20 countries (which comprise about 75% of the world's economic activity) conduct an emergency meeting to address the crisis and make their #1 take-away to form a task force to stop this crime. Yet the Wikipedia page, which denied the existence of the crime for as long as possible, has magically gotten fixed in a state where it still contains bromides and pablum downplaying the crime and suggesting it is just an exaggeration of corporate officials and merely a "confusing or bizarre form of trading", etc.? News articles have appeared concerning the manipulation of this page by Wall Street forces and perhaps the Wall Street corporation at the heart of the scandal. And yet, none of you touch the page? Nobody cleans up the cluttered, outdated, and indecipherable statements, or notices that stories like Reuters make the slant of the article laughable?

I have seen many strange things in the last four years, but this is by God the strangest. PatrickByrne (talk) 05:26, 25 November 2008 (UTC)

"US equity market – Fails to deliver: The naked truth" - EuroMoney
"Robert Shapiro, former economic adviser to Bill Clinton, chairman of Sonecon and an adviser to the presidential transition team of Barack Obama, believes there is sufficient evidence that naked shorting accelerated the collapse of Bear Stearns."

When systemic corruption of the US capital market is becoming the stuff of lead articles in respected foreign journals, is that bad?

When the US Treasury Secretary, SEC Chairman, president, president-elect, presidential candidates, countless Senators and Congressional representatives, union leaders, US Chamber of Commerce, American Bankers Association, Wall Street have implicated as playing a major role in the greatest financial meltdown of our lifetimes, but "the encyclopedia that anyone can edit" hews to a now-discredited party line ("mixed", "some concern", " "not harmful", "prevalence has been exaggerated", "a confusing or bizarre form of trading"), is that bad?

I wonder, Is this what it felt like inside the Soviet Union as it disintegrated? Endless ditties about soaring wheat production chanted by bakers mixing sawdust into their bread?

If anyone reading this actually wants one article that gives the big picture on what is going on in the corridors of power in DC, this is it. It really takes no more research than reading this EuroMoney article, which I reproduce below.

http://www.euromoney.com/Article/2060049/US-equity-marketFails-to-deliver-The-naked-truth.html

Fails to deliver in the US equity market have exacerbated the sharp declines in share prices of financials.

US equity market – Fails to deliver: The naked truth Helen Avery Monday, December 01, 2008

IT IS NO surprise that the stock of Bear Stearns was heavily shorted in the run-up to its government-supported rescue in March, given its high leverage, poor risk management and the fact that its sub-prime bets had gone awry. Short-selling of any financial company would have been understandable by March this year. But just why on March 12, two days before the rescue announcement, almost 1.25 million Bear Stearns shares were shorted is a question that is a little harder to answer.

Up to that point in 2008, cumulative fails to deliver of Bear Stearns’ stock were only between 10,000 and 200,000 on any given day. On March 14, more than 2 million Bear Stearns shares went undelivered, and from then until the end of March, failures increased, peaking one day at more than 13.78 million shares. At the same time, from March 12 to the announcement on Friday March 14, Bear Stearns’ share price crashed from $61.68 to $30, dropping to $4.81 the following Monday.

That the precipitous drop in Bear Stearns’ share price coincided with fails to deliver has forced the market to properly address a long-standing question: are fails to deliver responsible for rapid share price deterioration? Had those failures been averted through better regulation would Bear Stearns have had a slower downfall, or even avoided outright collapse? And what of Lehman Brothers, Fannie Mae and Freddie Mac? Indeed, would all financial companies have enjoyed more resilient share prices, instead of seeing sudden, sharp price declines that were the final nudge to creditors and counterparties abandoning firms and driving them into bankruptcy?

The SEC has since attempted to bring a halt to naked short-selling, which gives rise to fails to deliver, but are its efforts sufficient?

Formal investigations are taking place to look into abusive short-selling of the stocks of both Bear Stearns and Lehman Brothers.

Robert Shapiro, former economic adviser to Bill Clinton, chairman of Sonecon and an adviser to the presidential transition team of Barack Obama, believes there is sufficient evidence that naked shorting accelerated the collapse of Bear Stearns. He says: "Bear Stearns failed because it went bankrupt. However, the pace of the collapse of the stock price was clearly accelerated by the enormous naked short-sale activity. There perhaps could have been a more orderly bankruptcy which would have preserved more of the assets."

John Welborn, an economist with investment firm the Haverford Group, agrees. "Fails to deliver added to the downfall of Lehman Brothers and Bear Stearns but were not, obviously, the whole story. Fails in Lehman Brothers were never significant enough to drastically alter the tradable float. In Bear Stearns, however, a torrent of fails began on March 12, before the public knew most of the bad news. The important thing to note here is that T+3 settlement essentially allows people to sell an infinite amount of any stock either to precipitate a bear raid or to capitalize on one already in progress."

Welborn continues: "A bear raid encourages panic selling by long holders. Once enough long holders are induced to sell, then there are plenty of shares available to cover any naked positions ex post. When the long holders have sold their positions and the naked short sellers have covered at a lower price, then the issuer faces a dramatically depressed market. That may make it difficult (or impossible) to recapitalize, especially if that issuer is in the financial sector."

Naked short-selling can be a confusing topic. A short-seller can only sell short if it can locate a source from which to borrow that security and therefore ensure delivery to the buyer – within the T+3 requirement. In most circumstances it is up to the prime broker to confirm whether it is possible to locate the stock and agree the transaction. If it is not possible to locate a stock, which can happen when certain stocks become illiquid, the trade is not allowed to take place. Market makers are an exception to this rule, and are able to lend stock without having located a source from which to borrow, in order to keep the markets liquid. This type of "naked shorting" is legal. If the source of stock is not a market maker, selling of a stock without having located a stock to deliver is illegal. Illegal, however, means very little when no enforcement penalties are in place.

Up until the end of this summer – not till September did the SEC enforce a crackdown – shorting without locating a source from which to borrow has suffered no penalty in the US, and brokers’ statements about efforts to locate them might be rather vague. "A broker can say he has located a stock, but that’s it," says a hedge fund manager. "What if five other brokers are looking at that same stock and telling their clients they have located it. Who will get it?"

And if there is no penalty for failing to locate and failing to deliver, then why not just fail to deliver? In equity markets if a short-seller does not deliver, he can simply wait until the stock price deteriorates sufficiently so that he will never have to deliver, and therefore is able to keep the money from his sale. Do short sellers, be they hedge funds or proprietary trading desks, do this often? No. But can they do it? Yes. And were some doing this during the peak of the financial crisis? Absolutely.

One former employee of regulator NASD says he knows of a hedge fund that was shorting Freddie Mac and Fannie Mae on a "massive scale", with no intention of ever locating stock. "His prime broker let the trade go through regardless as he was a large client of theirs," he says.

Illegal naked shorting, at its worst, can be implemented to bring a company down. In the present crisis of confidence among financial institutions, it can also simply be a means of jumping on a losing target. If a financial institution’s stock looked as if it was falling, why not short-sell without promising a buy-in within three days and hope that the fall is sufficiently large beyond three days to make an even bigger profit?

A glance at the fails to deliver in the financials market indicates that some investors applied this strategy. A comparison of the average daily reported shares failing to deliver between the first quarter of 2007 and the first quarter of 2008 for the US’s top financial firms showed a clear increase over the period. The data, compiled by Washington publication IA Watch, showed a 335% increase for Freddie Mac, a 226% increase for Citigroup, a 133% increase for Goldman Sachs, a 632% increase for Morgan Stanley and a 1,123% increase for Bear Stearns. One source even suggests that some market participants never intended to buy-in and simply marked their tickets "long" selling shares that they did not even own as they knew they would never have to make delivery.

Fails to deliver: Unheard voices

Fails to deliver in the US stock markets are not a new phenomenon. In response to an increasing number of fails, the SEC introduced Regulation SHO in January 2004. This required that a daily list be compiled of all securities that had more than 10,000 fails to deliver, or more than 0.5% of issued shares failing to deliver for five consecutive days or more. No penalty was introduced to deter fails but it was believed that publication of the list would act as a deterrent. The majority of the stocks on the list were those of small firms on the Pink Sheets or Bulletin Boards and many were regarded as companies with weak business models that were likely to see fails to deliver, as levels of shorting in the stock would be high.

For years, small companies affected, and larger companies such as Overstock.com (which has market capitalization of $500 million) have appealed to the SEC to prevent fails to deliver, claiming that their stock prices have suffered as a result of the practice. In April 2004, in a series of articles, Euromoney warned about the implications for larger household names if fails to deliver were not properly addressed. Shapiro agrees that larger companies are now being targeted. He says: "Ordinarily this doesn’t happen to large institutions with large stock floats but in a panic situation they become vulnerable along with those companies that are always vulnerable – smaller companies that are without large public floats. In a time of panic, mechanisms that allow the markets to overshoot (naked shorts) mean you can drive a stock into the ground."

Patrick Byrne, chief executive of Overstock.com, continues to lobby against fails but insists it is not a matter of self-interest. "The argument gets reduced to me being upset that stock in my firm might be being shorted. That was never the argument. Shorting has its place, I know. This has always been about why the government is ignoring the loopholes within the settlement system that are allowing for fails to deliver to occur."

He is certain, as are several other long-standing lobbyists, that the recorded number of fails to deliver is only a fraction of the true amount. "If two broker/dealers clear through the DTCC, and one fails, then the two brokers can turn that failure into a private contract to be dealt with outside the DTCC and it becomes ‘ex-clearing’. After that there is no register of that fail," says Byrne. If failures are as frequent as suggested, the idea of broker/dealers preferring to cancel out each other’s fails on a private basis is not beyond the realms of possibility.

Wes Christian is partner in a law firm representing 15 companies that allege that their stock price has been driven down by illegal naked shorting and fails to deliver. "We are aware of these deals being ex-cleared and of the failings of Reg SHO. Allowing failures to deliver creates artificial supply and that drives down prices," he says. The defendants in Christian’s clients’ cases are the majority of broker/dealers on Wall Street.

Fails to deliver in the equity markets are seen to create artificial supply. If a stock can be sold without having to be borrowed, there is a strong possibility that stocks in excess of those issued are being sold. Indeed, several companies, Overstock.com included, have reported instances of more owners of stock than is possible. On March 14 128% of Bear Stearns stock outstanding was traded. These "phantom shares" can be on-lent without delivery again and again, further diluting the stock.

It’s a situation specific to the US markets, say participants. Patrick Georg at Clearstream Luxembourg says there has been no decline in settlement efficiency in Europe. Alan Cameron, head of clearing, settlement and custody client solutions at BNP Paribas Securities Services in London, says he has seen little to indicate similar instances of fails to deliver in Europe. "Some European countries like Spain impose strict fines on failures to deliver, as does Crest. It’s not an issue here in Europe." Byrne adds that in Europe, the impact on reputation of failing to deliver is a deterrent. A head of a prime brokerage in the UK agrees: "It just does not happen in Europe. Securities get delivered in a timely fashion or business is lost."

However, settlement is faster in Europe than in the US. It is surprising that the US still operates a T+3 system. Robert Greifeld, chef executive of Nasdaq, questioned the system in March this year at a conference when, in reference to fails to deliver, he said it was hard to believe that in 2008 the market still required three days to settle, and that a T+1 system should be part of a discussion about fails.

The SEC has pussyfooted around enforcing delivery in the US equity market over the past 10 years or so, but the collapse of financials stocks has pushed it to be stricter. On September 17, SEC chairman Christopher Cox announced several actions to "make it crystal clear that the SEC has zero tolerance for abusive naked short-selling." From that date, fails to deliver beyond T+3 have been subject to a hard close-out. If stocks fail to deliver beyond T+3, the broker/dealers acting on the short-seller’s behalf are prohibited from further short sales in that security unless stocks are pre-borrowed.

This change of tack upsets those such as Byrne who have been fighting to have their voices heard for years. "When companies that had access to the Fed window became victims of fails to deliver, the SEC then had to sit up and take notice," says Byrne.

Actions taken against naked shorting: Small steps

Since August, the number of companies with stock on the Reg SHO list has fallen from an all-time high of 650 to an all-time low of 90, although this does not take into account ex-clearing data. Shapiro says it is a step in the right direction. "The actions taken are an acknowledgement of the issues regarding naked shorting and fails to deliver at least. Progress is under way. Given there are many issues facing the SEC at the moment, this is encouraging."

Others, however, are disappointed that more has not been done. Byrne says: "A hard close-out is not nearly enough. To truly stop failures to deliver, the SEC must enforce a pre-borrow where parties have to guarantee that a locate has been found through a contract." At present, broker/dealers and short-sellers can say they have located a source of stock when several other parties might have also identified the same source. Peter Chepucavage of the International Association of Small Broker/Dealers and Advisers agrees that an initial pre-borrow rule is crucial in preventing fails to deliver. "The industry is resisting an initial pre-borrow rule but it is essential," he says. "Without it the stock market is like the airline industry. You’re overselling the airplane seats knowing that someone will not be able to board even though they reserved/located, to avoid decrementing their inventory."

The argument against pre-borrows is that liquidity will dry up, and that shorting will be deterred. However, Greg DePetris at Quadriserv believes the opposite would occur as lending would increase. "A more efficient settlement process should result from recent regulatory changes, and these tighter inventory controls might create new trading opportunities," he says. "It’s important for anyone in possession of lendable supply to monetize its value, and traditionally that’s been done through the lending spread and reinvestment of cash. The notion of pre-borrows implies that there may be derivative value in the latent supply of securities, which lenders may be able to realize for their clients."

Welborn says the SEC knows it has to introduce the pre-borrow rule if it wants to eliminate fails to deliver for good. "As long as there are companies on the Reg SHO list, then the problem has not been solved," he says. "The only sustainable solution to naked short-selling is a rule requiring both a pre-borrow and a hard delivery. With only one of these pieces in place, the system is still open to abuse. For example, a hard-delivery requirement by itself would not have made an iota of difference for Bear Stearns; only a pre-borrow could have put a brake on the naked short-selling."

Welborn points out that the SEC did precisely this in July when it ordered emergency pre-borrows for Fannie Mae, Freddie Mac and the 17 primary dealers. "The SEC knows what must be done to fix this problem once and for all," he says.

PatrickByrne (talk) 16:15, 2 December 2008 (UTC)

More "mixed reporting" (lol) from Reuters, DowJones, MarketWatch, etc.
"Reporting by major media outlets has been mixed" reads the article currently.

Yet check out these headlines:

Reuters
 * "SEC urged to do more to curb naked short selling"
 * By Rachelle Younglai


 * WASHINGTON, Dec 9 (Reuters) - U.S. securities regulators need to do more to crack down on abusive naked short selling -- a type of trading blamed for contributing to the free-fall in financial stocks -- former and current regulators said on Tuesday. Amid volatile market conditions, the Securities and Exchange Commission adopted a number of rules to rein in those who profit illegally from stock declines. Making bearish bets on stocks is a legitimate investment strategy but the SEC's rules are designed to weed out abusive practices, such as investors' failure to deliver stock by settlement date. Short sellers arrange to borrow shares they consider overvalued in hopes of repaying the loan for less and profiting from the difference. A naked short sale occurs when an investor sells stock that has not yet been borrowed, which can distort markets.


 * Former SEC Chairman Harvey Pitt praised the SEC for taking constructive steps but said the agency has not done enough.


 * "Naked shorting is a situation in which someone is gambling but they have no skin in the game. They are not required to make any effort to deliver the shares," said Pitt, one of the panelists speaking at a "Coalition Against Market Manipulation" event in Washington.


 * The SEC tightened up its rules this year and required short sellers to deliver securities three trading days after shorting the stock.


 * Rex Staples, general counsel for an association of state securities administrators, said the states are trying to eliminate the problem, but said "this seems to be a solution that the commission is best-equipped to solve."


 * "States are ready to act, but we are throwing our support behind the federal regulator at this point," said Staples, general counsel for the North American Securities Administrators Association.


 * Pitt and other panelists said the SEC needed to do more to eliminate ambiguity in its rules.


 * For example, investors are required to locate shares before shorting them. However, SEC rules require broker dealers to have "reasonable grounds" to believe that the security can be borrowed so that it can be delivered by settlement date. Critics say the language is vague.


 * "If you want to sell short any security, you should have a legally enforceable right to deliver stock on day of settlement. It's unambiguous, it doesn't leave any wiggle room," said Pitt.

Wall Street Journal


 * Judith Burns
 * WASHINGTON -- U.S. securities regulators need to do more to curb short-selling abuses, a group of academics, business executives and former top regulators said Tuesday.


 * The Securities and Exchange Commission should close loopholes and enforce current rules against "naked" short selling, said Harvey Pitt, former SEC chairman and now chief executive of Kalorama Partners, a Washington, D.C., consulting firm.


 * "The agency has to make it clear that naked short selling in any form is prohibited," Mr. Pitt said at a midday press conference.


 * Short sellers aim to profit by borrowing shares for sale and replacing them later at a lower price. "Naked" short sellers don't borrow shares they sell short, which can pummel stocks and facilitate market manipulation.


 * The SEC has sought to crack down on short-selling abuses in recent years, most recently with an interim rule requiring short sellers to deliver borrowed shares within three days of trade settlement. Mr. Pitt and others urged the SEC to make the requirement permanent and take other steps to stiffen pre-borrowing requirements, provide better tracking of stock-delivery failures, including those outside stock-clearing systems, and force buy-ins when delivery failures occur.

MarketWatch
 * "In addition to disclosure, securities attorneys and academics discussed other mechanisms that the SEC could impose that could reign in short selling at an event hosted by the Coalition Against Market Manipulation in Washington.


 * Participants argued that the agency needs stronger rules limiting illegal naked short selling, the practice of selling shares without arranging to borrow the securities up-front.


 * The SEC in September adopted rules requiring short sellers and their broker dealers to deliver securities within three days of a trade. Participating investors who fail to arrange to borrow shares in advance are prohibited from making future short sales in the same securities.


 * But securities attorneys at the event argued that there are too many qualifiers on the naked short selling rule.


 * Rex Staples, general counsel for the North American Securities Administrator's Association Inc., said there is a "reasonable" qualification on the delivery requirement. 'To the extent you can qualify a word like reasonable, you are going to get that time after time,' said Rex Staples, general counsel for the North American Securities Administrator's Association Inc.


 * Former SEC chairman Harvey Pitt, who participated in the discussion agreed that the SEC should eliminate ambiguity when it comes to the agency's naked short selling provision. The agency should also take steps to enforce the rules.


 * 'The agency must make it extremely clear that any naked short selling is illegal and it has to remove the ambiguities so the rules are very clear,' Pitt said."

Australia bans naked short-selling


 * CANBERRA: Australia moved to slap a permanent ban on the most controversial form of short-selling yesterday amid an historic fall in share prices, part of a crackdown that is also targeting hedge funds and credit rating agencies.

Dutch ban 'naked' short selling for 3 months


 * The Dutch Finance Minister is banning "naked" short selling of financial stocks for the next three months to increase the stability of financial markets.

........................................................................

As our financial system descends into a financial gray goo from a practice which this article dismisses as imaginary, simply going on past experience I will assume that everyone here at "the encyclopedia that anyone can edit" will continue ignoring the world's financial press rather than update this article so that it reflects something more than three-year-old bromides that were hackneyed the day they were written. But I've been wrong before.PatrickByrne (talk) 05:46, 10 December 2008 (UTC)


 * You're actually wrong, Patrick. I've been working on some stuff privately with regards to this. I'll post it in my sandbox when I'm done. SirFozzie (talk) 05:48, 10 December 2008 (UTC)


 * That is good to hear, SirFozzie. Best of luck.PatrickByrne (talk) 16:47, 10 December 2008 (UTC)

Australia
While looking for news articles on the new movie "Australia" I found an article saying that Australia had outlawed naked shorting. Shouldn't this be in the article? There already is a reference to Australia but there seems to be some kind of final action taken. (P.S. It is a dreadful movie.) Stetsonharry (talk) 14:38, 6 December 2008 (UTC)

Greater Problem in Bonds
This is such a great improvement. But it is misleading the reader to believe that this practice is limited to stocks. A much greater potential for naked shorting is in the larger bond market. As an example, Madoff stole 31 billion dollars over a period of 20+ years. In 1999, HUD had uncollateralized losses of 59 Billion. Where did the money go? Did someone sell them bonds that had no collateral? Max Keiser addresses the sale of uncollaterized bond by the US firms to people around the world. http://www.youtube.com/watch?v=Bwd2bVQZfBo  You will understand Keiser's condemnation of Paulson if you read Michael Lewis' article http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom   Lewis specifies that Paulson's former firm was counterfeiting bonds. Another firm was also listed. In the mortgage backed securties market, this is securitization fraud. It is not origination fraud, but the selling of duplicate securities that have no assets behind them.. Not just under collateralized when the housing market drops, it is no collateral on counterfeit bonds. Mhelburn (talk) 16:55, 6 January 2009 (UTC)
 * Interesting, but unclear what that has to do with short selling. ChildofMidnight (talk) 18:42, 6 January 2009 (UTC)

If you sell something that doesn't exist in the stock market, or short sell a stock without borrowing it, it is naked short selling. If you sell non-existant bonds in the bond market, it is the same thing. The discussion here has always been about the stock market and the potential for abuse is much larger in the much larger bond market. It is counterfeiting, fraud...

read Michael Lewis' piece "The End" in "Portfolio" or listen to Max Keiser's piece on counterfeiting. Mhelburn (talk) 16:58, 8 January 2009 (UTC)


 * No, this isn't naked short selling. Uncollateralized bond sales are not like fails to deliver&mdash;they're more like sham corporations (like I sell stock for a railway, but really use the money for something else). You would need to have a source that shows otherwise. Cool Hand Luke 21:51, 8 January 2009 (UTC)

"Media coverage" section
I've changed the name of this section to "Opinions expressed in newspapers and magazines and websites", because the section most definitely is not about reporting, by reliable sources, on how the media have covered the issue of naked short selling. (That might be interesting, assuming anyone actually has done that.) Rather, the section is a collection of comments about whether naked short selling is good or bad and how much of a problem it is. And it beings with a sweeping statement that some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings, a statement supported solely by citing one Wall Street Journal opinion piece (!).

I see no hope for this section; if there are substantive arguments to be made for or against naked short selling, or about the extent of the problem, they should be made in other sections, not in a section like this. Nor is there any way to decide what is appropriate space and weight, as required per WP:NPOV. Is the opinion of one economist, expressed on his blog, important? Why not have three or six or twelve economists weigh in? Why not a dozen editorial pages? Who decides which editorial pages are most important?

In short, I suggest deleting everything but this bit of substantive information, and move that elsewhere:The Economist said the SEC had "picked the wrong target", mentioning a study by Arturo Bris of the Swiss International Institute for Management Development who found that trading in the 19 financial stocks became less efficient.[82] -- John Broughton  (♫♫) 21:42, 21 February 2009 (UTC)


 * John, I'm concerned about removing anything that might add to understanding of the issue. This is highly complex, so I'd lean toward inclusion of as many notable opinions as possible, mindful as we are of WP:NOT. I have no specific opinions on one part of that section over another. Stetsonharry (talk) 19:02, 22 February 2009 (UTC)


 * The solution to complex issues isn't to repeat the same information, multiple times - it's to organize and explain information well. If there is anything that is in (what was) the "Media coverage" section that isn't already in the rest of the article, then it seems to me to make sense to move it.  And if it's already covered elsewhere, then I think it simply confuses the reader to have it mentioned again.


 * You also really haven't responded to the question I raised early about reliable sources. Whether something is or isn't an opinion piece is important - newspapers don't take responsibility for the facts and statements in opinion pieces in the way that they do for news pieces, and so Wikipedia treats the two very differently, just as it treats a letter to the editor (printed in a newspaper) differently from a news piece in that same article.  This section distracts from other parts of the Wikipedia article, which are based on reliable sources.  -- John Broughton  (♫♫) 01:11, 23 February 2009 (UTC)


 * OK, I think I've finally grasped your point. Yes we don't want duplication and should eliminate the section and move notable and nonduplicative criticism where needed. On the second point, on reliable sources: I think that the Barron's editorial meets the reilability and nonduplication test, as does the Wall Street Journal as it is from a notable columnist—Holman W. Jenkins Jr (needs to be linked as such in the article). Then the Economist as you suggest. What's your opinion on those and on the Luskin quote? Stetsonharry (talk) 14:48, 23 February 2009 (UTC)


 * The Luskin quote comes from his blog "poor and stupid." Under WP:V, subheading "Self-published sources (online and paper)": "Self-published material may, in some circumstances, be acceptable when produced by an established expert on the topic of the article whose work in the relevant field has previously been published by reliable third-party publications." Unless his work on this subject has been published in reliable third party publications, which I am quite certain it has not, this quote should go. Nor do I believe that Luskin can be called "an established expert on the topic of the article." --JohnnyB256 (talk) 15:21, 16 March 2009 (UTC)
 * I went ahead and removed the Luskin blog post, which I think is indefensible under WP:V as I explained above. I added a quote from a Wall Street Journal editorial, which was even-handed in its approach to the issue, saying banning NSS was a good preventive idea while implicitly suggesting it won't fix an actual problem. I removed "websites" from the section header, with removal of the blog posts. I don't think other websites are represented in that section. --JohnnyB256 (talk) 15:41, 16 March 2009 (UTC)

"Lehman Brothers collapse allegations" section
Per WP:NOT, Wikipedia isn't an indiscriminate collection of information. For example, this article shouldn't set out to document every example of where a company claimed that its problems were caused by naked short sales. But the last section in the article seems to do just that: A CEO mentions naked short sales among "a host" of causes; and (all the section says, in response to that claim) is that the Chair of the congressional committee thinks that there was  "no accountability for failure" in the company.

If "naked short selling" was a more-or-less throwaway line by the former CEO of Lehman Brothers, let's not take the bait and exaggerate the issue; and if in fact there is substance to the claim, let's not bury it by simply noting that a congressional chair said that the problem was all the fault of Lehman Brothers.

I think the section should simply be deleted. But, if not, it needs a lot more details (and there certainly is space, since it's short and the mention of AIG is unnecessary) about (a) the extent of the alleged naked short sales, (b) what newspapers and similarly more objective sources think of such claims (I don't believe that statements by Congressional chairs are particularly authoritative; plenty of evidence is available for those that think that committee hearings are reasoned, analytical matters); and (c) whether there are any investigations ongoing or planned for the charges that were made.

(Which isn't to say that Wikipedia shouldn't ignore this claim entirely - rather, it belongs in the Lehman Brothers article, as certainly does the Congressional Chairman's response. And it may well be there already - I've not looked.)  -- John Broughton  (♫♫) 22:18, 21 February 2009 (UTC)


 * It's mentioned in the lead, which suggests it is important and requires further details. I am not sure about removing the media section entirely either. Stetsonharry (talk) 16:07, 22 February 2009 (UTC)


 * Good point - the lead says amid claims that aggressive short selling had played a role in the failure of financial giant Lehman Brothers, the SEC extended and expanded the rules to remove exceptions and to cover all companies. I assume (without looking) that the article has details about what the SEC did to extend and expand the rules, and that might be the perfect place to put info about Lehman Brothers. (Certainly, reading this section as is, no one has a clue that such claims actually lead to anything other than chastisement of a CEO by a committee chair.)  So yes, something important enough to go into the lead section definitely belongs in the body of the article - but not artificially split up, as it is now.


 * As for removing the media section, I'd really appreciate your specific thoughts as to where we differ - perhaps you could post those in the section above this one? -- John Broughton  (♫♫) 17:54, 22 February 2009 (UTC)


 * Of course, that presumes it warrants inclusion of the lead. I just don't know. I'll add more to the above section if it helps. Stetsonharry (talk) 18:59, 22 February 2009 (UTC)


 * Sorry, not making myself clear. It seems that you've raised a good point - that the Lehman Brothers case provides context for SEC actions.  As such, it belongs with the text about those SEC actions, not in a separate section by itself.  Unless someone thinks otherwise, perhaps I should take a shot at moving the info around.


 * Also, I don't see any reason to worry about the lead section unless someone has a problem with it, as is. -- John Broughton  (♫♫) 01:02, 23 February 2009 (UTC)


 * I think that your original point is correct, and that section has bothered me for some time. The consensus of observers is that Lehman collapsed because of what Lehman did, not because of trading of its stock. I see an "undue weight" problem here. --JohnnyB256 (talk) 15:24, 16 March 2009 (UTC)


 * I have attempted to remove this section and have identified an "interested person" (SirFozzie) who restored the information. I see an WP:UNDUE issue here as well.


 * WP:NOT - it is not a collection of random allegations.


 * WP:BURDEN - naked short selling does not cause the bankruptcy of companies. To suggest it does, we need verifiable sources in order to include it in the article. The comment of an individual who is not an acknowledged expert on either corporate insolvency or securities trading is irrelevant.


 * WP:FRINGE - We use the term fringe theory in a very broad sense to describe ideas that depart significantly from the prevailing or mainstream view in its particular field of study. Those who know in securities and finance know that short selling does not in itself cause corporate insolvency. This is a rumour peddled by the uninformed. I am not aware of any economics study in any respectable peer reviewed publication which states that short selling is responsible for the demise of companies such as LEH and BSC. This short selling myth is the flat earth theory of the trading world. Beganlocal (talk) 16:53, 17 August 2009 (UTC)


 * Here's quite a few links from reputable sources., (yes the same link as below), , , .These all pass WP:V. The responsible way to handle this is to report it from both ways, both these verifiable, reputable sources, andthose that say that Naked Short Selling is a red herring in the collapse of Lehman Brothers. SirFozzie (talk) 03:43, 21 August 2009 (UTC)
 * Most of this is speculative (might have, did it, could have contributed to, etc.). However, there is no denying that there are allegations that naked shorts was a contributing factor to the collapse of the two firms and we should report that - clearly stating that this is unsubstantiated speculation and that most experts believe that the firms own practices were the major reason for their demise. --RegentsPark (sticks and stones) 04:27, 21 August 2009 (UTC)
 * I agree. Note also that the Bloomberg article cited in footnote 44 above was debunked by Columbia Journalism Review in a lengthy article. . There is a general absence of reliable sourcing on this subject and this sub-issue in particular.--JohnnyB256 (talk) 15:34, 21 August 2009 (UTC)
 * That article does not debunk the former, it merely provides some criticism. It also makes reference to The Man Who Shall Not Be Spoken Of as anything other than a nut. Zombywuf (talk) 10:31, 22 August 2009 (UTC)

''No, the view is not correct. Naked shorts were not a contributing factor. That view is not considered to be correct by any reputable source. The links provided above point to sources which merely speculate. We should not give these speculations undue weight. They correctly belong on the pages dealing with Lehman and Bear, not the page describing short selling. A company is not bankrupted by dealings, however large, in its public stock. No verifiable sources say otherwise. I've left some time for comments, and as there doesn't seem to be a source which suggests more than speculation I'm removing it. Please see WP:BURDEN before reinserting - we need a source which states that naked shorting was a cause, not just speculation that it could have made an existing problem worse. I have no objections to the content being moved to Lehman Brothers where it belongs - I will do this now.'' Beganlocal (talk) 11:45, 21 August 2009 (UTC)
 * Can you provide citations for those claims? Zombywuf (talk) 10:31, 22 August 2009 (UTC)

Not sure, if this section should be deleted, as it would be (if found to be true) prime evidence that "naked shorting" has significant (socio)economic impact. Here is an interesting article from Bloomberg on that topic: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aB1jlqmFOTCA —Preceding unsigned comment added by Charlesgreek (talk • contribs) 18:36, 22 March 2009 (UTC)


 * See .--JohnnyB256 (talk) 15:35, 21 August 2009 (UTC)


 * The Lehman Brothers bankruptcy was a notable part of the NSS mess, together with Bear Stearns, Merrill Lynch, Fannie Mae and Freddie Mac. And see this instead. That the CEO of Lehman placed the blame of its huge bankruptcy in NSS is notable. Whether that was actually the cause it's a different matter. --Enric Naval (talk) 19:05, 22 August 2009 (UTC)


 * Here's a quote from the article, with footnote: "SEC Chairman Cox noted that the emergency order [on fails in financial stocks] was "not a response to unbridled naked short selling in financial issues", saying that "that has not occurred".[35]" I'm not for removing the Lehman section necessarily, but I think having it as a separate section may be undue weight. --JohnnyB256 (talk) 19:16, 22 August 2009 (UTC)


 * Also I don't understand the tag on weasel words and I've asked Beganlocal to explain here.--JohnnyB256 (talk) 19:19, 22 August 2009 (UTC)


 * Yeah, a separate section is overkill an Beganlocal is right in that, but I have looked at the article and I can't think of a better place. One place could be under "Effects of naked shorting" (which ought to be renamed "claimed efects", btw). A better place could be under "Developments, 2007 to the present". --Enric Naval (talk) 22:53, 22 August 2009 (UTC)


 * Good idea on section header. I think that's a more neutral header, as the entire area is contentious.--JohnnyB256 (talk) 16:01, 23 August 2009 (UTC)

I've moved the text to the 'effects' section. It still reads like a 'he said' 'she said' piece and should be rewritten more generally (there must be other allegations and more 'academic' refutations of those allegations out there) but I'm on a horribly slow internet connection.--RegentsPark (sticks and stones) 02:54, 23 August 2009 (UTC)


 * I have put it back again. My reasons are many:
 * There is clear disagreement among several editors about this material. Until there is consensus, the article shouldn't change.
 * There is clearly documented evidence that this article has been skewed in the past to present NSS as unimportant and harmless. This make me regard any attempt to remove material attacking NSS as possibly suspicious.
 * It is clearly stated that the specific allegations are opinions, by referring explicitly to their source. As an example of a notable person's point of view about NSS, they may or may not be true, but are certainly indicative of their opinion of NSS.  This is in itself interesting and relevant, and definitely not against WP policies to report.
 * NSS should only be used in a very limited sense to make a market. The gigantic volume of fails to deliver, reported by the exchanges, gives the lie to this story.  It is clear that inappropriate NSS is very prevalent, and many attempts have been made to limit any discussion of this point in this article.
 * The slurs, I assume on PB, seem inappropriate: to a large extent he has been vindicated by events

Apologies to the new editors to this article who are editing in good faith. However, please acquaint yourself with the Mantanmoreland affair; this article was unbalanced then, and has never been properly corrected. In my opinion, this article is still skewed too far towards "Nothing to see here, please move along". With the embarrassing failure of the SEC to deal with Madoff, I don't really see any reason to treat their every pronouncement as gospel: we should look at wider sources than those sterile SEC reports. cojoco (talk) 10:38, 23 August 2009 (UTC)


 * The material was not removed. I moved it to the 'effects' section (for which there seems to be some consensus). The material itself is unchanged (except cosmetically). --RegentsPark (sticks and stones) 10:56, 23 August 2009 (UTC)


 * Yeah, it's still there in the article. --Enric Naval (talk) 11:05, 23 August 2009 (UTC)


 * I added to that Cox's statement that there was no "unbridled naked shorting" of financial issues. Further down, where this is quoted in full, for some reason the rest of his sentence, that it was a "preventative step" was omitted. This is a crucial point, and its omission underscores my concern about the skewing of this article.--JohnnyB256 (talk) 14:44, 23 August 2009 (UTC)

I find it very difficult to follow long threads like this, especially with all the indenting etc - I know this is not a forum but it would be good to have a slightly more readable format for discussions. I added the weasel tag as the article is riddled with weasel words - "some people say" etc etc. I didn't do a wholesale blank of the Lehman stuff - I actually moved it to Lehman Brothers where it belongs. Its undue weight to give it a whole section under NSS but entirely appropriate to the article on the company. Let me know if I've missed any comments or questions. Beganlocal (talk) 14:08, 23 August 2009 (UTC)

New diagram
Hey all, User:Grochim has made File:Naked_short.png (right) to illustrate naked short selling. Could one of you evaluate whether this is an accurate depiction of the process? Thanks! Dcoetzee 16:18, 9 March 2009 (UTC)
 * While it seems accurate to me as far as it goes, the whole concept of time seems to be missing from the diagram. I still don't understand how NSS fits in with the rules of the exchange in which share delivery is mandated to be, for example, T+3 for delivery within 3 days of the trade, and exactly three days in practice.  It looks really nice, though. cojoco (talk) 23:26, 9 March 2009 (UTC)
 * The diagram doesn't work at all, both in terms of time and in terms of simplifying what NSS means. --JohnnyB256 (talk) 15:21, 16 March 2009 (UTC)
 * Sorry, but this diagram is either done by someone honestly but naively piecing together new knowledge (in which case, Respect) or by someone attempting a whitewash. It depicts a case where the naked shorter takes steps to clothe his short by buying a share and delivering, whereas the entire brouhaha over naked short selling concerns cases where the naked shorter does not deliver (and thus creates the famed "Failure to Deliver" at the heart of this issue). Therefore, using this diagram to depict naked short selling is like having a diagram of a bank robbery where the bank robber walks into the bank and.... deposits his paycheck. In sum: The whole issue of Naked Short Selling concerns the creation of Failures to Deliver, so a diagram which depicts naked short selling as to include actually buying and delivering the shares in question is nonsensical. PatrickByrne (talk) 05:11, 20 March 2009 (UTC)
 * Hmm, what do you suppose is the right way to diagram this? It seems like there are two possible outcomes, one in which the shares are available and the naked short seller can afford to purchase them, and one in which this is not the case and a failure to deliver occurs. Maybe there should be two boxes on the right? Dcoetzee 06:51, 20 March 2009 (UTC)
 * My fundamental misunderstanding is that with a T+3 delivery time, I don't understand how a NSS can ever happen without a "fails-to-deliver", as I can't see how you'd obtain shares for delivery quicker than T+3 anyway. I don't think you can just ask all of the organizations involved to do all the paperwork extra quick because you have a NSS in progress. I also still don't understand what would happen if you were buying shares and did not not obtain them in the T+3 delivery time, and you missed out on a divident or stock split. Why is there such total silence on this?  Doesn't anyone on WP know anything about NSS? Or is the whole issue a dead duck now? cojoco (talk) 23:05, 22 March 2009 (UTC)
 * I may be wrong, but weren't some of the most knowledgeable people (such as the fellow from DeepCapture) who considered naked short selling a dangerous practice actually run off the Wikipedia project, in favor of defending a proven sockpuppeting journalist who possessed a much more tolerant viewpoint regarding NSS? Our situation would seem to be the by-product of Wikipedia's own admin governance practices. -- Morrell Maddie (talk) 14:36, 23 March 2009 (UTC)
 * I fear you may be right, but Patrick Byrne still seems to be struggling on to the best of his admin-blocked ability. cojoco (talk) 22:16, 23 March 2009 (UTC)
 * It's also worth mentioning that PB has had a stab at a rewrite of the NSS article in his sandbox, and this does have a few more details about the mechanics of NSS. However, this still leaves quite a few questions unanswered:
 * I believe that the "fails to deliver" graphs document outstanding shares, and these graphs do tend to drop back down again, so it does appear as if all fails-to-deliver do get cleared eventually
 * I have never seen any info about how the NSS appears from the buyers perspective, as I cannot see how delivery can ever occur in the usual T+3
 * It seems to me that NSS has been used to kill companies, but where is the investigative reporting your country needs?
 * I don't have the time or inclination to get into this, as there's plenty of stuff happening in Australia right now. cojoco (talk) 22:31, 23 March 2009 (UTC)

(outdent) This diagram is useless. The key difference between naked short selling and normal short selling is that the fact that the naked short seller sells without borrowing the shares. The schematic makes no mention of this. It is pretty, but quite useless. --RegentsPark (My narrowboat) 20:25, 1 May 2009 (UTC)
 * That's right. --JohnnyB256 (talk) 21:21, 1 May 2009 (UTC)

naked short selling
A most informative article (with information not found in the general wiki definition) can be read by anyone desiring an unbiased review by accessing the investor village website for elan (eln) pharmaceuticals and pulling up post # 336863...Inksdry (talk) 15:29, 22 March 2009 (UTC)

Suggestions from someone new to this subject
I do not know much about finance or economics, but became interested in it by a Daily Show interview with Jim Cramer. An evening of reading naturally led me to this article. I'd like to make a few comments about my experience with it, with the hope that it will help guide future updates.

Most of what is in here was new to me. My first few times reading through the article, I had a fair bit of difficulty understanding the subject. I already knew about short/long positions, and had a general understanding of how financial markets and trading work, but this article made me think I was missing something fundamental about the whole system. So I gave up and read through the talk pages, coming across a sandbox article by PatrickByrne. I think that this sandbox article, or at least the format of it, is far better at explaining the matter to someone new to the topic than is the current article. (At least, it is to someone new to the topic, which is what an encyclopedia ought to aim for.)

First of all, the existing introduction is too long. It introduces points of view which seem to be contentious: the SEC defends naked short selling, but there are penalties for it. This was very confusing to me. Why would they both outlaw and support the practice? The sandbox article made this clear up front: the practice is illegal except in special cases, and has been for a long time. From the current article, I thought that it has only been illegal since 2005, with regulation SHO. (In the USA, anyway, and presumably it has long been illegal in other major markets? This is still unclear to me, though from reading the talk pages I think this may be unclear to many experts as well... or else everyone is speaking from a point of view far beyond what I know.)  The introduction also contradicts later statements that the SEC is talking about making all naked short selling illegal.

The descriptions of normal/naked shorting in PatrickByrne's version are much clearer. It's concise. It also clearly lays out that when legislation is discussed, the article is going to be primarily about American trading. This is important.

To someone new to a topic, the introduction is the most important thing. The description is next. I found that the inclusion of the "extent" and "effects" subsections under the description muddles the current article, to the extent that I didn't really understand it until I read the sandbox version. Put those things in a later section. I also like how the sandbox article walks the reader through the process a little better, and also describes why naked shorting can drive down prices, which is what I came to the article to learn about in the first place!

It remains unclear to me why it is important that certain companies have been on the Threshold Security List. Did there turn out to be something wrong with those companies or their trades? The position of the SEC is also unclear. On one hand, they defend the practice and say it's harmless, but on the other they commision a report and launch two investigations. Are these different positions from different times? Or is there a disconnect within the SEC itself? What's the current official position? The article may benefit from culling old opinions and including only the most recent.

It looks like there's been a lot of work on this article, but that might not be for the best. I think that so many revisions have been made that a very expert-centric point of view has been unconsciously introduced. There's something to be said for simplicity here. A short introduction clearly delineating the important things (short selling, no borrowing, illegal in the USA with exceptions since 1934), clear definitions that don't stray from purely defining the matter (with mentions of the importance of various parts of those definitions), and only then the discussion around the more contentious stuff. Otherwise a new reader gets bogged down in the opinions and can't immediately grab the facts of the matter.

Anyway, I hope that my opinion is useful to you. Thanks for everyone's work on this. It's an interesting topic! —Preceding unsigned comment added by 70.77.44.127 (talk) 09:39, 24 March 2009 (UTC)


 * Hear, hear! cojoco (talk) 10:05, 24 March 2009 (UTC)

Floyd Norris blog followup
While I'm not surprised this article is locked, there is some misleading stuff at the end of Developments, 2007 to the present section: In May 2009, the New York Times's chief financial correspondent Floyd Norris reported that naked shorting is "almost gone." He said that delivery failures, where they occur, are quickly corrected.

This implies that naked shorting is mostly gone, but a followup on his blog provides details on how the measurement of naked shorting may be flawed and evidence can be hidden.

It would be appreciated if someone with edit power could review: Is Naked Shorting Gone? from Floyd Norris' blog and add the info with the reference. --Intentionally unsigned 01:15, 7 May 2009 (UTC) —Preceding unsigned comment added by 63.175.18.130 (talk)
 * An interesting comment, thanks. Note though that comments by the CEO of Overstock are speculation and his blog comments cannot be considered a reliable source. However, that said, I do think it isn't hard to find reliable sources for each element of his comment (desked trades and pre-netting are hardly unknown phenomena) and, if a reliable source can be found that links these to the difficulty in measuring the extent of naked shorting (I know it does, we just need a reliable source to say so), that could, and should, be included in a sub-section of the 'Extent of naked shorting' subsection. --RegentsPark (My narrowboat) 14:09, 7 May 2009 (UTC)

typo in 2nd paragraph
"systematic" should probably be "systemic" in the second paragraph of the first section

Do Reuters and the CEO of NASDAQ Count as "Reliable Sources"?
Setting aside his otherwise vaguely supportive comments, I notice that RegentsPark says that I must be discounted as "a reliable source," even though every serious person involved in this issue in Washington and and NY notes that I turned out to be pretty much right about this whole problem, years in advance. So be it. So I wonder if Reuters and the CEO of NASDAQ rise to the level of source acceptable to Wikipedia. Here is a Reuters story from earlier this month concerning the NASDAQ CEO speaking to the US Chamber of Commerce, on Meltdown 2008:


 * WASHINGTON (Reuters) - Data suggests that the U.S. ban on short selling of financial stocks in 2008 did not impact stock prices, the chief executive of exchange operator Nasdaq OMX Group Inc (NDAQ.O) told business leaders on Tuesday.


 * Chief Executive Robert Greifeld told the U.S. Chamber of Commerce in Washington that a type of short selling, called naked short selling, was the real problem.


 * Short sellers arrange to borrow shares they consider overvalued in hopes of repaying the loan for less and profiting from the difference. A naked short sale occurs when an investor sells stock that has not yet been borrowed, which can distort markets.

Does it seem strange to anyone else here that (as I have documented over and over), the Michael Jackson page updates within seconds of a story flashing across a wire, but here at "the encyclopedia that anyone can edit", this one page is mired in a three year old, outmoded, completely discounted reality? Is that strange? And is it just a coincidence that the page in question concerns this financial issue? If it is big enough to have the systemic implications the NASDAQ CEO mentions, do you think it might be big enough to involve enormous profits for someone? And might that create an incentive for a cover-up? [User:PatrickByrne|PatrickByrne]] (talk) 05:52, 30 June 2009 (UTC)


 * About sources. The CEO of Nasdaq is not a source, reliable or otherwise. He is, like you are, an individual with opinions that are worth noting. Reuters is a source and is a reliable source, but all it is sourcing is that the CEO of Nasdaq said xxxxx (it is not sourcing the statement 'naked short selling is the real problem'). Reliable sources are typically third-party sources that are published in venues known for fact-checking and peer review and primary sources are not considered reliable (it their views are credible then surely they will be accorded credibility by secondary reliable sources). About your other comment, I seriously doubt that anyone is making enormous profits by controlling the flow of information on this article!--RegentsPark (sticks and stones) 17:08, 2 July 2009 (UTC)


 * In a post-Lehman world, the potential for abuse in naked short selling is common knowledge. If market giants can credibly disrupt the balance of supply and demand by selling shares which they do not own, then the even the threat that they might do so can undermine a companies share price and ability to raise capital.  I deliberately avoided get entangled in the Naked Short debate on wikipedia earlier, but now time has settled it:  Patrick was right about the potential for abuse and the havoc it can create.  This is precisely why the SEC changed its rules after Lehman collapsed.  76.111.123.110 (talk) 11:36, 2 July 2009 (UTC)


 * Actually the SEC took action on naked shorting as a preventive measure, and specifically stated that there was no naked shorting of Lehman brothers. Let's try to be as accurate as we can in this discussion if we want to help improve the article and not merely vent. --JohnnyB256 (talk) 19:43, 2 July 2009 (UTC)


 * I agree that the SEC said that it was a preventive measure, but about "[The SEC has] specifically stated that there was no naked shorting of Lehman brothers", where did the SEC ever say that? The Bloomberg article suggest quite the opposite thing, that the order covered Lehman Brothers because there were clear indications of NSS going on. --Enric Naval (talk) 01:51, 3 July 2009 (UTC)
 * From the article: "SEC Chairman Cox noted that the emergency order was 'not a response to unbridled naked short selling in financial issues', saying that 'that has not occurred'". Lehman is a financial issue and was one of the issues (probably the most publicized one) covered by the emergency order. You need a microscope to find this crucial fact, which is one of the defects of the article. --JohnnyB256 (talk) 02:02, 3 July 2009 (UTC)
 * Ok, that comes from this article by Cox, and I see it supported by other sources like the NYT "But there is no evidence that there had been a lot of naked shorting in those stocks. The exchanges publish lists of stocks in which there were large numbers of failures to deliver shares at settlement, a situation that can be caused by naked short selling or by a number of other factors." and WSJ --Enric Naval (talk) 04:26, 3 July 2009 (UTC)
 * Exactly, and a casual reader would get the opposite impression unless he or she read the article very carefully. --JohnnyB256 (talk) 12:23, 3 July 2009 (UTC)


 * OK, so we are back on whitewash setting. The opinion of one former SEC Chairman (Chris Cox) that the thing he failed to regulate against had nothing to do with the collapse of Lehman is admissible. The opinion of another former SEC Chairman (Harvey Pitt) that "naked shorting is what’s causing a lot of the problems in the market" is not admissible. The NASDAQ CEO's opinion is not admissible. Nor are any of the events I have cited earlier on this discussion page: 19 financial firms scrambled for special protection from, the SEC issued an emergency order against, and G-20 regulators scrambled to stop, something the article currently suggests "is not harmful and [] its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings. Others have discussed naked short selling as a confusing or bizarre form of trading." Yes, of course that is a whitewash, and yes, manipulating world markets is profitable to someone, and those profits continue the longer these specious arguments are tolerated here. That is why they have gone to such trouble to hijack this page, as has been reported on by TheRegister ("Emails show journalist rigged Wikipedia's naked shorts") and has been widely recognized by newcomers here. PatrickByrne (talk) 02:30, 4 July 2009 (UTC)

SEC on liquidity
JohnnyB256 reverts me here to remove a statement that after having defended naked short selling as beneficial to market liquidity, the SEC has more recently acted to curb the practice. He states that, to the contrary, the SEC website continues to make the same statement it always did.

When I click on the source provided, it is our much relied upon "Key Points" document. The document is from 2005, and states as follows:

"Naked short selling is not necessarily a violation of the federal securities laws or the Commission's rules. Indeed, in certain circumstances, naked short selling contributes to market liquidity. For example, broker-dealers that make a market in a security4 generally stand ready to buy and sell the security on a regular and continuous basis at a publicly quoted price, even when there are no other buyers or sellers."

It appears, however, that the top of this same document is appended with a statement that it is under revision, and offering numerous links to "updated information." The first of these is the SEC rule effective October 17, 2008, which summarizes itself stating that "The amendments are intended to further reduce the number of persistent fails to deliver in certain equity securities by eliminating the options market maker exception to the close-out requirement of Regulation SHO."

I may well be missing something, but it seems to me then that the statement was accurate, and that the SEC has acted since its prior defense of NSS as beneficial to market liquidity to curb the practice. It seems moreover that this applies directly to the market maker exception which JohnnyB256 now highlights. (On this, Johnny's distinction that it is only one type of market maker exception that is being phased out would not seem to support an unqualified statement that the SEC continues to defend the practice based on the same 2005 source.)  If I am missing something, any clarification would be appreciated. Thanks, Mackan79 (talk) 08:43, 2 July 2009 (UTC)
 * Well, I'll try to clarify as best I can. The SEC has not been a model of clarity itself on this entire subject.
 * First, let's please be precise on the edits involved here. The sentence was "The SEC has defended the practice in limited form as beneficial for market liquidity,[footnote to SEC website here] prior to recent actions which have sought to curb the practice. "
 * The text in boldface is not correct and/or is original research, and I changed it. It now reads: "The SEC has defended the practice in certain circumstances, such as trading by market makers, as beneficial for market liquidity.[4]" That's correct, and tracks the pertinent text in the SEC document:
 * "Naked short selling is not necessarily a violation of the federal securities laws or the Commission's rules. Indeed, in certain circumstances, naked short selling contributes to market liquidity. For example, broker-dealers that make a market in a security4 generally stand ready to buy and sell the security on a regular and continuous basis at a publicly quoted price, even when there are no other buyers or sellers. Thus, market makers must sell a security to a buyer even when there are temporary shortages of that security available in the market. This may occur, for example," etc. etc. See
 * The SEC does not say "limited form." Nowhere does the SEC say this is a "limited" circumstance. I changed to the neutral phrase "certain circumstances." That's actually a bit on the conservative side, as it's far from limited, as the SEC seems to be saying that equity market makers need to go "naked" short constantly. It might be accurate to say "extensive" circumstances, but "certain" is more neutral.
 * Second phrase: "prior to recent actions..." This pretty much comes out and says, or at least strongly implies, that the SEC has taken action on this particular point, or has withdrawn its language on equity market makers. Not true, and the general language that you quote in support of this language does not in any way contradict what the SEC is saying about the liquidity benefits of equity market makers engaged in the practice. The rule from which you quote this language affects options market makers, not equity market makers. I went to the other rules linked at the top of "key points" and can't find any retraction of the comment on liquidity.
 * Yes, it's correct that the SEC has taken further action against NSS since "Key Points." But it made that statement in the context of an action against naked shorting, and has not retracted that statement at any time. To imply that the SEC has backed off from this point is original research and synthesis unless the SEC or reliable sources say that it has done so. It obviously has not done so, or its lengthy statement on market liqudity would not still be on the SEC website.--JohnnyB256 (talk) 15:04, 2 July 2009 (UTC)
 * Thanks for responding. As far as original research, I wonder if you saw that the key points document now has a box at the top saying that it is "under revision," and pointing to "updated information"?  It is from this updated information that I quoted the passage about eliminating the market maker exception.  The assessment that they have more recently sought to curb the practice seems relatively straight forward.  (I don't have a problem with "certain circumstances" versus "limited form.")


 * In other words, it would seem inaccurate just to say that the SEC has defended the practice for market makers and to increase market liquidity without acknowledging that their recent actions have sought to reduce this.  This is the point I was trying to clarify. Mackan79 (talk) 18:48, 2 July 2009 (UTC)


 * Yes, of course, I made a direct reference to one of the "updated information" links that you provided. I think that we have to work hard to avoid oversimplifying. They did not "eliminate the market maker exemption." What they're eliminating is the "options" market maker exemption. The ability of equity market makers to naked short (in the course of bona fide market making) has been left untouched. "Key points" makes no reference to the options market maker exemption, and its "liquidity" example was not a general reference to market makers, but was specific to equity market makers.


 * Keep in mind that options market makers were using NSS to hedge their positions. That's totally different from the equity market makers, which use NSS directly (selling when the don't have the stocks in inventory). That's a totally different kettle of fish.


 * Mind you, I imagine that market makers could use their exemption to abusively naked short. The SEC is not sanctioning all NSS by the market makers. They're quite clear on that. The point the SEC is making, which they've never retracted, is that if the equity market makers are good little boys and are doing their job, selling stocks they don't own without borrowing is a good thing. --JohnnyB256 (talk) 19:03, 2 July 2009 (UTC)


 * Oh, one other thing. You have to keep in mind that the SEC isn't really "defending the practice" in the abusive sense of the word (i.e., selling stocks people don't own to push down share prices). That's market manipulation and it has always been illegal. What they're doing in "key points" is explaining why sometimes selling stocks you don't own and haven't borrowed can actually benefit the market. The SEC in general has tended to speak out of both sides of its mouth on the issue. In congressional testimony they have never talked about liquidity etc. etc. (as best as I recall). But the division of market regulation has tended to look at the other side of the coin, and you see that in "Key Points," which is a MR document. --JohnnyB256 (talk) 19:11, 2 July 2009 (UTC)