Talk:Naked short selling

Isn't this starting to get a little silly?

The word is out in WR that anyone editing this article must fear repercussions. That may explain the following observation. Here is a link to tonight's Google search results on "naked short selling". It shows that in the last three weeks there have been nearly 2,000 articles on the subject of naked short selling, on the SEC's unprecedented emergency order to stop it in 19 financial institutions deemed "too big to fail", on the regulatory changes in the works, on the mad lobbying effort that is now underway in DC by hedge funds so that the loopholes through which NSS occurs get closed, etc. Yet this page still blithely depicts the issue as largely imaginary: "Regulators downplay the extent of naked shorting in the US"; "when a stock appears on this list, it is like a red flag waving, stating 'something is wrong here!'"; "fails were 'more like an acceptable kludge, helping the market work better, than a cesspot of corruption liable to bring down the financial system"; "The SEC downplays naked shorting as a factor in declining stock prices"; "some commentators contend that naked short selling is not harmful and its prevalence has been exaggerated"; most people who understand the issue or have looked into it think it's pretty bogus"; and "Gary Weiss ...cites economic justifications for naked short selling and downplays its significance as a problem for the market."

Wikipedians, your beloved project is being used in a cover-up, and by your inaction you are going along with it. What superb commitment to intellectual integrity. Bravo. PatrickByrne (talk) 01:12, 3 August 2008 (UTC)

Dunno about bias in the rest of the article, but the "Media coverage" section looks a little absurd now. In the last several weeks, this went from being an esoteric subject (wherein the opinions of, say, Gary Weiss might have actually been a big chunk of the coverage), to a major story in the business section. This heading needs an overhaul. I don't have a lot of time, but I'll be watching it closely and hopefully updating it. Cool Hand Luke 04:38, 3 August 2008 (UTC)

The word is out in WR that anyone editing this article must fear repercussions. Such as? Please substantiate this allegation, or withdraw it. Thank you.--Janeyryan (talk) 18:46, 3 August 2008 (UTC)

Luke, you're right. An overhaul would be a good idea. But the overhaul would have to make the distinction I was just trying to explain to Pat, between what the usual crusaders have been saying and what the Cox order and Cox' defenses thereof actually represents. Between the Wall Street v. Main Street theory of the problem NSS supposedly represents and the Wall Street self-cannibalization theory. They could both be wrong or they could both be right, or one could be wrong and the other right, but they are surely two different subjects. --Christofurio (talk) 19:27, 3 August 2008 (UTC) And Jane's right too.

Jane wants justification for this claim: "'The word is out in WR that anyone editing this article must fear repercussions." See here: "I am afraid Relata refero is right; I've contacted a couple of editors who have done work in this general field, and they won't even consider touching the articles, despite acknowledging they are complete messes. One said 'no thanks, I have a clean block record and I intend to keep it that way,' and the second said he had no doubt that any edits he made would be contested and railed at. Perhaps the arbitrators could put on their editing hats and demonstrate how it is done - or make personal requests of very knowledgeable and well respected editors to clean things up, under the protection of the committee. Risker (talk) 23:17, 29 February 2008 (UTC)" When people are afraid of touching articles in a field even while "acknowledging that they are complete messes" for fear of being "contested and railed at", or insist "I have a clean block record and intend to keep it that way", and will proceeed only with air cover provided by "the committee".... I think that is safe to describe that as a sense that "anyone editing this article must fear repercussions." Of course, who knows what counts as evidence on this board anymore, given that Christo argues that having Chairman Cox of the SEC denouncing naked short selling along precisely the same lines that I have, even at times even using the same words, is not "vindication", for some esoteric private ideological argument of his that is barely readable. Given that, maybe it is worth debating whether "repercussions" means the same thing as fearing the loss of "a clean block record" and knowing "that any edits he made would be contested and railed at." Or whether a desire to edit only under the cover of a committee counts as "fear". Who knows? Maybe we need to debate what "editing" means. Or, perhaps we can dispense with the pettifoggery. You now have ample citations above showing you that the SEC is taking unprecedented emergency action to protect the institutions at the core of our capital market from naked short selling. Here is a Salt lake Tribune article "Wall Street War: a Win for Utahn" ("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') showing how far awareness has come. Here is Jim Cramer, one of my biggest opponents three years ago, now completely changing his tune by saying that if naked shorting does not get fixed, you should pull out of the stock market. And so on and so forth. Yet your article continues to feature bromides like "most people who understand the issue or have looked into it think it's pretty bogus" and "downplays its significance as a problem for the market" (Weiss) and "Holman W. Jenkins, Jr., has derided naked shorting allegations". In othe rwords, they are deriding, downplaying, and calling "bogus" an issue that the SEC now takes emergency action to stop against the core of our capital market. I'm not sure that this could get any sillier. I repeat my claim: Wikipedians are allowing these pages to be used in the obvious cover-up of a financial crime of epic proportions. PatrickByrne (talk) 07:52, 6 August 2008 (UTC)

Can you please provide the identities of editors who have been blocked for editing this article? Much time has elapsed since that remark was made (on Wikipedia six months ago, not WR or Wikipedia Review currently, as you stated). There appears to be substantial editing of the article, so I trust you can provide that information. Thank you.--Janeyryan (talk) 14:04, 6 August 2008 (UTC)

At least two well-respected editors, (User:Mackan79 and User:Cla68) have been blocked for editing one or more of these 4 articles. In a rather infamous exchange User:G-Dett found you could get blocked/banned just by sounding like User:Wordbomb. So yes; it makes perfectly sense to stay away from these pages if you disagree with the Gary Weiss-people and want to keep your "block-list" clean. Myself, I just started editing on these pages (mostly the Byrne-article) after making it very, very clear that I am not a native English speaker, (but knows Swedish, Danish and Norwegian), hence I am clearly no Wordbomb-sock. Regards, Huldra (talk) 06:33, 8 August 2008 (UTC)

My personal experience is that disagrement with the Byrne-people has the identical effect.[1] Perhaps there should be free expression of views, subject only to Wikipedia policies.--Janeyryan (talk) 13:19, 8 August 2008 (UTC)

Huh? You think that being asked a question on your user-page is "identical" to being blocked? And when did Risker become counted among the "Byrne-people"? I don´t see that he has edited these pages at all! I only know of Risker as an admin who tries to enforce some order in quite difficult areas of WP. But yes: I totally agree with you: there should be free expression of views, and I certainly would not like to see this to become a "lets-block-him/her-because-they-sound-like-GW-year." Regards, Huldra (talk) 14:17, 8 August 2008 (UTC)

'Identical' was imprecise, but I thought that the tone of what appeared on my page was, perhaps unintentionally, intimiating. That is particularly so, given that my entirety of my contributions on this subject consist of contributions to this and another discussion page. I doubt that I would have received such a notice had I nodded in agreement.--Janeyryan (talk) 16:19, 8 August 2008 (UTC)

Here, Piperdown notes that everybody who edits any of the four protected articles will likely be checkusered (nobody wants this, given the history of false positives made by inexperienced checkusers...and the risk of wrongful blocking that might result). As noted above, here within Wikipedia is someone writing "I've contacted a couple of editors who have done work in this general field, and they won't even consider touching the articles, despite acknowledging they are complete messes. One said 'no thanks, I have a clean block record and I intend to keep it that way,' and the second said he had no doubt that any edits he made would be contested and railed at." I can find no evidence that this sentiment has changed, and as additional evidence that it has not changed, cite the many examples I have given above. In the last four months the SEC went from proposing an anti-fraud naked short selling rule (see their release "SEC Proposes Naked Short Selling Anti-Fraud Rule") to, as our financial system appeared on the brink of imploding, passing an unprecedented emergency order "SEC Enhances Investor Protections Against Naked Short Selling". As SEC Chairman Cox described it therein, ""Today's Commission action aims to stop unlawful manipulation through 'naked' short selling that threatens the stability of financial institutions." Here are 2,000 Google search results for stories that have appeared in recent weeks about "naked short selling". And so on and so forth. Yet this article remains frozen displaying three year old absurdities such as ""Regulators downplay the extent of naked shorting in the US"; "Wall Street Journal columnist Holman W. Jenkins, Jr., has derided naked shorting allegations"; "New York Times financial columnist Joseph Nocera ... said that 'most people who understand the issue or have looked into it think it's pretty bogus'"; and "Gary Weiss ... downplays its significance as a problem for the market." In short, the page remains frozen insisting that "regulators downplay the extent of naked shorting in the US" when regulators have in fact passed an unprecedented emergency order to prevent it from taking down our financial system. I cite this as additional, compelling evidence that the attitude of "editors who have done work in this general field... won't even consider touching the articles, despite acknowledging they are complete messes" remains unchanged. PatrickByrne (talk) 03:39, 8 August 2008 (UTC)

Yes, I agree: the article as it is now is very tilted. I will try to start working on it in a day or two. However, I am not generally editing in the "economics" area. We very much need the "regular" economics-editors here. And frankly, I don´t think they will come in the near future, unless something substantial happens here on WP. Eg, if Wordbomb was unblocked; now that would give all economics-editors the sign that "block-on-sight" of certain views here on WP is no longer the case. But I´m not holding my breath. Regards, Huldra (talk) 06:33, 8 August 2008 (UTC)

Mr. Byrne is the dominant voice on this page, so please let's not be silly about this.--Janeyryan (talk) 13:19, 8 August 2008 (UTC)

Prove it. --Relata refero (disp.) 18:35, 12 August 2008 (UTC)

Yeah, let's not be silly about this: look who has edited the page. Some of the edits there are strange, to say the least. This edit, eg, to "improve grammar, style and clarity" ....and which "just happened" to turn the meaning 180 degrees around.. .and info is not based in the ref. it uses.... Regards, Huldra (talk) 14:17, 8 August 2008 (UTC)

I am no expert on this subject, but I read that link and see no change in direction of this article whatever.--Janeyryan (talk) 16:19, 8 August 2008 (UTC)

Respectfully, perhaps you could then comment on talkpages where you are at least marginally familiar with the subject? --Relata refero (disp.) 18:35, 12 August 2008 (UTC)

"Mr. Byrne is the dominant voice on this page." More importantly, I have 0 voice on the page that matters (that is, the project page on Naked Short Selling), out of respect for the wishes of some who feel that would corrupt it. However, I respectfully suggest again that folks take a look at the [sandbox page] I created some months ago. On the one hand, it is months out of data. On the other hand, it has everything that is on the current project page, including the (in my view) bogus apologetics, but the material is organized differently. The early part is straightforward and factual, and is not salted with apologetics (as the current one is). Then it ends with the section on the controversy, with all the current apologetics in place, followed by a section that tells the other side. Again, it is months out of date and a tremendous amount has come out to expose this practice, but I cannot imagine a fair-minded person would not see this structure as more neutral, and preferable. And I do not see why the apologists for NSS could have any complaint, because their material is still [there], but just not unilaterally salted through the body of the article. PatrickByrne (talk) 15:34, 8 August 2008 (UTC)

I have 0 voice on the page that matters (that is, the project page on Naked Short Selling) said the gentlman prior to proposing an overhaul of the article.--Janeyryan (talk) 16:19, 8 August 2008 (UTC)

Correct. —Preceding unsigned comment added by PatrickByrne (talk • contribs) 18:51, 10 August 2008 (UTC) PatrickByrne (talk) 06:48, 11 August 2008 (UTC)

I suggest that all the controversial claims be combed out of the article and concentrated in a new section at the end. I have prepared a modest example that with is relatively current with new information, yet preserves all the apologetics that is current in the article (if it would not be too embarrassing for the apologists):

Controversy Over the Pervasiveness of Naked Shorting - Patrick's Respectful Proposal

There is debate about the extent of this manipulation within US capital markets. For many years the consensus was that this was a non-issue. Recently, however, this conventional wisdom has been dissolving.

Naked short selling criticism

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.

The SEC hired an economist, Leslie Boni, to investigate this issue. In 2006 she wrote a seminal paper, "Strategic Delivery Failures in US Equity Markets", showing that delivery failures were much more prevalent than had previsoly been thought, that the mechanisms that were supposed to stop them were triggered in .12% of the relevant cases, and that the distribution of delivery failures showed purpose and could not be explained as random human error. As her paper's summary put it: "Sellers of U.S. equities who have not provided shares by the third day after the transaction are said to have 'failed-to-deliver' shares. Using a unique data set of the entire cross-section of U.S. equities, we document the pervasiveness of delivery failures and evidence consistent with the hypothesis that market makers strategically fail to deliver shares when borrowing costs are high. We then show that many firms that allow others to fail to deliver to them are themselves responsible for fails-to-deliver in other stocks."

Robert J. Shapiro, former undersecretary of commerce for economic affairs, has claimed that naked short selling has cost investors $100 billion and driven 1,000 companies into the ground.

The North American Securities Administrators Association, representing state stock regulators, filed a brief saying that if these 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."[2][3]

Ralph Lambiase, head of the Connecticut Securities Agency and the NASAA, declared his disappointment at how the industry was handling the issue as a whole.

In early 2006, Bloomberg Magazine's Bob Drummond wrote "The Corporate Voting Charade", claiming that naked shorting was creating so much phantom stock it was ruining corporate democracy. As the article's subtitle put it: "One share does not always equal one vote in the crazy math of proxy contests. When short sellers borrow stock, investor democracy can be a sham."

In September, 2006, Bloomberg's Drummond wrote "Games Short Sellers Play", alleging that "Traders who sell shares they don’t own—and haven’t even borrowed—are driving down prices. More than 425 companies a month may be the victims of these schemes."

In February, 2007 Forbes Magazine published two stories supporting the view that naked shorting is a serious problem in US capital markets. One article, "Naked and Confused", described the naked shorting attack on Sedona, a Pennsylvania software firm. Another article, "Sewer Pipes", explored the apparent involvement of the Russian Mafia in this issue: "Hedge funds are posting nice returns from deals that may involve ex-cons, stock scammers--even the Mob."

In March 2007, Bloomberg Television featured a special on naked short selling, "Phantom Shares" that presented a sharp criticism of naked short selling in the US capital markets. Phantom Shares' was nominated for an Emmmy for Long Form Investigative Journalism.

In May 2007, Max Keiser reported on naked short selling as part of a report on Al Jazeera's People and Power show.

In July 2007, United States Senator Bob Bennett suggested on the U.S. Senate floor that the allegations involving DTCC and naked short selling are "serious enough" that there should be a hearing on them with DTCC officials by the Senate Banking Committee. The committee's Chairman, Senator Christopher Dodd, indicated he was willing to hold such a hearing.

Also in July, 2007, Forbes published another article, "Naked Shorting Case Gains Traction" concerning the failure of the prime brokerage industry to get a judge to dismiss litigation by Overstock.com against them.

According to The Guardian, Bear Stearns CEO Alan Schwartz has maintained naked short selling played a role in the March, 2008 collapse of Bear Stearns.

Lehman Brothers CEO Dick Fuld has gone on CNBC to make this claim as well: "Lehman Brothers CEO Richard Fuld has instructed his legal staff to tell regulators that he has information suggesting that short-selling hedge funds colluded to help cause the demise of Wall Street investment bank giant Bear Stearns, sources told CNBC."

On April 3, 2008, SEC Chairman Chris Cox, testified to the United States Senate that the SEC is investigating whether or not Bear Stearns was brought down by "illegal naked short selling".

In May, 2008, The US Chamber of commerce made public [a letter] in which they said, "We are pleased that the SEC... recognizes the serious problems with naked short selling and is taking additional steps to curb this abusive practice. We agree with Chairman Cox that naked short selling is a serious fraud that needs to be eliminated. However, we remain concerned that the current proposal does not address critical aspects of this disruptive practice."

On July 15, 2008, "The Securities and Exchange Commission today issued an emergency order to enhance investor protections against "naked" short selling in the securities of Fannie Mae, Freddie Mac, and primary dealers at commercial and investment banks," as their press release stated.

On July 21, 2008, Reuters ran the story a headline about former SEC Chairman Harvey Pitt, "Harvey Pitt to SEC: Expand ban on naked short-selling". It opened, "Emergency action by regulators to rein in abusive short-selling in some large financial firms should be expanded to include the stocks of all public companies, a former top markets watchdog said on Monday."

On July 22, Reuters reported that "Debate rages over naked short-selling as SEC mulls extending ban". The Reuters story described the situation succinctly: "The SEC’s emergency rule rattled the trading community, which scrambled to understand how the rule would be enforced. The unprecedented rule came after the SEC announced plans to crackdown on rumormongering and has started examining whether broker dealers and investment advisers have controls in place to prevent market manipulation."

On August 7, 2008, the American Bankers Association released a letter requesting that the SEC extend the protections afforded some in its July 15 Emergency Order be extended throughout the market. "At a time, when the economy is clearly under stress, the commission has a responsibility to assure that destructive practices such as abusive naked short selling are stopped," said the letter dated August 7. Here is a Reuters story on this.

Naked short selling apologetics

Regulators, hedge fund managers, and financial journalists downplay the extent of naked shorting in the US.

On its Regulation SHO website ("Does Naked Shorting Drive Prices Down?" section), the SEC cites the prevalence of false claims of naked short selling in Pump and Dump fraud. The SEC downplays naked shorting as a factor in declining stock prices, stating that stock values ideally should be determined by "the quality of the company itself," "supply and demand" of the company's shares, and the company's ability to generate positive income. The SEC's short selling FAQ criticizes what it claims are common misconceptions about the practice. For example, the SEC website denies that naked shorting causes "phantom" shares to enter the market: Naked short selling, the SEC said, would not increase a company's shares outstanding shares nor result in "counterfeit shares."

Statistics on failures to deliver securities are sometimes used as evidence of naked short selling in specific stocks. However, the U.S. Securities and Exchange Commission stated in January 2008 that "fails-to-deliver can occur for a number of reasons on both long and short sales. Therefore, fails-to-deliver are not necessarily the result of short selling, and are not evidence of abusive short selling or 'naked' short selling."

At a North American Securities Administrators Association (NASAA) conference on naked short selling in November 2005, an official of the New York Stock Exchange stated that NYSE had found no evidence of widespread naked short selling, and alleged "fear mongering that there's this rampant naked shorting that's gone unregulated." At that conference, Cameron Funkhouser, NASD senior vice president of market regulations, noted that although companies have alleged stock manipulation through the Berlin stock exchange, the NASD has seen "not one instance of naked short selling [on the Berlin stock exchange]". An official of the SEC said that "While there may be instances of abusive short slling, 99% of all trades in dollar value settle on time without incident."

Short seller David Rocker has contended that failure to deliver securities "can be done for manipulative purposes to create the impression that the stock is a tight borrow." In such a situation, the failure to deliver would be on the part of "longs," not "shorts.""Naked Truth Dressed to Baffle". www.thestreet.com. Retrieved 2008-04-03. </ref>

There is a debate regarding the extent to which DTCC is involved. DTCC says naked shorting is not widespread enough to be a major concern. "We're not saying there is no problem, but to suggest the sky is falling might be a bit overdone," DTCC's chief spokesman Stuart Goldstein said. DTCC General Counsel Larry Thompson calls the claims "pure invention."

A study of trading in initial public offerings by two SEC staff economists, published in April 2007, found that excessive numbers of fails to deliver in IPO's were not correlated with naked short selling. The authors of the study said that while the findings in the paper specifically concern IPO trading, "The results presented in this paper also inform a public debate surrounding the role of short selling and fails to deliver in price formation."

Even though fails to deliver are viewed by some as a way of measuring the degree of naked short sales, the SEC economists said the delivery failures seen in the IPO market "cannot be explained by short selling in general or 'naked' short selling specifically."

An April 2007 study conducted for Canadian market regulators by Market Regulation Services Inc. found that fails to deliver securities were not a significant problem on the Canadian market, that "less than 6% of fails resulting from the sale of a security involved short sales" and that "fails involving short sales are projected to account for only 0.07% of total short sales."

Until at least 2007, most Wall Street financial journalists took the position that naked short selling is not harmful and its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings.

Wall Street Journal columnist Holman W. Jenkins, Jr., has derided naked shorting allegations, and claimed that "fails were more like an acceptable kludge, helping the market work better, than a cesspot of corruption liable to bring down the financial system."

In the New York Times, several columnists have criticized the campaign against naked short selling. Chief financial correspondent Floyd Norris contended that investors of stocks that are being shorted "might do better to try to understand why some think the shares are overvalued, rather than simply rail about unfair short selling.".

New York Times financial columnist Joseph Nocera has criticized naked shorting allegations as diversionary complaints, and said that "most people who understand the issue or have looked into it think it's pretty bogus."

Author, columnist and former Business Week investigative reporter Gary Weiss maintains that the SEC enacted Regulation SHO in part due to pressure from a handful of small and microcap companies. He also cites economic justifications for naked short selling and downplays its significance as a problem for the market.

Hmmmmm

I'll make three quick observations about the above. First, "apologetics" is an activity, whereas "critics" are people. It would make sense to begin with "NSS criticism" and then go to "NSS apologetics." Or, in the alternative, begin with "critics" and proceed to "apologists." But don't mix them up.

FixedPatrickByrne (talk) 02:30, 12 August 2008 (UTC)

Second, why is Drummond's affiliation specified in two successive paragraphs? Would someone after reading the first of those grafs immediately forget that Drummond is with Bloomberg Mag and need reminding so quickly? Just wondering.

Fixed PatrickByrne (talk) 02:30, 12 August 2008 (UTC)

Third, as with the viscosity of crude oil, there is light, there is heavy, and there is intermediate. With traffic lights, there is red, there is green, there is yellow. We might want a name and a category for the yellow-light theorists. The West Texas Intermediates of NSS. I think that is now the position in which one can place Chris Cox and the official position of the SEC, which after all holds that NSS is a problem for Wall Street, but has declined to extend its order even to banking in general, much less to biopharms and so forth.

Chris - thanks for aknowledging that Chairman Cox believes "that NSS is a problem for wall street." But you err by continuing, he "has declined to extend its order even to banking in general, much less to bipharms and others." You seem to regrad this as proof that Cox does not believe that NSS is a problem for banking in general, much less biopharms and others. That claim is flatly false: Cox has on numerous occasions (many of which are cited above) directly asserted that NSS is a problem for other companies in the market, such as the ones you mention. The fault in your logic is that you have a hidden proposition, assumed without argument, that hidden and faulty assumption being, "if Chris Cox thought that nss was a problem for banking in general or bipharms and others, he would have extended his emergency order to them." Please provide citation to support that hidden assumption. PatrickByrne (talk) 02:30, 12 August 2008 (UTC)

Just my own respectful initial observations. --Christofurio (talk) 23:25, 11 August 2008 (UTC)

Mine too.PatrickByrne (talk) 02:35, 12 August 2008 (UTC)

And you may want to make room for such research as http://www.imd.ch/news/upload/Report.pdf --Christofurio (talk) 14:37, 15 August 2008 (UTC)

[And, on an only slightly-related note, I was surprised to see that Mantanmoreland is writing Obama's speeches. Or is the old "lipstick on a pig" metaphor actually fairly common after all?]

New source- The Register

Here is some new information in a reliable source that should be considered for the article in relation to Byrne's and Weiss' battle over Naked Short Selling and how it relates to Wikipedia in particular. Perhaps a new section in the article?:

• Metz, Cade, "Wikimadness XVII: The Return of Byrne", The Register, August 11, 2008. Covers Weiss' and Byrne's battle over Naked Short Selling and Byrne's allegations that Weiss was employing the User:Mantanmoreland account and its socks to try to control the subject in Wikipedia. Cla68 (talk) 01:33, 12 August 2008 (UTC)

Cla; I´m not sure I agree with you completely here. I feel much more for User:Relata refero suggestion above, namely that this article suffers from a lack of academic sources, (and has too much dependence on financial journalism.). I have left a note on Relatas talk-page: [4]. The sources Relata mentions above is one place to start. Also, the review he refers to is, I believe, here(?)

Actually, I think I would have moved up the "Studies" section, to go between the: 1 Description, and 2 Regulations in the United States. (That is: the "Studies" section would become the new section 2, while "Regulations in the United States" would become section 3). This just to indicate the importance of the "Studies" section. What do you think? Huldra (talk) 02:28, 12 August 2008 (UTC)

Oh, and I also think that possibly the SEC´s July 15 order is important enought to go into the lead? Huldra (talk) 02:41, 12 August 2008 (UTC)

• The Register is not exactly the most reliable source. If there were interesting news, I suspect it would first appear in better places. They seem to do a fair amount of rumor mongering at The Register, and not so much fact checking. Jehochman ^Talk 02:48, 12 August 2008 (UTC)

Well, the the conflict between Weiss and Byrne has also been noted in the NY Times, NY Post, and, I think Bloomberg, with the Times article mentioning that it may have spilled over into Wikipedia. The Register reporter notes that he believes the Wikipedia articles are slanted towards an anti-Byrne stance. Judging by Huldra's comments above, if this is true, then it appears to be on its way to being corrected. Cla68 (talk) 04:30, 12 August 2008 (UTC)

Cla; you are right in that the Weiss/Byrne/Wikipedia conflict has been mentioned in quite a few sources, however, my concern is that this "local" conflict is at least 100 times bigger here on WP than out in the "real world". What I am trying to say is that I don´t want us to be "navel gazers" (Eh, do you have that expression in English?). There are far, far more important issues here. As one example; take the collapse of Bear Stearns: it is so enormously more important than all our infights here, don´t you agree? Therefore, I find the single fact that Bear Stearns CEO Alan Schwartz believes that NSS played a role in the collapse of Bear Stearns [5], far more important than the whole Weiss/Byrne/Wikipedia saga... For me it would be more important to get that across than all the socking by GW. For all its nastiness: it is simply not important enough *compared* with the other issues here. And, from what I understand: the demise of Bear Stearns was an important influence for the SEC´s July 15 order. (And I see that CNN has a new headline about NSS [6]. It is certainly no fringe subject anymore.) Anyway, does everybody agree that the SEC July 15 order should - in some form or other - go into the lead? And can we move up the "Studies" section (even if we have not expanded it yet?) Huldra (talk) 05:28, 12 August 2008 (UTC)

I agree about the Register and about the Byrne/Weiss kerfuffle. --Janeyryan (talk) 13:23, 12 August 2008 (UTC)

Just a note in response to User:Huldra's message on my talkpage. I certainly thought at the time that there was an under-representation of the academic literature, and will certainly get on it when I have time, and if I decide to return to full-time editing. I have, however, been following with interest the SEC's recent decision and the consequent press coverage, and cannot disagree with User:PatrickByrne when he says that the media coverage section is at worst pretty definitely POV now, and at best dangerously out-of-date. --Relata refero (disp.) 16:42, 12 August 2008 (UTC)

The media coverage section is quite POV, even more so given the recent shifts and coverage of this topic. However, as I said on Weiss' talk page, coverage on that living person should wait for a better source, if forthcoming. Everything else needs a new coat of paint, and Byrne's commentary in this Reg story might have a place in the article. Cool Hand Luke 01:10, 13 August 2008 (UTC)

The Reg article is about Wikipedia, not about the naked shorting issue except as it relates to Byrne's real or perceived grievances against NSS articles on Wikipedia. I think what's needed are articles that are from reliable sources, neutrally presented, describing media reaction. What I have seen in Google News has been straight reporting and duplicative. I agree that more needs to be done to present the great onslaught of coverage, straight and uninspiring as it may have been. Unfortunately we have been somewhat diverted by Mr. Byrne's quest for vindication, which I would suggest is tangential if not utterly irrelevant to the greater issue.--Janeyryan (talk) 01:45, 13 August 2008 (UTC)

Most of us have not, actually. --Relata refero (disp.) 03:58, 13 August 2008 (UTC)

Yes, I agree, most of you have not, Relato. "Unfortunately we have been somewhat diverted by Mr. Byrne's quest for vindication..." Readers should be aware that such misleading claims get thrown about as though they were fact, apparently in an attempt to confuse the suggestible. Whom has been diverted? Is she speaking of herself? etc. Incidentally, I'm on no quest for "vindication": I just want the article to tell the truth. It is stuck in Bizarro World: the apologists have the high ground, but at least on this Talk page enough people get it. I wonder, will the siege be a long one? Or will there be a sudden rushing of the gate? PatrickByrne (talk) 04:40, 16 August 2008 (UTC)

Yes, Mr. Huldra. In response to one of your more incidental queries, "navel gazing" is an English-language idiom. http://vdict.com/navel-gazing,7,0,0.html --Christofurio (talk) 03:41, 13 August 2008 (UTC)

Oh, thank you Christofurio. And eh, its ms. Huldra. ;-P Regards, Huldra (talk) 05:03, 26 August 2008 (UTC)

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)

Reintroduce

I see that a lot of stuff is archived; ok. But I take the chance on reintroducing Relatas "sources"; I found them useful. Here they are:

A word.

So one can't move on this project these days without discovering that this article may or may not be a problem. I've come to have a look myself. It has problems. Here are the problems:

• Far too much dependence on financial journalism. The "media coverage" thing dominates the end of the article, and is least encyclopaedic. It should be cut down drastically. Since there are several complaints about it, and a recommendation from the Business and Economics Working Group already on this page suggesting as much, it beggars belief that it has not been done as yet.
• Nowhere near enough reliable academic sources covered in the "studies" section. I am not an expert, but have some small knowledge of theoretical financial economics, and the current section is clearly underweighted, outdated and unrepresentative. Here are a couple of relevant studies:
  • Finnerty, John D. (Fordham): Short Selling and Death Spirals, SSRN no 687282.
  • Boni, Leslie (Anderson SoM) :Strategic delivery failures in U.S. equity markets, JFinMar 9:1.
  • Angel, Christophe and Ferri (Georgetown and GMU): A Short look at Bear Raids.
  • Culp and Heaton, (Chicago GSB): Naked Shorting, SSRN no 982898.
  • Knepper, Zach (Berkeley): Future-Priced Convertible Securities & The Outlook For “Death-Spiral” Securities-Fraud Litigation, Berkeley Legal Press. This last has a decent survey of the litigation.
• It also dramatically fails to provide a worldwide perspective; there are several other countries with much stiffer approaches to this than the US, including the PRC, Singapore and Spain (IIRC) and although there are academic studies of all those approaches, none are in here. I notice the content on the Indian regulation has been unjustifiably pruned back.

Relata refero (talk) 11:01, 14 February 2008 (UTC)

......re-introduced by Huldra (talk) 05:25, 26 August 2008 (UTC)

More entarte Kunst, this time from Associated Press: "Naked short-selling blamed in Wall St crisis"

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)

Revising lead

Can you explain the reversion, Janeyryan? My initial questions are:

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).

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)

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)

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. [7] [8] [9] 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)

"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."[10][11]

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

<sigh of relief>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—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.--Janeyryan (talk) 14:55, 18 September 2008 (UTC)