Talk:Naked short selling

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)

"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."[1][2]

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. 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.[3]

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.[4] 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.[5]

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:

• 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.

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)

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.

• 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".....

Regards, Huldra (talk) 07:15, 19 September 2008 (UTC)

Thanks guys. A review of Leslie Boni (2004):

• 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.

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)

Angel and Ferri is indeed more about the uptick rule (and a draft paper), but a couple of relevant points:

• 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.”

--Mackan79 (talk) 19:26, 20 September 2008 (UTC)

And here is Knepper:

• 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.”

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)

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 {{update}} template on the article for now, at least it acts as a bit of a caveat. Risker (talk) 19:34, 20 September 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)

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—never clearly defined—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)

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 [6] 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 [7].. 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 <ref>http://news.smh.com.au/business/asx-ban-on-short-selling-is-indefinite-20081003-4t16.html</ref>, the Netherlands <ref>http://news.yahoo.com/s/ap/20080921/ap_on_bi_ge/eu_netherlands_short_selling</ref>, and Switzerland <ref>http://www.iht.com/articles/2008/09/19/business/sell.php</ref><ref>http://www.iht.com/articles/2008/09/21/business/short.php </ref>.

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. [8] [9] [10] 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.[11] 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 [12] 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 [13] 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." [14]. 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]]. <ref>http://money.cnn.com/2008/10/06/news/companies/lehman_hearing/?postversion=2008100612</ref>"

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 [15]. 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. [16] 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

[17] "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"

[18] "Lehman executives understood the seriousness of the firm's dire financial state but "didn't act fast enough" to prevent the collapse, Waxman said"

[19] 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.

[20] 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 [21][22][23]

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)

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[24]). 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)

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.[25]

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)

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:

• 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")

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.

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:

• 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?

cojoco (talk) 05:51, 23 October 2008 (UTC) I will try to answer:

• 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.

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)

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)

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.[26]. --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)

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 Janeyryan (talk · contribs) and JohnnyB256 (talk · contribs) do not comply with conditions A and C of the the current probation on this page.[27]

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.")[28] ("I think what you have here is an article that while it pleases your contributor Mr. Byrne is misleading to readers and skewed.")[29] 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.")[30] ("The fact that you disagree with this viewpoint does not make it unworthy of inclusion.")[31] It has also included editing of the article.[32][33][34] (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.[35]

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[36] 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.[37]<ref name="Ellis">

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.<ref name="Ellis">

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[38] , 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.--~~~~