DTCC Responds on Naked Short Selling

DTCC Responds on Naked Short Selling
Let’s start with the question, what is naked short selling and why has it suddenly become an issue?
Short selling is a trading strategy where a broker/dealer or investor believes that a stock is overvalued and is likely to decline. It is an integral part of the way our capital market system works. Basically, it involves borrowing stock that you don’t own and selling it on the open market. You then buy it back at a later date, hopefully at a lower price, and as a result, making a profit.
Naked short selling is selling stock you don’t own, but not borrowing it and making no attempt to do so. While naked short selling occurs, the extent to which it occurs is in dispute.
FAQs
SEC Updates Q&A on Short Selling and Reg SHO
From the Division of Market Regulation: Responses to Frequently Asked Questions Concerning Regulation SHO (May 6, 2005)
SEC Issues Q&A on Short Selling and Reg SHOFrom the Division of Market Regulation: Key Points About Regulation SHO (April 11, 2005)
Naked Short Selling and the Stock Borrow ProgramAn interview with DTCC First Deputy General Counsel Larry Thompson (@dtcc newsletter, March 2005)
LITIGATION
SEC Files Amicus Brief in Nanopierce Appeal (February 7, 2006)
Status of Litigation against DTCCThe current status of litigation against DTCC involving naked short selling. (October 26, 2006)
PRESS RELEASES & STATEMENTS
August 31, 2006 - Media Statement on Global Links
June 28, 2006 - MEDIA STATEMENT: DTCC Clarification on Fails to Deliver
June 2, 2006 - Federal Court Dismisses Lawsuit Against DTCC
March 15, 2006 - Media Statement on Robert Shapiro’s Report on Naked Short Sales
March 14, 2006 - DTCC Clarifies Work Experience of Former DTC Employee
February 17, 2006 - DTCC and the State of Connecticut Issue Joint Statement
January 24, 2006 - Critique of Prof. John Finnerty's paper - A critique by DTCC of Prof. John Finnerty's recent paper, "Short Selling, Death Spiral Convertibles and the Profitability of Stock Manipulation" as it relates to DTCC and its subsidiaries. This critique was offered at the FMA conference where Prof. Finnerty's paper was presented.
January 23, 2006 - Regulators Say Reg SHO is Working - Regulators at the SEC, NYSE and NASD say Reg SHO is working on cutting down fails. May 3, 2005 - DTCC Applauds Court Decision to Dismiss Nanopierce Lawsuit
March 31, 2005 - DTCC Calls Euromoney Article on its Stock Borrow Program and Naked Short Selling 'Sloppy Journalism'
March 30, 2005 - DTCC Announces Effort to Correct Record on its Stock Borrow Program and Naked Short Selling
January 23, 2003 - Media Statement: DTCC Statement On Alleged Short Selling And Issuers Withdrawal From DTC
RECENT NEWS ARTICLES ON NAKED SHORT SELLING
January, 2006 - Regulators Say Reg SHO is Working - @dtcc newletter article.-"While there may be instances of abusive short slling, 99% of all trades in dollar value settle on time without incident..."[more]
May, 2005 - Nevada Court Dismisses Nanopierce Lawsuit Against DTCC On Naked Short Selling - Follows series of nine other failed suits
"A Nevada court has dismissed a lawsuit brought by Nanopierce Technologies, Inc. against DTCC and its subsidiaries that sought to hold DTCC responsible for the drop in Nanopierce’s stock price ..." [more]
March 30, 2005 - Who's Behind Naked Shorting? - By Karl Thiel, The Motley Fool
"I'm deeply skeptical of some conspiracy theories that suggest that short selling is not only rampant, but also a part of a coordinated scheme involving brokers, media, and regulators trying to bring down targeted companies ..." [more]
February 18, 2005 - A New S.E.C. Rule Fails to Raise Share Prices, and Some Are Angry - By Floyd Norris, The New York Times
"It's a criminal conspiracy when stocks move the wrong way, and the government should do something about it. That is the cry these days of some investors in stocks that have been heavily shorted even after a new rule from the Securities and Exchange Commission took effect ..." [more]
COMMENTARY
Letter to EuromoneyDTCC’s Reaction to April 2005 Article.PDF, 85KB, March 31, 2005
PRODUCT FACT SHEETS
NSCC's Stock Borrow Program - The Stock Borrow Program allows participants to lend NSCC available stocks and fixed income securities from their account at The Depository Trust Company (DTC), to cover temporary shortfalls in NSCC's Continuous Net Settlement (CNS) System.
NSCC's Continuous Net Settlement (CNS) System - CNS is an automated book-entry accounting system that centralizes the settlement of compared security transactions and maintains an orderly flow of security and money balances.