Post by jannikki on Aug 15, 2007 21:33:01 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
Not to be Rude But...August 15, 2007
David Patch
I told you so. I told you that greed would overwhelm all else and chaos would be the result when the tick test was eliminated.
In public comment memos to the SEC, in personal memos to the regulators, and using Stockgate as a venue I lobbied against the elimination of the uptick rule. I pointed out the flaws in the analysis by the SEC and most notably by the economists they retained to evaluate the pilot period on the elimination of the uptick rule. I even pointed out the conflicts of interests several of the economists chosen had with short selling hedge funds but nobody wanted to listen. This decision was made before the proposal was ever presented to the public and the rest of the process was merely manipulated to fit the decision already made.
Consider that the SEC put up for public comment the proposal to eliminate the uptick rule and received commentary from both sides of the argument. Representing the "for" camp were the members of Wall Street who stood to gain substantially by such eliminations along with the Wall Street lobbyist known for putting investors on the back burner when it comes to Wall Street profitability. From the "against" camp were the uneducated individual investors and a former SEC attorney out of the Division of Market Regulation who articulated a rationalization for restraint.
Caution was urged by those against the change based on the subtleties identified in the roundtable meeting held by the SEC to discuss the pilot program results. Several economists coming to differing conclusions on the impacts such a rule change may have on the thinly traded securities. The SEC reported only on the positive with little face time given to the negatives. Some even cautioned that Wall Street may have been 'playing nice' during the pilot period because they could see the green at the end of the tunnel if they showed restraint over this limited period. It was easy to overlook this potential as it came and went in a blink of an eye. Those holding such thoughts may have had a temporary bout of clairvoyance as the volatility certainly came when the tick test evaporated.
Those comment memo's signing up for the change simply wanted to create additional liquidity into the markets with UBS, ETRADE, and the Managed Fund Association going on record with that thought. The fact that it was all sell side liquidity being added was not of consequence as long as it was liquidity.
And with the camps again divided between industry and public the SEC once again snubbed the investing public's concerns and sided with Wall Street. The public comment phase was simply a Federal requirement not something the SEC typically uses as a tool for making informed decisions.
Caution be damned, this SEC Staff was going full speed ahead into uncharted waters. Should those economists be correct about the impacts this may have on thinly traded securities so be it. In another few years, after the damage is done, the SEC can change the rule again similar to what recently happened with the initial ill-advised 'grandfather clause' of Regulation SHO.
The additional years of abuse will again be written off as collateral damage. No one individual to be accountable to the impact this may have on real families.
Here is a novel idea, has anybody stepped back and noticed a pattern here? The SEC gaffes all seem to come at the expense of the public and to the favor of Wall Street and more specifically the short sale markets on Wall Street.
Jim Cramer calls this latest rule change stupid and irresponsible. The WSJ is reporting on a regular basis that some on Wall Street are now blaming the recent volatility on the elimination of the tick/price test rule. Exactly the opposite of what the SEC concluded in their somewhat flawed analysis.
In one recent article [Rule Change Ticks Off Some Traders] the WSJ reported:
"Gary Lahey, a former chairman of the Chicago Board Options Exchange, says it's hard to quantify the added volatility given all the turmoil of late but there is no question it has had an impact. "You're going to get more volatility because it's easier to whack a stock," says Mr. Lahey, who nevertheless favors the rule change.
On the New York Stock Exchange, Seaport Securities broker Theodore Weisberg agrees: "They quietly changed the ground rules," says Mr. Weisberg. "There's no question it's been an aphrodisiac for volatility."
But who could have known?
Hey guys look over here - I did! I saw it coming and I raised the red flag for caution. This amateur was apparently able to outthink the pros once again and at the present time has made both regulator and professional financial beat writer look foolish.
Funny thing is, I have started to receive phone calls just this week from reporters asking about the elimination of this rule and why so few knew it was coming. Could it be that too many were fixated on where their 'sources' directed their attentions and few were keeping their eye on the ball?
I pointed to the SEC proposal, the pilot program, and the roundtable meeting held at the SEC. I also identified that the real story lies in the number of comments presented, or lack thereof, to the SEC. An issue this big received no greater than 30 letters with several being from myself.
Where were the firms on Wall Street now crying foul when they had the opportunity to respond with their concerns? They are the damn professionals, they see what the SEC can't or won't, why did these firms fail to speak up or worse, for those that did come forward, why did they speak for the elimination instead of against it?
Another common thread raised by these reporters who contacted me was "Who came up with this crazy idea anyway?
It is a logical question. Think about it; if the tick/price test was not hindering anything specific why get rid of it? Does the market have that much of a liquidity problem that short sales are not getting executed?
Hardly, the short interests in our markets are at record highs. Clearly then the short seller is not having any trouble getting the short sales executed. They may have problems getting them settled but executed, no problem.
So who is the genius that came up with the idea that after 70 years of pricing protections we should rid ourselves of such protection to curry favor from the short sellers? I have an idea who it most likely was but I will keep that to myself, is that okay Mr. Brigagliano.
So again, how is it that this amateur was out there crying foul while most of the financial press were fixated on beating up a public CEO for voicing concerns over present market practices that are causing critical levels investor distrust. The press once again caught flat-footed for providing poorly tainted coverage back when coverage was necessary and questions needed asking.
Oh, as for those bear raids the experts claimed couldn't exist in today's electronic market environment guess gain. I beg to differ. The sophistication simply altered the look of a bear raid. Today bear raids are mini events made to take out percentages at a time and alter a market for the next raid to come. As Mr. Lahey stated, and Jim Cramer repeats near daily, "It is easy to whack a stock down".
Not only is it easy, it takes a small fraction of shares to drive a stock down 10% that it does to raise that same stock 10%. The elimination of the tick test simply made this ratio diverge even more.
As for those market making exemptions the SEC put out there to protect against this? I am still looking for the market makers responsible for maintaining an orderly market to step in during these mini raids of sell side imbalance and take the orders into the bids. Seems to me by the way they have disappeared that they are in on the game and have instead parted like the red sea when such an event is under way. Just something else these regulators have found cause to ignore.
If anybody at the SEC Division of Market Regulations would like a lesson in market trading and games played, I can be hired out at a nominal consulting fee. If interested, see Jim Brigagliano he knows how to get in contact with me.
For more on this issue please visit the Host site at www.investigatethesec.com (posted with permission)
Copyright 2007
An online newspaper reporting the issues of Securities Fraud
Not to be Rude But...August 15, 2007
David Patch
I told you so. I told you that greed would overwhelm all else and chaos would be the result when the tick test was eliminated.
In public comment memos to the SEC, in personal memos to the regulators, and using Stockgate as a venue I lobbied against the elimination of the uptick rule. I pointed out the flaws in the analysis by the SEC and most notably by the economists they retained to evaluate the pilot period on the elimination of the uptick rule. I even pointed out the conflicts of interests several of the economists chosen had with short selling hedge funds but nobody wanted to listen. This decision was made before the proposal was ever presented to the public and the rest of the process was merely manipulated to fit the decision already made.
Consider that the SEC put up for public comment the proposal to eliminate the uptick rule and received commentary from both sides of the argument. Representing the "for" camp were the members of Wall Street who stood to gain substantially by such eliminations along with the Wall Street lobbyist known for putting investors on the back burner when it comes to Wall Street profitability. From the "against" camp were the uneducated individual investors and a former SEC attorney out of the Division of Market Regulation who articulated a rationalization for restraint.
Caution was urged by those against the change based on the subtleties identified in the roundtable meeting held by the SEC to discuss the pilot program results. Several economists coming to differing conclusions on the impacts such a rule change may have on the thinly traded securities. The SEC reported only on the positive with little face time given to the negatives. Some even cautioned that Wall Street may have been 'playing nice' during the pilot period because they could see the green at the end of the tunnel if they showed restraint over this limited period. It was easy to overlook this potential as it came and went in a blink of an eye. Those holding such thoughts may have had a temporary bout of clairvoyance as the volatility certainly came when the tick test evaporated.
Those comment memo's signing up for the change simply wanted to create additional liquidity into the markets with UBS, ETRADE, and the Managed Fund Association going on record with that thought. The fact that it was all sell side liquidity being added was not of consequence as long as it was liquidity.
And with the camps again divided between industry and public the SEC once again snubbed the investing public's concerns and sided with Wall Street. The public comment phase was simply a Federal requirement not something the SEC typically uses as a tool for making informed decisions.
Caution be damned, this SEC Staff was going full speed ahead into uncharted waters. Should those economists be correct about the impacts this may have on thinly traded securities so be it. In another few years, after the damage is done, the SEC can change the rule again similar to what recently happened with the initial ill-advised 'grandfather clause' of Regulation SHO.
The additional years of abuse will again be written off as collateral damage. No one individual to be accountable to the impact this may have on real families.
Here is a novel idea, has anybody stepped back and noticed a pattern here? The SEC gaffes all seem to come at the expense of the public and to the favor of Wall Street and more specifically the short sale markets on Wall Street.
Jim Cramer calls this latest rule change stupid and irresponsible. The WSJ is reporting on a regular basis that some on Wall Street are now blaming the recent volatility on the elimination of the tick/price test rule. Exactly the opposite of what the SEC concluded in their somewhat flawed analysis.
In one recent article [Rule Change Ticks Off Some Traders] the WSJ reported:
"Gary Lahey, a former chairman of the Chicago Board Options Exchange, says it's hard to quantify the added volatility given all the turmoil of late but there is no question it has had an impact. "You're going to get more volatility because it's easier to whack a stock," says Mr. Lahey, who nevertheless favors the rule change.
On the New York Stock Exchange, Seaport Securities broker Theodore Weisberg agrees: "They quietly changed the ground rules," says Mr. Weisberg. "There's no question it's been an aphrodisiac for volatility."
But who could have known?
Hey guys look over here - I did! I saw it coming and I raised the red flag for caution. This amateur was apparently able to outthink the pros once again and at the present time has made both regulator and professional financial beat writer look foolish.
Funny thing is, I have started to receive phone calls just this week from reporters asking about the elimination of this rule and why so few knew it was coming. Could it be that too many were fixated on where their 'sources' directed their attentions and few were keeping their eye on the ball?
I pointed to the SEC proposal, the pilot program, and the roundtable meeting held at the SEC. I also identified that the real story lies in the number of comments presented, or lack thereof, to the SEC. An issue this big received no greater than 30 letters with several being from myself.
Where were the firms on Wall Street now crying foul when they had the opportunity to respond with their concerns? They are the damn professionals, they see what the SEC can't or won't, why did these firms fail to speak up or worse, for those that did come forward, why did they speak for the elimination instead of against it?
Another common thread raised by these reporters who contacted me was "Who came up with this crazy idea anyway?
It is a logical question. Think about it; if the tick/price test was not hindering anything specific why get rid of it? Does the market have that much of a liquidity problem that short sales are not getting executed?
Hardly, the short interests in our markets are at record highs. Clearly then the short seller is not having any trouble getting the short sales executed. They may have problems getting them settled but executed, no problem.
So who is the genius that came up with the idea that after 70 years of pricing protections we should rid ourselves of such protection to curry favor from the short sellers? I have an idea who it most likely was but I will keep that to myself, is that okay Mr. Brigagliano.
So again, how is it that this amateur was out there crying foul while most of the financial press were fixated on beating up a public CEO for voicing concerns over present market practices that are causing critical levels investor distrust. The press once again caught flat-footed for providing poorly tainted coverage back when coverage was necessary and questions needed asking.
Oh, as for those bear raids the experts claimed couldn't exist in today's electronic market environment guess gain. I beg to differ. The sophistication simply altered the look of a bear raid. Today bear raids are mini events made to take out percentages at a time and alter a market for the next raid to come. As Mr. Lahey stated, and Jim Cramer repeats near daily, "It is easy to whack a stock down".
Not only is it easy, it takes a small fraction of shares to drive a stock down 10% that it does to raise that same stock 10%. The elimination of the tick test simply made this ratio diverge even more.
As for those market making exemptions the SEC put out there to protect against this? I am still looking for the market makers responsible for maintaining an orderly market to step in during these mini raids of sell side imbalance and take the orders into the bids. Seems to me by the way they have disappeared that they are in on the game and have instead parted like the red sea when such an event is under way. Just something else these regulators have found cause to ignore.
If anybody at the SEC Division of Market Regulations would like a lesson in market trading and games played, I can be hired out at a nominal consulting fee. If interested, see Jim Brigagliano he knows how to get in contact with me.
For more on this issue please visit the Host site at www.investigatethesec.com (posted with permission)
Copyright 2007