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Reg SHO FAQs December 27, 2004
What is the new Regulation SHO? from Nasdaq
Regulation SHO is a new rule announced by the Securities and Exchange Commission (SEC) on July 28, 2004, making changes to the regulation of short sales. The new rule:
Eases some current restrictions on effecting short sales, by suspending price test restrictions for a subset of actively-traded securities during a one-year Pilot Program, and Creates new restrictions, including: a uniform "locate" requirement for short sales in all equity securities, ando additional requirements on securities with significant settlement failures.
When do I need to comply with Reg SHO?
Most of the new provisions have a compliance date of Monday, January 3, 2005. The only exception is the Pilot program. The Pilot was rescheduled by the SEC in an order issued on November 29, 2004, and will now run from May 2, 2005, until April30, 2006.
Is there going to be a uniform price test?
No, the SEC has deferred adoption of a uniform price until completion of the Pilot.
What is the Pilot?
The Pilot is a one-year program that will exempt approximately 1,000 securities from any price test, both the bid test (for NASDAQ National Market ® securities) and the tick test (for exchange-listed securities).
What is the SEC’s purpose behind this Pilot program?
The SEC will review data collected during the Pilot to determine whether to: (1) eliminate a price test for some or all securities;
(2) adopt a uniform bid test for all securities, which could include NASDAQ
Small Cap Market SM and other over-the-counter (OTC) securities, not
currently covered by a price test; or
(3) maintain the current price tests.
What stocks are in the Pilot program?
The Pilot program will apply to a subset of Russell 3000 Index stocks. The 1,000 Pilot
securities are comprised of 47.8% NASDAQ National Market securities, 50% NYSE-listed securities, and 2.2% Amex-listed securities.
What about securities not in the Pilot?
Securities not included in the Pilot will still be covered by the existing bid test (for NASDAQ National Market securities) or tick test (for exchange-listed securities).
What is the Locate Rule?
This new uniform rule, which supplants existing rules such as the NASD’s Affirmative Determination Rule (Rule 3370), requires a firm, prior to effecting a short sale in any equity security, to "locate" securities available for borrowing, and document what the
firm has done to locate the securities. Market makers effecting short sales in connection with bona fide market making are exempt from this requirement.
What are "Threshold Securities"?
The SEC has adopted additional requirements for "threshold securities", which are securities with substantial settlement failures. A list of such threshold securities will be calculated and disseminated daily by the SRO on which the security is listed (or for which the SRO bears primary surveillance responsibility). NASDAQ is disseminating a list of threshold securities that covers NASDAQ National Market and SmallCap issues as well as OTCBB and other OTC securities.
Where can I find this daily list of threshold securities?
There are two NASDAQ sources for this information:
•FTP site Text File:
The web version of the List will be available on the Symbol Directory page at
What are the additional requirements that apply to threshold securities?
The "close-out" requirement requires a participant of a registered clearing agency to close out any fail to deliver position in a threshold security that has remained for 13 consecutive settlement days by purchasing securities of like kind and quantity. If the participant does not take action to close out the open fail to deliver position, the participant is prohibited from effecting further short sales in that security without first borrowing or arranging to borrow the security ("pre-borrow" requirement). Market makers are not exempt from this requirement.
Where can I find the SEC’s Frequently Asked Questions on Reg SHO?
On December 17, 2004, the Securities and Exchange Commission (SEC) published responses to frequently asked questions on Regulation SHO. The responses can be found on the SEC website.
|NASD Notice to Members 04-93 -
Issues Relating to the SEC's Adoption of Regulation SHO
On June 23, 2004, the Securities and Exchange Commission (SEC) adopted certain provisions of a new short sale regulation, designated Regulation SHO.1 Regulation SHO consists of new Rules 200 (definitional and order marking requirements), 202T (short sale price test pilot) and 203 (uniform locate and delivery requirements). Together with the Regulation SHO adopting release, the SEC issued an order establishing a one-year pilot suspending the provisions of SEC Rule 10a-1(a) and any short sale price test of any exchange or national securities association for short sales of certain securities for certain time periods (Pilot).2
NASD, in conjunction with The Nasdaq Stock Market, Inc. (NASDAQ), is issuing this Notice to Members to advise member firms and other interested parties of several recent actions and related guidance surrounding the adoption of Regulation SHO. First, on November 30, 2004, NASD filed for immediate effectiveness a proposed rule change to repeal NASD Rule 3110(b)(1),3 Rule 3210,4 Rule 3370(b)5 and Rule 11830,6 which are duplicative of or overlap with the uniform requirements of Regulation SHO. The repeal of these rules will be operative on January 3, 2005, the compliance date of Regulation SHO. Second, NASD and NASDAQ staff are providing information and guidance on several issues relating to Regulation SHO. Questions and answers have been provided relating to the Order Audit Trail System (OATS) rules, the application of Rule 3350 (the Short Sale Rule), the publication and dissemination of the “threshold list” required by Regulation SHO and excused withdrawal status for market makers that cannot comply with the Regulation SHO pre-borrow requirements. Finally, NASD is highlighting the recent questions and answers published by the SEC relating to Regulation SHO and is encouraging members to review this guidance prior to the January 3, 2005 Regulation SHO compliance date.
Questions regarding this Notice may be directed as follows: For questions regarding the repeal of NASD rules, contact the Office of General Counsel, Regulatory Policy and Oversight, NASD, at (202) 728-8071 or the Legal Section, Market Regulation, NASD, at (240) 386-5126; for questions regarding OATS Reporting, please contact the OATS Help Desk at (800) 321-NASD; for questions regarding Rule 3350 and market maker excused withdrawals, contact Office of General Counsel, The Nasdaq Stock Market, Inc., at (301) 978-8400; and for questions regarding Threshold List Securities, direct them to firstname.lastname@example.org or Market Operations, NASD, at (866) 776-0800.
1 See Exchange Act Release No. 50103 (July 28, 2004), 69 FR 48008 (August 6, 2004).
2 See Exchange Act Release No. 50104 (July 28, 2004), 69 FR 48032 (August 6, 2004) (Pilot Order). See also Exchange Act Release No. 50747 (November 29, 2004), 69 FR 70480 (December 6, 2004) (Second Pilot Order).
3 Rule 3110(b)(1) requires that an associated person indicate on the order ticket whether an order is “long” or “short.”
4 Rule 3210 prohibits a member from selling a security for its own account or buying a security as a broker for a customer, if the member has a fail to deliver in that security that is 60 days old or older, or 90 days old or older for foreign securities.
5 Rule 3370(b) requires, among other things, that (1) no member accept a long sale order from a customer unless the member has possession of the security, the customer is long in his account, the member makes an affirmative determination that the customer owns the security and will deliver it on settlement date or that it is in good deliverable form on deposit with a member or other permissible entity; and (2) no member effect a “short” sale order for a customer, nonmember broker-dealer or proprietary account in any security unless the member makes an affirmative determination that the member will receive delivery of the security or that the member can borrow the security for delivery by settlement date, subject to certain exemptions.
6 Rule 11830 generally mandates delivery of a security within 10 days of the settlement date for short sales executed in NASDAQ securities that, on the trade date of the transaction, had a clearing short position equal to at least one-half of one percent of the issue’s total shares outstanding.
|The Fox is Watching the Hen House (from RGM / FinancialWire article on Depository Trust & Clearing Corp article)|
The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined. And, as the SEC's June 4 ruling indicates, its monopoly over the electronic trading system appears even to be protected.
How entrenched is the Depository Trust and Clearing Corp.? It's two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (OTCBB: NDAQ) and the embattled American Stock Exchange! Regulators, regulate thyself?
In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:
They include Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (NYSE: C); Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (NYSE: UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);
Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (NYSE: MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (NYSE: STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (NYSE: MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (NYSE: BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (NYSE: JPM).
In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.
|follow up, the act of following up. 2. an action or thing that serves to increase the effectiveness of a previous one, as a second or subsequent letter, phone call, or visit. 3. Also called follow. Journalism. a. a news story providing additional information on a story or article previously published. b. Also called sidebar, supplementary story. a minor news story used to supplement a related story of major importance. Compare feature story (def. 1), human-interest story, shirttail. –adjective 4. designed or serving to follow up, esp. to increase the effectiveness of a previous action: a follow-up interview; a follow-up offer. 5. of or pertaining to action that follows an initial treatment, course of study, etc.: follow-up care for mental patients; a follow-up survey. fol·low –verb (used with object) 1. to come after in sequence, order of time, etc.: The speech follows the dinner. 2. to go or come after; move behind in the same direction: Drive ahead, and I'll follow you. 3. to accept as a guide or leader; accept the authority of or give allegiance to: Many Germans followed Hitler. 4. to conform to, comply with, or act in accordance with; obey: to follow orders; to follow advice. 5. to imitate or copy; use as an exemplar: They follow the latest fads. 6. to move forward along (a road, path, etc.): Follow this road for a mile. 7. to come after as a result or consequence; result from: Reprisals often follow victory. 8. to go after or along with (a person) as companion. 9. to go in pursuit of: to follow an enemy. 10. to try for or attain to: to follow an ideal. 11. to engage in or be concerned with as a pursuit: He followed the sea as his true calling. 12. to watch the movements, progress, or course of: to follow a bird in flight. 13. to watch the development of or keep up with: to follow the news. 14. to keep up with and understand (an argument, story, etc.): Do you follow me? –verb (used without object) 15. to come next after something else in sequence, order of time, etc. 16. to happen or occur after something else; come next as an event: After the defeat great disorder followed. 17. to attend or serve. 18. to go or come after a person or thing in motion. 19. to result as an effect; occur as a consequence: It follows then that he must be innocent. –noun 20. the act of following. 21. Billiards, Pool. follow shot (def. 2). 22. follow-up (def. 3). —Verb phrases23. follow out, to carry to a conclusion; execute: They followed out their orders to the letter. 24. follow through, a. to carry out fully, as a stroke of a club in golf, a racket in tennis, etc. b. to continue an effort, plan, proposal, policy, etc., to its completion. 25. follow up, a. to pursue closely and tenaciously. b. to increase the effectiveness of by further action or repetition. c. to pursue to a solution or conclusion. —Idiom26. follow suit. suit (def. 13). fol·low·a·ble, adjective —Synonyms 3. obey. 4. heed, observe. 8. accompany, attend. 9. pursue, chase; trail, track, trace. 19. arise, proceed. Follow, ensue, result, succeed imply coming after something else, in a natural sequence. Follow is the general word: We must wait to see what follows. A detailed account follows. Ensue implies a logical sequence, what might be expected normally to come after a given act, cause, etc.: When the power lines were cut, a paralysis of transportation ensued. Result emphasizes the connection between a cause or event and its effect, consequence, or outcome: The accident resulted in injuries to those involved. Succeed implies coming after in time, particularly coming into a title, office, etc.: Formerly the oldest son succeeded to his father's title. —Antonyms 1. precede. 2, 3. lead. 4. disregard. 9. flee. news follow up|
|NeoMedia / Buyins.net TMCNet|
|NeoMedia Technologies, Inc. (OTCBB: NEOM) together with
its subsidiaries, provides Internet advertising solutions using wireless
technologies to connect print and broadcast media companies to active
mobile content. It offers software and hardware products to read and scan
1-D and 2-D barcodes in the mobile environment, as well as enable
applications in mobile marketing, couponing, ticketing, and payment. The
company's products and services include NeoReader, a code scanning
software that allows users to scan 2-D or 1-D barcodes from product
packages, ad campaigns, retail displays, publications, or any medium, as
well as provides one-click access to mobile content; EXIO, consisting of
printer, display, keypad, and GSM/GPRS module to read and process 2-D
symbologies, such as Data Matrix from mobile phone displays and printed
1-D barcodes; MD-20, an OEM code reader; and Lavasphere, which enables
mobile devices with integrated cameras to read Data Matrix codes, 2-D
symbologies, and 1-D barcodes. Its products also comprise Link Manager, a
Web-based tool for creating and linking codes and keywords that act as the
resolution service for its codes; Gavitec Modular Solution Server, which
provides services, such as concept development, product design, customized
hardware and software components, support, consulting, and implementation;
MaxiCode Encoder that creates symbols in the print stream of choice;
Portable Date File 417 Encoder, which creates bar code print streams for
desktop, mid-range, and mainframe platforms; and Wang Interchange Source
Processor, an integrated set of utilities that facilitate the migration of
Wang VS COBOL applications to the open systems and Internet-ready world of
UNIX or Windows NT. The company offers its products in the United States,
the United Kingdom, Western Europe, the Middle East, and Asia/Pacific.
NeoMedia was founded in 1989 and is headquartered in Atlanta, Georgia with
an additional office in Aachen, Germany. With 1.30 billion shares
outstanding and an undisclosed short position, there is a failure to
deliver in shares of NEOM. According to quarterly data provided by the
SEC, there were still 21,053,832 shares of NEOM that were
failing-to-deliver as of November 19, 2007.
Galloway Energy Inc. (OTC: GWGI) owns and operated oil and gas reserves. The company is based in Canada. With 55.00 million shares outstanding and 1,800 shares declared short as of October 2008, there is a failure to deliver in shares of GWGI. According to quarterly data provided by the SEC, there were still 20,253 shares of GWGI that were failing-to-deliver as of February 29, 2008.
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 1-3, 2009. Los Angeles, CA. Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 1-3, 2009. Los Angeles, CA. Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 1-3, 2009. Los Angeles, CA. Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 1-3, 2009. Los Angeles, CA. Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 1-3, 2009. Los Angeles, CA. Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 1-3, 2009. Los Angeles, CA.
Ecu Silver Mining Inc (OTC: ECUXF) engages in the exploration and development of gold and silver, as well as base metals, including lead, zinc, and copper in Velardena mining district of Mexico. The company's property portfolio comprises Velardena property, which includes Santa Juana, Terneras, San Mateo, and San Juanes mines; Chicago property that consists of Los Muertos-Chicago mine; and San Diego property, which includes La Cruz-La Rata and El Trovador mines, as well as other shallower shafts. It was formerly known as ECU Gold Mining, Inc. The company was incorporated in 1985 and is headquartered in Rouyn-Noranda, Canada. With 267.61 million shares outstanding and 13,300 shares declared short as of October 2008, there is a failure to deliver in shares of ECUXF. According to quarterly data provided by the SEC, there were still 626,746 shares of ECUXF that were failing-to-deliver as of November 27, 2007.
About BUYINS.NET WWW.BUYINS.NET is a service designed to help bonafide shareholders of publicly traded US companies fight naked short selling. Naked short selling is the illegal act of short selling a stock when no affirmative determination has been made to locate shares of the stock to hypothecate in connection with the short sale. Buyins.net has built a proprietary database that uses Threshold list feeds from NASDAQ, AMEX and NYSE to generate detailed and useful information to combat the naked short selling problem. For the first time, actual trade by trade data is available to the public that shows the attempted size, actual size, price and average value of short sales in stocks that have been shorted and naked shorted. This information is valuable in determining the precise point at which short sellers go out-of-the-money and start losing on their short and naked short trades.
BUYINS.NET has built a massive database that collects, analyzes and publishes a proprietary SqueezeTrigger for each stock that has been shorted, www.buyins.net/squeezetrigger.pdf. The SqueezeTrigger database of nearly 2,450,000,000 short sale transactions goes back to January 1, 2005, and calculates the exact price at which the Total Short Interest is short in each stock. This data was never before available prior to January 1, 2005, because the Self Regulatory Organizations (primary exchanges) guarded it aggressively. After the SEC passed Regulation SHO, exchanges were forced to allow data processors like Buyins.net to access the data.
The SqueezeTrigger database collects individual short trade data on over 7,000 NYSE, AMEX and NASDAQ stocks and general short trade data on nearly 8,000 OTCBB and PINKSHEET stocks. Each month the database grows by approximately 50,000,000 short sale transactions and provides investors with the knowledge necessary to time when to buy and sell stocks with outstanding short positions. By tracking the size and price of each month's short transactions, BUYINS.NET provides institutions, traders, analysts, journalists and individual investors the exact price point where short sellers start losing money.
All material herein was prepared by BUYINS.NET, based upon information believed to be reliable. The information contained herein is not guaranteed by BUYINS.NET to be accurate, and should not be considered to be all-inclusive. The companies that are discussed in this opinion have not approved the statements made in this opinion. This opinion contains forward-looking statements that involve risks and uncertainties. This material is for informational purposes only and should not be construed as an offer or solicitation of an offer to buy or sell securities. BUYINS.NET is not a licensed broker, broker dealer, market maker, investment banker, investment advisor, analyst or underwriter. Please consult a broker before purchasing or selling any securities viewed on or mentioned herein. BUYINS.NET may receive compensation in cash or shares from independent third parties or from the companies mentioned.
BUYINS.NET affiliates, officers, directors and employees may also have bought or may buy the shares discussed in this opinion and may profit in the event those shares rise in value. Market commentary provided by Thomas Ronk.
BUYINS.NET will not advise as to when it decides to sell and does not and will not offer any opinion as to when others should sell; each investor must make that decision based on his or her judgment of the market.