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On July 15, 2008, The Securities and Exchange Commission issued an emergency order, http://www.sec.gov/rules/other/2008/34-58166.pdf to enhance investor protections against "naked" short selling in the securities of Fannie Mae, Freddie Mac, and primary dealers at commercial and investment banks.
The SEC's order will require that anyone effecting a short sale in these securities arrange beforehand to borrow the securities and deliver them at settlement. The order will take effect at 12:01 a.m. ET on Monday, July 21. In addition to this emergency order, the SEC will undertake a rulemaking to address these issues across the entire market.
"The SEC's mission to protect investors, maintain orderly markets, and promote capital formation is more important now than it has ever been," said SEC Chairman Christopher Cox." The Commission's action aims to stop unlawful manipulation through 'naked' short selling that threatens the stability of financial institutions.
The SEC's order will require that anyone, other than Market Makers, effecting a short sale in these securities, be required to Pre-Borrow shares, prior to executing a Short Sale. In Response to this specific mandate that market participants Pre-Borrow shares, RegSHO.com announces today the introduction of the "LocateLock" product. Developed jointly with Locatestock.com the LocateLock offers hedge funds and traders instantaneous, real-time, electronic, hard to borrow liquidity, to ensure that they are not Naked Short. The "LocateLock" product creates an electronic record with all the critical data required to meet the mandate of the Emergency Ruling.
RegSHO.com aims to help enforce SEC rules against "naked shorting" - an illegal version of short selling where traders sell shares without first borrowing them. Short sellers try to profit on a stock's decline. Short sellers borrow shares from others in order to meet their delivery requirements. Eventually they buy shares back and return the shares that they borrowed.
RegSHO.com will allow traders to locate shares in illiquid, hard-to-borrow stocks, provide enhanced tools to assure short sale compliance and publish real-time availability of borrowed shares. It also will offer needed assistance to mid-sized brokerage firms that allow retail investors to earn income by lending their shares.
"Short selling helps create market liquidity, and offsets irrational exuberance in our securities markets," said Pitt, CEO of Kalorama Partners, LLC. "But naked short sales hurt companies and investors. RegSHO.com is aimed at promoting the beneficial role of short selling, while curbing abuses."
Pitt noted that current SEC Chairman Christopher Cox recently called for technological solutions to "abusive naked short selling."
Pitt's firm, Kalorama Partners, has teamed with John Tabacco Jr., CEO of Locatestock.com, an electronic marketplace for borrowing and lending shares, and Tom Ronk, CEO of Buyins.net, a company whose software identifies the demand for borrowed shares.
"Recent SEC efforts to close loopholes in antiquated short-selling rules will increase the demand for hard-to-borrow stocks," Tabacco said, "making RegSHO.com the right product at the right time."
The nation's 5,200 brokerage firms need a securities-lending program. There are over $700 billion equities on loan in the U.S. and the appetite to borrow keeps growing as hedge fund assets grow. RegSHO.com hopes its automated platform will help brokerage firms as competition to borrow stocks heats up.
Once the new SEC rule changes take effect, short positions previously grandfathered from compliance must be closed out within 35 days, pushing brokers and hedge funds to lock up borrows before they enter into transactions-known as a locate.
"Delivery failures, often a sign of naked short selling, continue for about 53% of hard-to-borrow stocks," Ronk said, citing SEC statistics. "RegSHO.com should help address the growing need for transparency and liquidity in the short sale market place.
Deutsche Bank Aktiengesellschaft (NYSE: DB | Quote | Chart | News | PowerRating) provides investment banking products and services. It operates in three divisions; Corporate and Investment Bank, Private Clients and Asset Management, and Corporate Investments. The Corporate and Investment Bank division engages in the origination, sale, finance, structure, and trade of fixed income, equity, equity-linked, convertible bond, foreign exchange, and commodities products for corporations, financial institutions and sovereigns, public sector and multinational organizations, and financial centers. It also offers trade finance, cash management, trust, and securities services; provides mergers and acquisitions advice, general corporate finance advice, leveraged debt and equity origination services, and various credit products and financial services; and delivers capital-raising, investing, hedging, and financing solutions. The Private Clients and Asset Management division provides portfolio/fund management products, such as active fund management, passive/quantitative fund management, alternative investments, and discretionary portfolio management; and investment advice, brokerage, and securities custody services. This division also offers deposit products, including current accounts, time deposits, and savings accounts; and payment, accounting, cash and non-cash payments processing and disposition, letters of credit, and guarantees, and other cash transactions. The Corporate Investments division manages industrial holdings, private equity and venture capital investments, and private equity fund and corporate real estate investments. As of December 31, 2007, the company operated 1,889 facilities worldwide. Deutsche Bank Aktiengesellschaft was founded in 1870 and is headquartered in Frankfurt am Main, Germany.
Allianz SE (NYSE: AZ | Quote | Chart | News | PowerRating) is one of the world's biggest insurers and offers a range of insurance products and services -- including life, health, and property/casualty coverage for individuals and businesses -- through some 100 subsidiaries and affiliates operating all over the globe. In addition to selling insurance, Allianz provides retail and institutional asset management services through Allianz Global Investors and private equity investment through Allianz Capital Partners. Its Dresdner Bank subsidiary is one of Germany's largest banks, offering both retail and investment banking. Allianz has transformed itself into a Societas Europaea, a joint stock company that operates under European Union rules.
The Goldman Sachs Group, Inc. (NYSE: GS | Quote | Chart | News | PowerRating) provides a range of investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. It operates in three segments: Investment Banking, Trading and Principal Investments, and Asset Management and Securities Services. The Investment Banking segment provides financial advisory services, including advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings, and spin-offs; and underwriting services, including public offerings and private placements of common and preferred stock, convertible and exchangeable securities, investment-grade debt, high-yield debt, sovereign and emerging market debt, municipal debt, bank loans, asset-backed securities, and real estate-related securities, such as mortgage-related securities and the securities of real estate investment trusts. The Trading and Principal Investments segment engages in market making in, trading of, and investing in fixed income and equity products, currencies, commodities, and derivatives on these products. It also involves in specialist and market-making activities on equities and options exchanges; clearing client transactions on stock, options, and futures exchanges; and making principal investments directly and through funds that the company raises and manages. The Asset Management and Securities Services segment provides investment advisory and financial planning services, as well as offers investment products. This segment also provides prime brokerage services, financing services, and securities lending services. The company was founded in 1869 and is headquartered in New York, New York.
Royal Bank of Scotland (NYSE: RBS | Quote | Chart | News | PowerRating) operates as Royal Bank of Scotland and NatWest, the company has some 2,300 branches in the UK that offer deposit accounts, credit cards, and mortgages to retail clients in the UK. Its Ulster Bank unit has some 200 branches in Ireland and Northern Ireland. RBS provides corporate banking services, sells insurance, and offers private banking through The Coutts Group and Adam & Company. In the US it owns Citizens Financial (with 1,600 branches, one of the US's largest foreign-owned bank) and transaction processor RBS Lynk. In 2007 RBS led the consortium that acquired Dutch Bank ABN AMRO, adding much of its operations to its own.
HSBC (NYSE: HBC | Quote | Chart | News | PowerRating) is one of the world's top banks by assets, HSBC Holdings is active throughout the UK and Europe, North and South America, Asia/Pacific, Australia, the Middle East, and Africa. All told, HSBC has some 10,000 offices in more than 80 countries, providing consumer and commercial banking services, credit cards, asset management, private banking, securities underwriting and trading, insurance, and leasing. Its North American operations include HSBC USA, consumer lender HSBC Finance, and HSBC Bank Canada.
JPMorgan Chase & Co. (NYSE: JPM | Quote | Chart | News | PowerRating) a financial holding company, provides a range of financial services worldwide. The company operates through six segments: Investment Bank, Retail Financial Services, Card Services, Commercial Banking, Treasury and Securities Services, and Asset Management. The Investment Bank segment provides various investment banking products and services, including advising on corporate strategy and structure, capital raising in equity and debt markets, risk management, market-making in cash securities and derivative instruments, and research. It serves corporations, financial institutions, governments, and institutional investors. The Retail Financial Services segment offers regional banking services, mortgage banking, and auto finance services that include checking and savings accounts, mortgages, home equity and business loans, and investments through bank branches, ATMs, online banking, and telephone banking. The Card Services segment issues credit cards. This segment has a joint venture with First Data Corporation, which involves in the processing of MasterCard and Visa payments. The Commercial Banking segment provides lending, treasury services, investment banking, and asset management services to corporations, municipalities, financial institutions, and not-for-profit entities. The Treasury and Securities Services segment offers transaction, investment, and information services. It also offers cash management, trade, wholesale card, and liquidity products and services to small and mid-sized companies, multinational corporations, financial institutions, and government entities. The Asset Management segment provides investment and wealth management services to institutions, retail investors, and high-net-worth individuals. It also offers global investment management services; trust, estate, and banking services; and retirement services. JPMorgan Chase & Co. was founded in 1823 and is headquartered in New York, New York.
FOR MORE INFORMATION
MEDIA CONTACT: Thor Valdmanis The Dilenschneider Group Work (212) 922 0900 Cell (917) 774 5471 Email tvaldmanis@dgi-nyc.com
BROKERS AND HEDGE FUNDS CONTACT: RegSHO.com's toll free number: 866 943 7625
ABOUT KALORAMA PARTNERS: Kalorama Partners is a strategic consulting firm founded in 2003 by Harvey Pitt, the 26th Chairman of the US Securities and Exchange Commission. Kalorama offers a unique combination of pragmatic business, regulatory, accounting and economic expertise to assist global businesses in forming and implementing their strategies.
ABOUT LOCATESTOCK.COM: LocateStock.com, the premier electronic securities lending company, provides real time, hard to borrow liquidity and market data, to hedge funds and professional traders seeking short sale transparency and liquidity. The LocateStock.com suite of products includes two proprietary software platforms, "The Matador" and "The New York Short Sale Exchange Trader." Both electronic platforms provide transparency, liquidity and price discovery, allowing previously underserved traders access to a wide array of U.S. domestic securities, in a fully compliant environment meeting all the requirements of Regulation SHO. Today, Locatestock.com has over 85 hedge fund and broker dealer clients and over 2,300 registered end users.
ABOUT BUYINS.NET: Buyins.net is a service designed to help brokerage firms, institutional investors, management and shareholders of publicly traded US companies respond to naked short selling. The service has built a proprietary database that uses Threshold List feeds from NASDAQ, AMEX and NYSE. For the first time, actual trade by trade data is available to the public that shows the size, price and dollar value of short sales in stocks that have been legally shorted, as well as, naked shorted. The Buyins.net database collects, analyzes and publishes a proprietary volume weighted average short price for each stock that has been shorted, including nearly 2 billion short sale transactions going back to January 1, 2005 when the data was first available.
CONTACT: Thomas Ronk, CEO, BUYINS.NET Tel: +1 800 715 9999 e-mail: Tom@buyins.net WWW: http://www.buyins.net
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