This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Naked Shorts' Long Shelf Life

What if they passed a law and no one followed it?

Not one of those bizarre, outdated laws you hear about -- like in Maine, where people are required to bring shotguns to church -- but a brand new law with an entirely sensible goal, like keeping people from selling equities that don't exist.

Since January, Regulation SHO has required self-regulatory organizations like the NYSE or the NASD to keep a "threshold list" of securities that have a sizable failure-to-deliver position. That is, they must disclose daily the stocks that someone sold without either owning them or borrowing them.

Selling stocks that nobody owns, called naked short-selling, isn't necessarily illegal. Broker-dealers may sell imaginary shares to maintain liquidity in a stock that sees a sudden surge in demand. So the Securities and Exchange Commission gives broker-dealers a 13-day grace period before they are required to close out those naked-short positions. After 13 days, it's safer to assume there must be at least some abusive shorting going on.

Last month, noticed that Internet Initiative Japan (IIJI - Get Report), a Nasdaq-traded ADS that had seen some spectacular and mysterious volatility coinciding with its aborted plans to issue new shares in Tokyo, had been on the NASD's threshold list for 17 days.

That seemed like an unusually long time back then. But IIJI has now been on the list for 39 straight days, according to, a site that compiles threshold-list data.

And that's just the tip of the iceberg. lists 59 other securities that have been on threshold lists for longer than IIJI has -- some of them for as long as 134 days. Of course, most are micro-cap stocks that are so illiquid it's not surprising broker-dealers find shares scarce.

But there are also 10 other companies, all traded on the Nasdaq, that have substantial daily volume and market caps between $150 million and $1.1 billion that have been on its threshold list for more than 26 days -- twice the allotted grace period after which the positions must be cleared out. They include well-known names like Netflix (NFLX - Get Report), Taser International (TASR - Get Report) and (OSTK - Get Report) -- hardly illiquid, yet they've been on the threshold list for months.

Overstaying Their Welcome?
It's not just micro-caps that languish on NASD's threshold list
Ticker Name Days on List Market Cap (millions) Short Ratio Shares Short as % of Float*
1 NFLX NETFLIX 134 $1,100 15.5 30.4%
2 GIVN GIVEN IMAGING 134 $637 17.9 13.5%
3 TASR TASER INTERNATIONAL 134 $567 5.8 31.6%
4 GLBC GLOBAL CROSSING 134 $397 22.3 47.7%
5 CALM CAL-MAINE FOODS 134 $149 10.8 11.8%
6 NAVR NAVARRE CORP 74 $247 30.4 35.3%
7 OSTK OVERSTOCK.COM 72 $858 14.0 51.7%
8 ENWV ENDWAVE CORP 45 $328 11.0 26.1%
10 AGEN ANTIGENICS 33 $257 27.7 27.4%
Source:, yahoo finance
*as of 7/12/05.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
IIJI $9.37 0.00%
NFLX $124.16 0.00%
OSTK $13.22 0.00%
TASR $19.27 0.00%
AAPL $118.03 0.00%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs