Even if I don't understand half of the business terms it's still enough to make me pick up my jaw from the floor where it fell.

Yeah, it doesn't just drop the jaw, it sends it skidding out the room...

Perhaps I should explain the context ... Financial Cryptography systems have pretty much solved the problems shown in Stockgate and Mutual Funds scandals. Yet, implementing systems with FC faces huge institutional barriers, not the least of which is that opportunities to make money out of the system's ropiness are somewhat lost.

Meanwhile, scandals keep coming. One estimate of the mutual funds scandal has it at half a trillion dollars, and this Stockgate thing is coming in over a trillion in lost and stolen money. A trillion here, a trillion there, pretty soon you're talking real money.

Further info on the scam has come to light on how the cycle works. I can't be bothered to write the details right now, but it can be basically limited to the PIPE market. This means that the amount raided is probably in the billions, and wouldn't come close to the trillions suggested above by some observers.

How does this get rectified? Who is investigating this problem? What is the SEC doing? Are they even aware of the problem?

John

There is only one solution that is "real" and that is RTGS. That won't happen any time soon. In the meantime, expect the system to limp along and hope that nobody gets too greedy, because that's when firms start failing.

The SEC can't do anything, but they are certainly aware of the problem. It's caught between an outraged congress, an apathetic public, the powerful vested interests of trillion dollar money managers, and an impossible mission.

None of that is going to change either, but the real thing that needs to be done is to change the mission, which was some socialist objective set after the crash of '29. Until that happens, expect the SEC to get forced into more and worse regulation, in order to appear to be meeting its congress-mandated goals.

Well, the unreconciled difference with DTC is easily taken care of since the shorts come home to roost eventually. So when they do they can be applied and netted away. It is of course illegal to do this type of operation and many of the technical aspects of how it is done are not clear, nor will they be made clear.

The simple matter that the pump and dump stocks complain about - the naked short sellers - is taking the attention away from their own robbery of shareholders via dilutive transactions that make suspect use of funds like PIPEs.

There is another area of play not taken into consideration which is the Contracts for Difference Markets of London that basically allow synthetic shorts to be placed without regard to US short sale rules or stock loan requirements. I suggest the Deep Throat suggestion of follow the money is the answer; the PIPE transaction, ie convertible debt issuance via a privately negotiated transaction, is the root of the problem since it allows for the closing of the short positions. The average Hedge fund that does PIPEs makes between 10 and 25% on their funds per year and it is a safe bet to make.

The PIPE products and the DTCC seem like separate issues to me. The intelligent course would be to dump the DTCC and find a path to RTGS but I wouldn't hold my breath. Until this happens anyone who invests in Equities is out of his mind.

As far as PIPEs are concerned, any board that makes such an issue should be kicked out, hard, by their shareholders. There's no such thing as governance at the individual firm level either.

Of course the answer will be more regulation. What do you expect when you ask regulators to solve a problem for you? We already have an economy that is floated on fiat currencies; why not go one step further and legitimize the DTCC into a Fed-like foundry for the fabrication of imaginary equity?