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Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

Location: Blogs Bud Burrell - Front and Center
Posted by: bburrell	11/9/2006 1:44 PM
IMAGINE The following query in the Wall Street Journal/Investor's Business Daily: If your Company would prefer the following treatment of its market and securities as described below: No Naked Short Selling No Counterfeit Long Positions No Excess Proxies No Fails to Deliver No Dividends in Lieu Instantaneous Delivery Versus Payment No Conflicts of Interest Please call us at 800 555 XXXX. What Company Would NOT call? I have had a glimpse of a possible future, and it is patented. Let me hear your reactions. I AM AN INTERESTED PARTY IN THIS.
Copyright ©2006 Bud Burrell
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Comments (35)

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By ckza on 11/9/2006 2:16 PM
As a shareowner of any public company, I would be in hog heaven, if only this were true. What I say to the authorities who maintain dominion and responsibility over the marketplace is; make this be true!

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By davidn on 11/9/2006 3:29 PM
I assume this is outside America? This sounds great, but how would you stop them from listing your stock on the Pink Sheets or Berlin as well? As long as it appears on one manipulatable exchange, then arbitrage would cause the honest exchange to follow the manipulated one to the basement.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By mhatmccane on 11/11/2006 10:04 AM
Could this system handle an IRA account with on line trading ? Would this system take care of accounting for dividends and splits?

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/11/2006 10:05 AM
It would eventually handle these items like IRA accounting. Dividends and Splits are no issue.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By tommytoyz on 11/11/2006 1:30 PM

Bud,
Moving stateside securities to an offshore depository can involve some more problems than you've mentioned. The brokers here will do all possible to ensure that it becomes as difficult as possible to move any securities to your new exchange and punish the issuers that announce to move on their way out.

A delisting here, coupled with an exchange of new securities for the old ones issued by the corporation and listed on the new exchange is certainly doable. But if stateside brokers refuse to recognize those securities, then each owner will have to register within your system and open a new account.

The NSS shares here will just be closed out with cash at the last trading price before delisting. Delivery will never be necessary. So the danger here is that NSS shares will spike up enormously just before the delisting or as soon as it's announced and crashing the price of the stock all the way to the last day it trades here in the U.S.

This is how these moving issuers would be punished and Wall Street profit from their move.

It's like with a tender offer. All NSS positions are closed out at the tender price and delivery is never necessary and a short squeeze never happens.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By bburrell on 11/11/2006 1:34 PM

If a stock dividend is declared after the de-registration, the only place the brokers can come is to the Market overseas.

If there is no tender per se, the counterfeit longs are left on the books of DTCC.

They can't be exchanged with a legitimate Foreign TA.

By treaty, if there is an exchange, it has to be honored, or there is litigation.

A number of companies have made this move, and many more will.

Best, Bud.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By anthony kalantzis on 11/13/2006 8:06 AM
i think my good friend richard altomare would love this new exchange

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By Robert on 11/13/2006 6:47 PM
Hi Bud, I admire you for your work and desire to make a better system. You mention that a number of other companies have made the move. Can you please give us some of the names of the companies and what effect the move had on their stock price, naked short positions, and overall stock condition? Thank you,

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/13/2006 6:50 PM
I don't know which ones are in litigation, and I don't want to step over any boundaries. Do a simple Google Search, and some of the key names will pop up. 60 Minutes did a segment on this. These were almost all major companies, and their has been no negative impact on their share prices I have heard of.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By bburrell on 11/13/2006 7:02 PM

Here is an example, first up on Google:

Cooper moves HQ to Island

--------------------------------------------------------------------------------
By Mairi Mallon

--------------------------------------------------------------------------------

Despite controversy in the United States about companies moving to Bermuda to save taxes, toolmakers Cooper Industries yesterday officially reincorporated from Ohio and has moved its official headquarters to the Island.
But a spokesman for the company revealed that Cooper was not even opening an office in Bermuda and will simply use the services of its registered agent AS&K Services Ltd. -- and will not have a single employee on the Island.
In a Press release yesterday Cooper Industries said that its reincorporation in Bermuda has been completed and was effective at the opening of the day's trading on the New York Stock Exchange.
On May 15 shareholders of Cooper Industries, one of Houston's largest manufacturing companies, voted 9-to-1 on Tuesday to change its place of incorporation from Ohio to Bermuda.
With no remaining regulatory hurdles, Cooper expected to be a Bermuda company as soon as possible after the close of business May 21, and the announcement of the completion of the deal was made yesterday.
Cooper Industries is one of several Houston companies reincorporating in Bermuda or the Cayman Islands, primarily to save on taxes on foreign income.
The United States is one of just a handful of countries that taxes foreign income.
Cooper Industries is a $4.2 billion-per-year company that makes electrical products, tools and hardware.
The move comes at a time that many US companies have already or are considering the move to Bermuda or other tax-friendly jurisdictions.
But the US Congress has been looking at ways to discourage the trend, and so far four separate bills have been introduced in Washington with a view to penalise or stop US companies that move.
Stanley Works of New Britain, Connecticut had a shareholder vote to move accepted, but the following furore over the move has pushed them to have a second vote after legal action was taken to prove the vote was not valid.
In Cooper's case, of the 93 million shares eligible to vote, 68.3 percent voted in favour while 6.3 percent voted against.
Thus 90.8 percent of the 69.9 million shares that were voted at last Tuesday's special meeting were in favour, spokesman John Breed said.
The lone dissent at the meeting here was from an investor who complained about having to pay capital gains tax on shares he bought long ago, which have appreciated in value.
Because the United States taxes companies based on place of incorporation rather than the source of income, companies such as Cooper are at a competitive disadvantage, said Chairman, President and Chief Executive Officer H. John Riley Jr.
He said foreign competitors are gobbling up domestic companies. Mr. Riley cited an article in Congressional Quarterly saying that from 1998 through 2000, 80 percent of all transactions of $300 million or more were foreign companies buying U.S. firms.
Houston companies have been particularly active in moving their places of incorporation, although this does not affect the headquarters location.
On May 1, Noble Drilling, a major offshore drilling contractor, became a Cayman Islands company after gaining 96 percent approval in a late April vote.
Noble said it needed to be able to compete with Transocean and GlobalSantaFe, both Houston companies that for some time have been incorporated in the Cayman Islands.
Nabors Industries, the largest land-based oil and gas driller, and Weatherford International, a major oil-field services company, both have scheduled June votes on reincorporating.
Veritas DGC of Houston is working to acquire Norwegian company Petroleum Geo-Services, which would result in a seismic industry giant that would be incorporated in the Cayman Islands.
Cooper Industries estimates that re-incorporating in Bermuda will add $55 million per year to cash flow and 58 cents per share to annual earnings.
Before start of trading yesterday, all shares of Cooper Industries outstanding common stock were automatically converted to shares of Cooper Industries Ltd. common stock and traded under the symbol CBE.
Shares of Cooper were at $41.19 in early trading Wednesday, up 26 cents, or 0.6 percent.
After the announcement last week of the reincorporation its stock gained 85 cents per share to close at $43.45, bringing the gain for the year to date to 24 percent.
Additional information about Cooper is available on the company's Internet site: www.cooperindustries.com .

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By Olynn1205 on 2/8/2007 3:09 PM
Hello Bud, I am an investor in USXP. I have a cash account with TD Ameritrade, if USXP moved to this new exchange overseas, would I have to request my certificates to be able to move my shares? Or would TD Ameritrade be able to do this? How would that work! Thanks for your time! Be blessed!

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/9/2006 3:31 PM
It would be outside the US. If anyone sees a listing on the Pink Sheets, or in Berlin, you know they aren't trading securities, they are gambling. You can only trade securities if your are inside the custody system, which is instantaeous DVP. Everyone will eventually get this.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By clearthinker on 11/9/2006 4:16 PM
who holds all the paper?

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/9/2006 4:17 PM
A European Bank Custodian. There are no IOU's in the system. It is cash or securities on deposit in the Custodian's accounts.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By davidn on 11/9/2006 5:01 PM

Bud, what would stop a brokerage from buying shares, then moving them to a US depository? If they are allowed to pull their certificate, then the certificate could be redeposited to a different depository. Or is there a way to forbid that?

Will Americans find it easy to purchase on this European exchange?

This is a great idea, but I'm sure you aware that companies are listed on the Pinks, Berlin and OTC without their permission all the time.

I'm cautiously optimistic that you're on to something.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By bburrell on 11/9/2006 5:10 PM

The brokerage would have to open an account, knowing there is no role for brokers in this system.

The system would not allow withdrawal of certificates except in a tender, and then only with consent of both parties, the original issuer and the acquiring entity. Cash can be withdrawn or deposited, but not the core securities.

Americans could open an account with the custodian without any general limitation, except that for the granted transparency, they would only have access to de-materialized securities that could not be removed from the custodian account.

In this system, the only securities in the system are those in the custodian. This only makes sense if the number of outstanding shares in the company stock register/ledger are always equal to the number of shares in the custodian's total positions. There are no counterfeit shares or IOU's in an Instantaneous DVP environment.

The UK and Germany are moving to eliminate NSS and fails. This system projects a custodian whose country will not tolerate either, and which will file criminal charges against anyone trying to manipulate their markets, or do anything to injure their bank custodians' security.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By Zulu Spear Thrower on 11/9/2006 6:11 PM
Maybe PB can get Overtstock to list on it first.... then shortly thereafter a few other companies will appear. The NY media will ignore it, then laugh at it. Then try to sabotage it. Finally they'll give in..... to paraphrase what we've heard many times. At that point, the floodgates would open, and it would be the heavy hitters wanting to be listed. Can't wait! *****************************

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By Wicked World on 11/9/2006 6:12 PM

Pretty much since the Aguirre SEC revelations came to light I determined to one day soon pull out entirely from the US markets. For me that was the straw that broke the camels back. (I mean if the "cops" are in on it too then does it really matter how much worse the problem is?)

So FWIW, as a small individual investor I would follow to such an exchange as you describe. I've had such a thing down on my "to do" list for a short while. Have seen here to consider Hong Kong or London.

What has happened to our country!?!

to Davidn,
good to see you chiming in here. You always have excellent questions and please continue to point out how the numbers at the DTCC, SEC, NSCC, etc. don't add up and *most* importantly WHO REALLY OWNS THE CERTS.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By davidn on 11/9/2006 8:18 PM
I peeked at your site (found it through google and your SEC filings). I think you are on to something. Good luck!

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By Berk on 11/10/2006 2:43 AM

If a company like Overstock or Pegasus which has a large naked short on it, decides to move to such a system, what happens to the NSS position? Does it force a cover because all certs need to be pulled before it can go onto the new system?

I think this is a great idea! Is it possible to invest in the company yet or is it privately held? If it is public what is the name of the company? What is the trading symbol?

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By bburrell on 11/10/2006 2:53 AM

If a company has a major NSS position, the brokers for the counterfeit longs are forced to cover if there is a tender or dividend involved. They have to go to the foreign market involved to buy the real shares. This pressure is increased if the Company combines a move to a foreign market with a de-registration in the US, something I have addressed in my blog posts for some months now. If a tender is involved, the analogs to the Williams Tender Rules kick in. If the foreign company declares any kind of dividend, it will only be paid to actual beneificial interest shareholders as proved by presentation of share certificates.

The company with this is a private company at the moment, which is all I can say. All would be revealed before mid-December if luck will out.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By mhelburn on 11/10/2006 4:55 AM

Any business entity is as honest as the most corrupt element. Our markets have been corrupted with too many rules that benefit the participants at the expense of the shareholders and companies.

A committee made up of industry bigs is offering up their suggestions on Nov. 30 to make the U.S. markets more competitive. Will they see that their own corruption of the system and within the system is driving people away?

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By mhelburn on 11/10/2006 5:04 AM
Bud, What about this? Any participant that breaks a rule is banned for life.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/10/2006 4:57 AM
m, Don't bet on industry bigs making billions from our systemic corruption doing anything to change that until listed companies start pulling their chips (read shares) OFF the board, and tell the BIGS to take a flying leap.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.

By bburrell on 11/10/2006 5:09 AM

m,

I like Lifetime bans, or 10 years at a minimum, like our 609B rule in US procedure, except after 10 years, readmission isn't automatic, but rather is probation for another 10 years.

Conversely, it is pretty hard to break rules in an Instantaneous DVP environment, the integration of the custody, clearance and settlement being all under one roof.

I am sure some slick(s) will try to find a way to game this system, and I am equally sure we can beat them.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bbhindyou on 11/10/2006 6:26 AM
If you manage to get this done I salute you. I know where I would prefer to hold a retirement account of secure shares. I can't wait to invest my money in a system that guaranties my money bought what I paid for.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/10/2006 6:29 AM
bb, The system is running now, and only needs additional redundancy and Swiss approval. The process patent is filed, and should take about 30 months to get approved subject only to prior art issues. There may be a UK player or players, and there will most certainly be some kind of Asian option/license. We should all know what is going to happen by the end of January latest.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bbhindyou on 11/10/2006 6:37 AM
Then I won't be the only one taking my money out of wall street. Last one out out of corruption city turn off the lights!

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/10/2006 6:40 AM
bb, You would have no way of knowing it, but that was an old Block Trading line about the NYSE's prospects before Grasso in the late '70's and early '80's. "Last Guy OFF the Floor, Turn out the Lights!"

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By seattle on 11/10/2006 8:28 AM
It was also a billboard in Seattle when Boeing had all their layoffs in the 70's.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/10/2006 11:22 AM
The office on Madison is a Virtual Office. We haven't used it, but rather tested it.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By rtway1 on 11/10/2006 4:58 PM
Bud this would be nirvana. I'm starting to loose all hope for this country morally and legally. If you could get this off the ground and be the industry standard you could rewrite the history of Wall St as far as the final chapter. Go for it anything is better than the mafia style way we do business now.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/10/2006 5:00 PM
I will do my best, I just have to figure out how to stay alive, and also I have to find another country to live in. Then again, I could just turn it into a video game here. The arrogance of these bastards is beyond belief.

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By mhatmccane on 11/10/2006 5:51 PM
I have a Roth and an IRA acct with Scottrade and an IRA with BofA Securities, all of my trading is done on-line. Could your system accomadate me?

Re: Imagine An Exchange with No NSS, Fails, Excess Proxies, Dividends in Lieu, etc.	By bburrell on 11/10/2006 5:51 PM
It isn't approved yet. Ultimately, it could, but there are no brokers in this system, at least not yet.