Posted on 07/15/2008 2:54:37 PM PDT by kc8ukw
US regulators will take emergency action to stop abusive short-selling of stock in financial institutions such as mortgage financiers Fannie Mae and Freddie Mac and investment bank Lehman Brothers.
Christopher Cox, Securities and Exchange Commission chairman, told legislators on Tuesday that the agency would issue an emergency rule to stop so-called “naked” short-selling of shares in significant financial entities. The SEC will also consider new rules to extend those trading limits to the rest of the market.
(Excerpt) Read more at ft.com ...
I’m a financial planner and I generally hate additional regulations. That said, I think getting rid of naked options could be a good idea.
Interesting that they want to immediately stop naked short selling of companies that can’t produce audited financial statements (e.g. FNM) but don’t have any problem with naked shorting of real companies that trade on the bboards that do produce audited statements, nor of the silver ETF SLV, which is supposed to be backed by real silver but can’t possibly be if nakedly sold short.
Getting rid of naked options is a completely different matter.
The SEC will also consider new rules to extend those trading limits to the rest of the market.
The camels nose in the tent?
Not the way to characterize it. Short selling is selling something you have borrowed (normal and desirable activity in a capital market). Naked short selling is selling without even borrowing the shares (illegal and undesirable). There are variations, such as re-selling borrowed shares which were already committed to a prior short sale. This is what the primary dealers have been doing.
I would like to list of all those who shorted IndyMac and link that to Schumer contributers/friends.
How about just cutting Schumer’s vocal cords?
They need to reinstate the uptick rule fast!
I have been buying shares of both companies in lots of 100 since last week as the price continue to plunge. Both are “on sale”. It’s a good time to get them at rock bottom prices if you plan on holding them for the long haul.
The SEC should stick to winning football championships.
Good point!!!
And why is it that more than a year ago that rule was dropped after being put in place since 1938? Just why is that, uh SEC?
The SEC would do NOTHING (picture Cramer screaming) about naked short selling when it was just killing the retail investor. Now that it is attacking the foundations of the capital markets maybe it is a good idea to enforce the law after all.
Since stocks started trading in 100ths that rule is ineffectual.
Plus of course one could always buy puts or sell naked calls.
This maneuver will make no difference... just makes them look like they did something...
BINGO!!!
What is there to stop any other stock from being destroyed by the illegal naked shorts? NOTHING!!
Capitalism decoupled from a Judean Christian ethic is... greed. Plain and simple.
That could be why the ACLU and others try their best to destroy that foundation of morals, to usher in communism because capitalism will have appeared to have failed when rampant greed takes over.
Normally a good strategy. In these cases however, there may not be a "long haul." The two Fs are on the hook for $5Trillion in mortgages. Combined they have $81Billion in "capital.". If 2% of these mortgages were to default that would be $102Billion...out of business...ad dios, bye bye.
While the Feds may try to save the companies to keep the "only working secondary market in mortgages alive" they will not even kiss the equity holders a kiss after they've been.....
I day trade the market daily. I have sold short exclusively since January and I have not entered into a long position since January. It is my understanding naked short selling is illegal, but I imagine it goes on. The SEC was a pathetic agency before Chris Cox took it over and he has done nothing to change that. If you are not buying stock long on margin, then you should tell your broker that you do not want your stock available to be borrowed for shorting purposes. As far as the downtick rule goes, I do not care if it reverts back. I was a profitable trader before it came about and I will adjust. But getting rid of the downtick rule has created more intraday trading range and for intraday traders who are willing to take both sides of a trade like myself it has created more opportunities at least on the NYSE as I never trade four letter stocks.
The rule where the stock had to be on the uptick for a number of days (5?) to be shorted? I had no idea it had been dropped, but I'd been out of the market for about 5 years.
The last I heard, naked shorting was something that was often accused, especially on stocks struggling to get/keep listed, always denied, but the likley cause of demise of many companies (and excuse for lousy product/management of others).
I'd always thought it was illegal, as there can end up being more shares shorted than the float.
It's not?
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