Posted on 07/21/2008 9:12:14 AM PDT by em2vn
“He that sells what isn’t his ‘en must pay his debts or go to prison” is an old stock market axiom that has stood the test of time. Loosely translated, it means that if you sell a stock “short” (betting that it's going down in price), you're responsible for ANY loss incurred if that stock rallies. And, last week that old market “saw” took on new meaning when the Securities Exchange Commission (SEC) changed the rules on “naked” short-selling.
Clearly, “naked” short-selling has been a “dirty” little secret on Wall Street for years, but that has now changed with the revelations from the SEC. Indeed, last week the SEC changed the rules and required that “naked” short-sales, in certain securities, be settled like the majority of stock transactions. To us, this was the “lit match” for the already gasoline-layered environment in the equity markets.
(Excerpt) Read more at minyanville.com ...
Waiting for all the defenders of shady-Wall-Street practices in 5, 4, 3, 2......
Dirty!!! Is exactly right! Those that ‘Naked Short’ should go to jail. The average Joe has no idea how the money grubbers on WS steals, and the Feds look the other way. To much money going into too many pockets for this practice to go away quietly.
mark
I agree they will pop up soon defending the practice. As I mentioned, if the average guy knew how the WS types operate, there would be hell to pay.
Exactly. And when the worm turns on the so called “pros” such as Bear Stearns, guess what? They get a federally funded bailot.
I would love to get a bailout each time I make a mistake.
Sorry, you need to be considered TOO BIG TO BE ALLOWED TO FAIL for that level of help.
You clearly don’t understand how 21st century Amerika works.
Rules against naked short selling have existed for some time, its just that the SEC didn’t proactively enforce them.
And then their is the foreigners who hide behind their countries even looser enforcement so they can naked short US securities as much as they want. The germans are notorious for naked short selling US securities due to their countries very lax enforcement and have wrecked many US companies by it.
On what exchange does the data for these foreigners short selling appear.
It would seem without such data the short sells couldn’t be seen to have taken place, and would not impact a stock’s price.
Before hyperventilating, don't accept everything the media hypes as fact. is there any evidence that nakes shorting is widespread? NYSE seems to indicate it isn't. As far as I know, 99% of trades settle on time, and 90% that don't, settle within 3 weeks.
What does that mean. The article makes vague assertions that this is bad, but it does,t actually say what changed or how it changed.
Does it mean that investors can just go bankrupt instead of to jail if they don't have the money to cover a short sale?
The article author says there is a lot of recovering of stock that were heavily sold short. So does that mean that people who made bad investments are taking advantage of the changes to cover their losses with less harsh penalties, or are people covering their short sales and selling short less because it is less advantageous to sell short under the new rules?
It seems like a horribly written article that assumes that you are familiar with how the rules were and what the changes were, and their effects.
Of course it is widespread. At any given time there are a hundred or more NASD stocks on shorting restriction because a threshold level of the trading remains unsettled (read short sales that were supposedly legit turned out not to be).
And the threshold calculation is obscenely generous in the first place.
In the example of Germany, there are smaller exchanges (ex. Berlin-Bremen Stock Exchange) around the country than the major bourse in Frankfurt, that have been caught listing U.S. securities without consent. And once listed there, a heavy increase in volitility, volume, and dramatic swings in stock prices can occur almost instantly.
Over 5,500 U.S. companies are listed on that exchange, with General Electric, Home Depot, Microsoft and most of their fellow Dow Jones Industrial Average components prominent among them, along with all Nasdaq-listed companies.
Listing a company without its consent is legal on Germany’s third market, called Freiverkehr, which in loose translation means “free traffic.”
A typical naked short sale scenerio on these exchanges will be:
The naked short seller will sell the stock and then buy it back quickly before the two-day window closes. That way, there’s never a need to deliver the securities or prove they were available.
Never mind. I just re-read your post and realized that I just restated your statement.
Not at all. I expect business to have a freerer hand under a Republican administration than a democrat one.
However, the President has many tools at his disposal to address an issue. In this case the FTC hasn’t been anything business compliant.
The President could have ordered the Attorney General to investigate the sub-prime mess. Now he could order the same AG to investigate naked short sells and their effect on the economy.
It’s a very good thing to prosecute criminals even if they do contribute to a political campaign and wear three thousand dollars suits.
I hope you don’t posit that the President didn’t know about the naked shorts. I live in a burg in the middle of nowhere and I’ve known about naked short selling for years.
President Bush has been a dead hand on the rudder of the nation for years.
The President should have gotten off of his lazy ass years ago and realized Wall Street is a dagger at the heart of America.
He has been in office for nearly eight years. That is more than enough time to address the shortcomings of previous administrations.
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