You need to provide evidence for such strong statements. Just because there is volatility does not mean that these policies are wrong. On each of these policy decisions, there are arguments on both sides. Do you have any evidence that there was not careful study before changing each rule?
The primary reason for market volatility is bad economic news. There are many policies in the lending area that have contributed to the bad economic news. Even if the SEC policies were not changed, there would still be a major downturn in the markets.
Blaming the SEC for market downturns is not much different than blaming speculators for the oil market explosion. The fundamental problem with the oil market is increased demand and stagnant supply for a vital commodity. It feels comforting to blame the speculators. I do not believe that tightening oil market rules will impact the long term price trends. Tightening market rules can impact liquidity and market functioning so it is a delicate balancing act.
“You need to provide evidence for such strong statements. Just because there is volatility does not mean that these policies are wrong.”
As a matter of fact I do. I’m a 17 year veteran of the financial services industry, and if you check out a 2 year chart of the VIX Index you will see that immediately after the Uptick Rule was taken out by the SEC on July 6, 2007 - the exact same month the stock market volatility increased by approximately 70% and has not gone down since. This is not a mere coincidence.
The Uptick Rule was put in place in 1938 to help prevent any further “bear raids” like investors experienced during the Great Depression and guess what - we’ve been seeing the same things happening now. You don’t suppose that’s why the SEC finally acted today with Naked Short Selling rules, or why the London Exchange has banned all short selling until January 16, 2009?
I’ll tell you another reason why Chris Cox is incompetent - he announced yesterday early afternoon that the new Naked Short Selling rules were going into effect as of today. At the time of his announcement the Dow was down about 170 points. Instead of announcing such a move after the market close, he foolishly allowed the naked shorts to get in one more afternoon of criminality - and the DJIA ended down 450 points - an incredibly stupid move by an incompetent head of the SEC.
I’d like to see an investigation as to how the bean counters at the SEC came about taking out the Uptick Rule and the Program Trading Curbs a few months later. Were they possibly lobbied by some hedge funds? It would be interesting to find out.
By the way, after London Exchange announced there will be no more shorting stocks until January 16, 2009, the Dow rallied 200 points in 30 minutes.
Make no mistake, the SEC is partially responsible (I’d say at least 50%) for the recent selloff in the stock market.