Posted on 09/20/2008 2:50:01 AM PDT by TigerLikesRooster
SHORT SHRIFT: CRITICS
BLAST SEC TRADING BAN
By KAJA WHITEHOUSE
Posted: 3:26 am September 20, 2008
The Securities and Exchange Commission's temporary ban on short-selling took down the good with the bad.
Several groups yesterday said they took a beating as a result of the ban, which forbids short-selling of 799 financial stocks. Among those sideswiped by the ban were hedge funds and traders who legally shorted financial stocks, as well as businesses that deal in so-called stock options, that saw trading dry up yesterday as a result of the SEC rule.
Prices were so out of control yesterday that the major stock exchanges, including the New York Stock Exchange, were forced to cancel trades for dozens of stocks conducted in the first hour of trading.
Brokerage firms were also "busting" trades that rose so high they caused an uproar from angry customers, people said.
"We protected the big bankers in New York, but the retail investor is once again bearing the brunt of it," said Peter Bottini, head of trading and customer service for online brokerage firm optionsXpress.
Stocks rallied yesterday, but beneath the euphoria of the government's ban and plans to purge banks of toxic mortgage holdings was a good degree of panic from people who say they were martyred to prop up big Wall Street firms.
The ban also pushed aside a key group, known as market makers, that normally provide liquidity to the market by stepping in when a buyer can't find a seller or vice versa.
Also pulling out of trading in financial stocks were people who trade using complex computer models. These traders, which include big hedge funds like AQR and Jim Simon's Renaissance Technologies, normally provide liquidity through rapid-fire trading.
(Excerpt) Read more at nypost.com ...
Ping!
Time to go long on metals I guess?
Capitalism is on life support and the Fed is about to pull the plug.
Soros supposedly made his gazillions shorting currency and bringing whole nations to ruin. These crooks deserve absolutely no mercy.
By their reasoning, I could pretend to buy all my neighbor's homes (none of which I own) at deflated prices, use that information to drive down the market prices to what I've pretended to offer, then resell the option to buy them at real market prices, all without ever having purchased or taken possession of the homes. Oh, and use Other People's Money for the gamble, just in case anything goes wrong with the deals.
Who gives a darn about "Capitalism" it is just a Marxist term. We need Free Enterprise. Right now Government Regulated Enterprise is on life support and the solution is more regulations. The regulations focus on preventing the market from fairly pricing what is for sale.
Life is hard.
I’m curious as to the opinions of FReepers who actually know something about this subject—are you for or against the hold on short-selling?
Essentially what hey have done is placed Market Controls into the stock market, a market that should be free government meddling and price controls. The big picture function of shorting is to stabilize prices that may otherwise fluctuate greatly leading to market destabilization.
Now, what will happen is that when the ban on short selling is lifted that those 799 names are going to crash.
In other words, major players in a Republican Administration has just killed the Free Market.
And the irony is that the Chi-Coms are loaning money to the Fed to Nationalize Industry.
Thanks for your response, I’m trying to figure out why some conservatives seem very high on this and others are condemning it.
My guess is that if a Democratic Administration had Nationalized a major corporation, bailed out Wall Street Houses and placed restrictions on the Stock Market that those “conservatives” would be screaming bloody murder.
I am against the ban on short selling. I am against naked short selling though. I don’t see how the latter is any different than the Fed just printing money willy nilly... oh... never mind.
Could you explain that comment? Trying to educate myself here. Thanks in advance.
A typical short sell is akin to a covered position. You through your broker have access to shares of a stock owned in someone elses portfolio. You sell the shares of stock you don’t own by borrowing them. You owe the person you borrowed them from any dividend payments made during the period you are shorting them.
If the stock price goes down, you buy at the lower price and repay the number of shares you borrowed and pocket the difference in shares you didn’t have to pay back. If the price goes the other direction you can get what is called a margin call that would require you to put up cash or equity to cover the amount your short.
A naked short is you or your broker don’t own the shares to sell. You’ve just printed some shares of stock to sell like the fed printing money willy nilly.
Thanks, excellent explanation.
Short selling has been an accepted practice for hundreds of years! That said, in this age of worldwide instant communication and investment, it is entirely possible to utterly destroy ANY company OR NATION through the practice!
Just read about George Soros and the Bank of England!
All it takes is the accumulation or control of massive amounts of capital, widespread dissemination of rumors concerning the imminent financial collapse of a company or nation, and computer based short selling of the financial instruments which support the target entity!
No rational person who actually believes in free enterprise should be willing to see their belief sustained to the point of financial suicide!
In this age of fiat currency and unlimited currency creation, totally unfettered financial transactions can readily precipitate the total collapse of an economy!
Even with the "Ban" on short-selling of the stock of 799 financial firms, it will continue to occur (just not in the huge fashion of the past few days).
Hopefully, the outright ban on short-selling will be lifted soon because, the ban itself is already having consequences which adversely impact otherwise beneficial financial transactions.
Short selling has been an accepted practice for hundreds of years! That said, in this age of worldwide instant communication and investment, it is entirely possible to utterly destroy ANY company OR NATION through the practice!
Just read about George Soros and the Bank of England!
All it takes is the accumulation or control of massive amounts of capital, widespread dissemination of rumors concerning the imminent financial collapse of a company or nation, and computer based short selling of the financial instruments which support the target entity!
No rational person who actually believes in free enterprise should be willing to see their belief sustained to the point of financial suicide!
In this age of fiat currency and unlimited currency creation, totally unfettered financial transactions can readily precipitate the total collapse of an economy!
Even with the "Ban" on short-selling of the stock of 799 financial firms, it will continue to occur (just not in the huge fashion of the past few days).
Hopefully, the outright ban on short-selling will be lifted soon because, the ban itself is already having consequences which adversely impact otherwise beneficial financial transactions.
If every hedge fund went bust tomorrow I would have zero sympathy. They have distorted the markets. They have been clever enough to hire libertarian stooges to shill for them. Kudlow is an unpaid stooge. He provides the ideology to justify the rape of our financial markets
Fine for the short term and ban naked shorting for good
This ban would not have been instituted unless matters got really realy bad, and they did
Hank Paulson and everyone else was very spooked when gold zoomed 13% in one day and MM funds were suffering huge redemptions
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