Naked short selling is a scourge. I for one will not invest any money in the US equity or commodity markets until this issue is addressed seriously. The means to prevent naked short selling exists, but no will.
It is already illegal to intentionally sell short without the means to deliver but nobody is policing it. Nobody is forcing a buy-in when the trade fails. Furthermore, market makers and options contract market makers are permitted to naked short sell as a hedging strategy, but that loophole is ripe for abuse since anyone could force an option market maker to naked short sell by taking a large options position.
For crying out loud they even have a list of stocks with inordinate numbers of fails and they don’t do anything other than list them as REG SHO (fail). They don’t investigate who is failing, why they are failing, or force anyone to deliver.
This scam has destroyed or damaged hundreds if not thousands of companies. If you can sell shares that you do not own, cannot locate for borrow and have no intention of borrowing, then you are artificially increasing the supply and putting downward price pressure on the issue.
The markets are unsafe and ripe for fleecing - as everyone with eyes has just seen occur.
“””Naked short selling is a scourge. I for one will not invest any money in the US equity or commodity markets until this issue is addressed seriously. The means to prevent naked short selling exists”””
That about sums it all up naked shorts, comex, stocks, Credit default swaps, carry trade, derivatives etc were all free credit trades till they got caught with negative leverage and now we have to bail them out.
The elite and their greed have destroyed this country Democrat and Republican. The Joe the plumbers had their heads down doing it by the book, paying their taxes, working doing something constructive. I am incensed every time some pundit blames the average guy for this mess.
It is already illegal to intentionally sell short without the means to deliver but nobody is policing it. Nobody is forcing a buy-in when the trade fails. Furthermore, market makers and options contract market makers are permitted to naked short sell as a hedging strategy, but that loophole is ripe for abuse since anyone could force an option market maker to naked short sell by taking a large options position.
For crying out loud they even have a list of stocks with inordinate numbers of fails and they don’t do anything other than list them as REG SHO (fail). They don’t investigate who is failing, why they are failing, or force anyone to deliver.
This scam has destroyed or damaged hundreds if not thousands of companies. If you can sell shares that you do not own, cannot locate for borrow and have no intention of borrowing, then you are artificially increasing the supply and putting downward price pressure on the issue.
The markets are unsafe and ripe for fleecing - as everyone with eyes has just seen occur.
Can these practices be policed and regulated even if we wanted too?
What I heard was that Chris Cox's SEC staff was too small
At any rate blame President Bush and Cox here. Also Greenspan. They believed in 100% hands off attitude towards markets. This is what the libertarians always want and this is what they got. A totally unregulated and obscure market in credit default swaps and other derivatives. Which may be OK in theory but not when the taxpayers are forced to bail them out
Greenspan made many statements in favor of derivatives. He liked the way they hedged risk
According to Paul Volker, the former chairman of the Federal Reserve, the entire modern financial system is based upon derivatives, and the financial system today is entirely different from the traditional American or global financial system because derivatives - a relatively new concept - now underly the entire fabric of the financial system.