Posted on 07/27/2008 10:12:33 PM PDT by Fred
Wall Street executives expect the Securities and Exchange Commission to extend the temporary limits it has placed on short-selling and expand them to cover additional stocks beyond the 19 financial companies it targeted two weeks ago.
The limits are set to expire Tuesday, and executives, lobbyists and hedge-fund representatives of the Managed Funds Association, the biggest hedge-fund industry group, have been talking throughout the weekend, trying to come up with possible approaches to asking the SEC to reconsider expanding the rules, according to people familiar with the talks.
A call with regulators on Friday gave the funds group "a fair degree of certainty" that the SEC intends to seek an extension of the emergency period, these people said. Regulators said an extension could be for as short as 60 days and could involve insurance, housing-industry and a broader range of financial stocks, according to these people. SEC Chairman Christopher Cox indicated last week the rules might be extended to all stocks.
In a short sale, a trader sells borrowed stock in a bet the price will decline and the stock can be profitably repurchased at a lower price. The new rules require specific arrangements to borrow shares in short sales rather than the existing rules, which allow a looser assurance the shares can be located.
The rules appear to have had their intended effect of halting the slide in shares of financial companies such as Fannie Mae, Freddie Mac and Lehman Brothers Holdings Inc. Combined with falling oil prices and encouraging earnings reports from some banks, shares in some of these names have doubled.
(Excerpt) Read more at online.wsj.com ...
The pathetic Chris Cox in action.
The day when the market really takes el dumpo and the shorts have all been chased away....the longs will all be in fetal positions BEGGING for those shorts to cover. And they won’t be there. Then we’ll see that DJIA -1000 down day.
It seems to me that selling long or or selling short is just betting... If it is in the public interest for the government to outlaw betting on football, it is certainly in the public interest to prohibit betting on the market.
Yes, we will. Who's gonna be the first to post "I told d'ya so"?
A suggestion only Chris Cox would love.
“A suggestion only Chris Cox would love.”
I don’t know who Chris Cox is, but it seems to me that going out and buying up all the oil at $100 a barrel and selling it at $140 a barrel is not the right thing to do.
Are you referring to a short squeeze, note, there will still be short selling, the only difference is that the one shorting must have concrete proof of having the access to the number of shares being shorted.
I agree and many (non-naked) shorts have been scared out even with no legitimate reason. I have heard even puts have diminished. This is truly a recipe for disaster, if that phrase hasn't been used already in this thread.
Being merely an agreement to purcase shares {perhaps for more shares than are in existence in the first place}, confidence that hedge fund shorters will provide a floor is somewhat underwhelming.
“Welcome to the free market.”
It’s more of a free market without speculators. Supply and demand should govern the market, speculators only distort it for their own personal gain.
No, I’m not really referring to a short squeeze. If anything, I’m talking about a LONG squeeze.
What I am referring to is that there SHOULD be a nominal balance between longs and shorts in a free market. Many longs feel that shorts are somehow their enemy, as if this was a cheerleading exercise. No, if you’re a long, shorts can be your best friends. When and if markets fall precipitously, one of the things that puts the brakes on is the action of shorts covering. But if the SEC and the Fed successfully conduct this campaign to chase shorts out of the market, those brakes will not be there. Did you know that short selling isn’t even allowed in the Chinese market? And it’s down about 50%.
We really do not have price discovery like there once was in US markets. The markets are dominated by hedge funds and some of the larger banks who, if you think about it, have significantly reduced prospects for making money unless and until the credit markets free up. Witness the trading profits put up by Goldman, Lehman, et al. They are large, larger than ever.
So by the time the Fed will come to the rescue of banks who blew their brains out with stupid loans, to the rescue of FNM/FRE who are mismanaged by homeless politicians and party hacks in patronage positions, and most vigorously to their pals in the major banks, how much a free market is left?
Why would they be scared, just find the stocks and go from there, at this time the no naked shorting only applies to 19 equities....
I hate to keep repeating myself, correct me if I am wrong, BUT ONE CAN STILL SHORT just not naked shorts...
Is it so underwhelming that it produced the single most violent and widespread short covering rally in stock market history the week before last or is there some other theory you’d care to advance?
I know but they are (scared).
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