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I would lend the shares for shorting if I am not intending to sell in the near future as I get paid to and it has no affect on the earnings of a company which is what really determines the long-term price of the shares.
1. Who/what did people blame before short selling was public knowledge
There is an unsurprising ignorance of the difference between naked and covered short selling, given the appalling standard of financial journalism as displayed in this article.
I'm still spewing short sellers brought down my Dutch Tulip Bulb business.Didn't the media used to say "profit takers moving in" but I suppose thats only relevent for bull markets when there are profits to be taken:.
This is a fair comment......
....the Internet has changed how people trade......and what we see....
The problem lies in the timeframe and naked shorts....I think the banning of naked shorts is a must.....
I am not going to outline the differences between covered and naked shorts ...there's plenty of info if you google it....but they are very different
I totally agree as I have mentioned earlier.
I suppose a point to remember is that if certain rogue operators hadn't abused the regulations or traditional custom where regulations were sparse, so blatently, such as by creating and fueling rumors and fear etc to assist their shorts, we wouldn't have this situation.
The investment industry operators only have themselves to blame to a large extent for not sticking to a code of conduct that would keep control of the so called rogue shorting industry by self regulation and avoid this sort of heavy handed approach by the law makers,
There is an unsurprising ignorance of the difference between naked and covered short selling, given the appalling standard of financial journalism as displayed in this article.
"Naked" short selling has always (and should be) illegal.
The US and Aus regulators have banned naked short selling (hang on, it's always been illegal). However the UK has banned ALL short selling on financial stocks.
The average muppet investor, I can forgive, even if they're muppets. The financial journo's are promulgating nonsense. Given the importance of understanding the issue, it is unforgivable.
The regulators, in manipulating sentiment in the face of said ignorance, should be arrested (serious!!!).
The UK regulators should be thrown into the tower of London to await beheading (only half joking).
This is changing the rules because they're losing... moving the goalposts.
Absolutely sickening.
And rumours were never used on the upside were they?
Idiot thinking.
When times are good, investment banks resisted all forms of intervention and regulation in the name of free market principles but now, when they gouged themselves with debts and are in trouble, they are begging the government to bail them out and ban short-selling on their stocks.
Double standards, don't you think.
But you see this exposes the fluffy thinking as espoused by you. The umpire has a vested interest in the outcome.Of course they were. But one has to remember who has the power to make the rules.
From a political perspective if values keep going up people (and pollies) are generally happy.
But when they go down they're not so happy... and if people get the perception that certain big operators are profiting even manipulating the market by fueling their shorts with rumour that naturally pisses people off.
Nah, the real idiots were the chief market operators for not enforcing a code of conduct that would keep everyone happy, public and pollies included.
The bottom line is when you're on a good thing and want to keep it... DON'T PUBLICLY FLAUNT THE SYSTEM.
By exasperating the market correction a few rogue operators have succeeded in causing a lot of the public and consequently pollies to loose confidence in the industry to self regulate the system, hence the crack down.
In short what do you expect if you ignore the umpire... you get sent off. If you then throw sand in the eyes of those who do have the power to change the rules you obviously risk them suspending or banning you from playing again.
Not very smart to abuse the umpire if you want to keep playing the game.
From John Stepek, across the river from the CityJohn Stepek
You all know the story of the Emperor’s New Clothes. It’s an amusing tale of how a ruler’s greed and folly and the madness of crowds are punctured by the naïve and pure honesty of a young boy. I suppose you could say that the moral of the story is - “the truth will out”.
But I always thought there was something about the fairytale that didn’t quite ring true. I finally realised what it was a few years ago when I read a similar folk tale from Singapore.
In it (or one version at least), a young lad takes the Raja and the local population to task over a clearly deluded scheme to boost the local economy. Instead of thanking him heartily and running the Raja out of town, the crowd chucks him off a cliff into the sea. The moral of that story is – “no one likes a smart-alec.”
And the world’s short-sellers are rapidly finding out to their cost, which of the two tales is the most accurate reflection of human nature…
Short-sellers aren’t to blame for the banking sector’s problems
It’s time to “clean up” the City, says Gordon Brown. He’s going to rush forward better rules to protect whistleblowers, apparently and crack down on “irresponsible behaviour” in the financial markets. After all, he says, “we don’t want these problems occurring in the future.”
The FT reports how his noble words have roused the party’s left-wing. Labour MP John Cruddas said: “In the wake of casino capitalism and with the onset of recession, the state is the only means society has of protecting itself from the destructive forces of global capitalism.”
It would be hilarious if it didn’t make you want to weep. Bankers may well have acted as if they’ve been sitting in the casino during the boom years. But it was a state-owned casino, with governments as the croupiers, and central bankers behind the bar giving out free booze.
This Government built its reputation for economic “stability” on soaring house prices and nothing else. It was happy enough to point to this growth in “wealth” (not “debt”) as evidence of its competence all through the boom. And the reason that banks were able to lend as freely and as stupidly as they did, was because central bankers pushed interest rates so low. And who were central bankers working for? The Government, who set the inflation target too high, at a time when prices were being pushed lower – a healthy development - across the world by globalisation.
But of course, it can’t be the Government’s fault. So now we have a witch-hunt against the nearest available target – short-sellers. Yet, if you really want to protect whistleblowers, you should embrace short-sellers. Here’s why.
Short-selling’s a risky business. When it goes right, you can make a lot of profit. But when it goes wrong (as it clearly has today, given the rapid surge in the FTSE 100 and elsewhere), you can end up owing far more than your initial stake. So it’s not something to be done lightly. Unlike many ‘active’ fund managers, who just buy what everyone else is buying, a short-seller has to pick their targets carefully.
So when a short-seller takes an interest in a company, you can bet it’s got problems, or that it’s about to run into problems. It’s no coincidence that the most shorted stocks in the run-up to the UK recession have included retailers, newspapers, and of course, banks.
The point is that the shorts are just taking advantage of the underlying problem. The banks made wildly irresponsible loans all through the property boom, and now that the bubble has popped, they are in serious trouble. In a perfect world without politicians, there’d be no problem with short-sellers taking advantage of that – in fact, the banks are only getting their just desserts.
The real ‘spivs’ behind the financial crisis
If Alex Salmond and the like want to attack ‘spivs’, how about the spivs who were cheerily selling young couples interest-only mortgages at six times their joint income? “Don’t worry about interest rates, love, you’ll be able to remortgage to a better deal in a couple of years’ time. And don’t worry about the capital – you can always start paying that back once you can afford it. Besides, the house’ll be worth a lot more by then.”
Those unlucky homeowners are now staring negative equity and rising mortgage payments square in the face, and the truth is it doesn’t matter a damn to them who owns their debt, because they can’t pay it anyway. Banning short-selling won’t help them.
But then, all that dodgy dealing was going on back in the good times. And when times are good, no one wants to hear the warnings, or to let anyone spoil the party. And unfortunately for short-sellers, when times turn bad, most people would rather throw the smart-alecs off a cliff, than admit that maybe they got it wrong.
I've been away for many months, and you are still just as much of a spanker now as you were then.Of course they were. But one has to remember who has the power to make the rules.
From a political perspective if values keep going up people (and pollies) are generally happy.
But when they go down they're not so happy... and if people get the perception that certain big operators are profiting even manipulating the market by fueling their shorts with rumour that naturally pisses people off.
Nah, the real idiots were the chief market operators for not enforcing a code of conduct that would keep everyone happy, public and pollies included.
The bottom line is when you're on a good thing and want to keep it... DON'T PUBLICLY FLAUNT THE SYSTEM.
By exasperating the market correction a few rogue operators have succeeded in causing a lot of the public and consequently pollies to loose confidence in the industry to self regulate the system, hence the crack down.
In short what do you expect if you ignore the umpire... you get sent off. If you then throw sand in the eyes of those who do have the power to change the rules you obviously risk them suspending or banning you from playing again.
Not very smart to abuse the umpire if you want to keep playing the game.
I've been away for many months, and you are still just as much of a spanker now as you were then.
But you see this exposes the fluffy thinking as espoused by you. The umpire has a vested interest in the outcome.
It is helped along by people like you who want to ignore the cold hard facts... that the system is unsustainable.
So congratulations Whiskers, you are in the imbecile majority who can't think past your own self-interest and the few short years "western capitalism" (aka demi socialism) has left.
We have (errrr had) a once in a cycle opportunity (perhaps the last opporunity) to correct systemic ills of our economies and stave off the end of western economic hegemony and avoid handing it on a silver platter to the far east.
Because of the idiotic complicity of ignorant muppet investors, regulators and gu'mint, we have missed a golden opportunity.
Be proud Mr Manchurian Candidate.
</rant courtesy of Kronenburg 1664>
[From the XAO thread]
No, I didn't expect this sort of a bounce... because I really didn't think this 'pot hole' would get so deep.
But as it got deeper I could see no other option than the US regulators really jumping on 'suspicious' activity particularly 'naked' shorting, since they had threatened to previously if the market couldn't regulate itself.
I think it's just going to be a fact of life now that a few greedy and unscroupulous operators have tried to exploit the market going up then down again and got the lawmakers really pissed off enough to force their hand to more heavily regulate and monitor the system.
While some problems still exist in the US it just seemed inevetable that something like this would happen... I can't just recall the exact phrase I used some time ago (U F might recall)... bit it was basically that the worst of the US economic fallout would be deferred to another day.
Sorry, you can't bounce the tag Manchurian. This shows complete lack of knowledge.No way... the Manchurian's are the arogant loose canons in the industry that took on the umpire, dared him to act and lost.
Likewise, a lack of knowledge. I am celebrating my best week in 7.5 years as mentioned on the beer thread. Volatility is good, no matter which direction.So what's this pissed off Fuming mood all about eh? Did ya get caught a bit short, maybe with yer pants down?
Sorry, you can't bounce the tag Manchurian. This shows complete lack of knowledge.
The "umpire" has ensured more Ma & Pa's get hurt in the market and people like you are too cognitively biased to know and too self centred to care.
I am fuming because I have a social conscience and detest moral hazard. In fact, the "umpire" here in the UK has broken the law over the LTSB/HBOS merger and a class action is being initiated right now.
Stay tuned selfish man.
If you have such a moral conscience shouldn't you have abstained from the market and not tried to profit from the situation as soon as you realised the bad practices were happening? It sounds a bit hypocritical to even engage in, let alone profit from something you so strongly believe is a moral hazard.
SEC Considers Revising Shorting Ban in Options Market (Update2)
By Edgar Ortega and Michael Tsang
Sept. 19 (Bloomberg) -- The U.S. Securities and Exchange Commission may revise its ban on short sales to add financial companies and carve out an exemption for brokerages that pair off brokers in the $1.6 trillion U.S. options market.
The commission may add companies after firms such as M&T Bank Corp. were left off a list of 799 insurers, banks and securities institutions barred from short sales. The staff also will recommend that options market-makers be exempt from the ban, easing concern the rule would raise investor costs, the agency said in a statement today.
``If they don't fix it, there just won't be an options market on Monday,'' Steve Claussen, chief investment strategist at OptionsHouse LLC, the Chicago-based online brokerage unit of options trading firm PEAK6 Investments LP. ``If they have an exemption for market-makers that they're allowed to sell stock short, then they can provide a market in the options.''....
...`Disastrous'
Options market makers would have been prohibited from making short sales starting next week under the ban adopted today to keep speculators from driving down stock prices. The Options Clearing Corp., which guarantees all trades exchange- listed options, said a ban would have proved ``disastrous.''
Under rule announced today, market-makers such as Interactive Brokers Group Inc. and Susquehanna International Group LLP would be unable to short a stock to hedge their risks when clients buy or sell options on financial shares. Options give investors the right to buy or sell stocks at fixed prices in the future.
Market-makers, accounting for about 40 percent of trades, are obliged to quote prices at which they'll buy and sell securities so investors are able to complete trades...
....``Either you had to change the rules or you had to halt options trading,'' said Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options market analytics. ``This is the better choice. You couldn't have left it as it is because options market makers were refusing to quote without the ability to hedge.''
Option Prices
Prices for options today show that market-makers were already seeking to compensate for the added risk by widening the difference between their bids and offers, according to Peter Bottini, an executive vice president of Chicago-based online brokerage OptionsXpress Holdings Inc. The wider spreads make it more costly for investors to buy or sell options.
``For our retail customers, the costs of adjusting their portfolio has gone through the roof, because the bid-ask spreads have gone through the roof,'' said Bottoni, a former market maker at the Chicago Board Options Exchange.
Worse... much worse.... is that they want to re-inflate the bubble, to rebuild the house of cards, to achieve a few more miserable years of power; at the expense of total financial collapse later, rather than taking the medicine now.
It is helped along by people like you who want to ignore the cold hard facts... that the system is unsustainable.
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