that's where my mind has been going with this. if the market is going to crash..it will crash. the only thing this rulings changes is who will profit from that crash!!!!!!!!!!!!!!!
You know what I am talking about? These f**k introdcued one unnecessary crooked patch again another others crooked stupid rules earlier. All these rules do is to protect "they" not us the public investors and traders. IMO, what they should do is to remove these crooked rules rather than building more of them. Give us back the free market, you f**k.
What the SEC has done is gotten rid of Married Puts for transactions in which no real economic benefit is taken place, aka one day bullets. They are saying that since there is no economic benefit in the transaction, then there is no effective long position and therefore the sale of the long would be a violation of the tick test if done on a downtick. Technically, even if it was done on an uptick or a zero plus tick, the trade would have to be designated a short sale to be valid. Since this is an interpretation of a current rule, I believe it is effective immediately. I contacted Essex Radez and they said that they don't agree with the interpretation, but nevertheless they agree that the above is what the SEC is saying.
One day bullets clearly fit under that description of no eco benefit. But what about conversions, while it has"economic benefit" to market makers as they manage risk throughout the day, conversions for desk pro traders could also fall under the 1 day bullet. i.e. use of it is solely to skirt the short sale rule and as such may not pass muster in event of audit,etc.
anybody have any idea what the average daily volume of this instrument was? Buy and sell side? What about the other side of the trade? Did the put seller hedge?
By Christopher Faille, Reporter Tuesday, November 18, 2003 WASHINGTON (HedgeWorld.com)âThe Securities and Exchange Commission issued an interpretive release intended to close a loophole in the so-called âuptick rule.â The SEC said Nov. 17 that it had become concerned that the abusive use of âmarried putsâ allows some trading strategies that evade the application of that rule. A married put is a transaction in which an investor simultaneously buys a stock and a put option. The subsequent sale of the stock portion of this pair can be part of an effort to drive down the value of the stock, enhancing the value of the put. Until now, such actions have not been considered âshort salesâ and so an investor with such a strategy has not had to await an uptick. The interpretive release listed some characteristics of the transactions that concern them: The purchase of an at- or in-the-money non-standardized put option with a brief (one to five day) expiration period; The contemporaneous purchase of an equivalent number of shares of the same security; The contemporaneous sale of the stock acquired with a married put, in essence divorcing the stock position from the put option; The repeated use of a facilitator that sells both the puts and the long position, often by selling the stock short to the counterparty; The netting out of the transaction between the facilitator and the counterparty, often at the end of the day the married put was purchased; and The payment of a standardized fee, not calculated in accordance with a standard options pricing model, to the facilitator for the transaction. The SEC now takes the position that married puts with these characteristics are sham transactions that do not give rise to security ownership. Accordingly, investors who use such puts will have to wait for an uptick before selling the underlying security. The SEC said that it recognizes that married puts are also used âas part of a legitimate hedging strategy, and we do not want to discourage their use for that purpose. Rather, we are calling attention to abusive married put transactions that have characteristics described above and are used in a scheme to create sham long positions in order to evade [SEC] rules.â The uptick rule has long been controversial Previous HedgeWorld Story. Its opponents believe it interferes with the price-discovery function of markets, while its defenders believe it is a valuable protection against market manipulation and panic sales.