Comments? Ha! You have a couple hundred K to blow on a lobbyist? That may get you lunch at Applebees with a GS 10 on the SEC staff who thinks that Short is somebody named Martin. If these morons had even the slightest idea of how financial markets operate we wouldn't be in the fix we're in now. Anybody know a financial wiz who would want to sit in some crappy cubicle in D.C. working as a slave wage for the SEC? Well, neither do I. So what do you expect from government beauracrats? Brilliance?
It's already been mentioned in no uncertain terms that the government WILL NOT ALLOW THE BANKS TO GO UNDER AT ANY PRICE. They'll bleed the taxpayers dry if they had to. All this "public comment" is a joke. But let's get one fact straight. It wasn't the shortsellers who brought down this economy. It was the chronic bad business management on the part of both borrowers and the lenders that brought this economy on its knees. To punish shortsellers without first punishing the CEOs who ran afoul is laughable.
Isn't this about the Uptick rule? Would reinstating the uptick rule somehow be a major impediment on short selling? it is not like they banned short selling all together or anything. BTW...have any of you ever wondered whether there were some rogue short sellers who abused the privilege and that is why these changes are being considered? I find it quite amusing that to short sellers CEO's are all bad, long investors are all morons that can't determine rational price discovery (only short sellers can), and pump and dump is the only mechanics of stock manipulation. what bubble world do you guys live in. THERE ARE CROOKS amongst you. There were regulations (SarBox for example) targeting corrupt CEO's and there have been regulations created to prevent pump and dumps, why the crying when there are regulations to reel in bad short sellers?
Leave short-sellers alone. They are innocent scapegoats. They were just riding the bus. If you want to reinstate the rule count the market makers in and we'll see how it goes.
gkishot, i am sure as there is a sun that rises each day that there are innocent and there are not so innocent short sellers out there. the game is to find a means of preventing the abusive ones from operating without impairing the legitimate ones. As for the market makers, the most telling tale that the SEC knows they are abusing the privilege comes by virtue that the SEC is stating that under these proposals there would be no exemption for them. That is a new set of logic to this equation. You have to ask what drove them there.
Define 'abusive short-sellers' with some specific example of an 'abuse' so I know what you are talking about.
Patchie, Dont assume that everyone on this board is a hack daytrader....some of us read it for amusement and post stupid comments occasionally just to solicit a response. Its clear that everyone who understands how the current market microstructure works knows this is an irrelevant idea. Even the SEC committee understands this, I was on a call with the team CSFB sent to monitor the hearing yesterday afternoon. They made it pretty clear that the committee is only considering reimplementing the rule due to pressure from the Senators and Representatives in Washington that have ZERO understand of how the current market structure works. They just want to appease the retail public who have been convinced by idiots like Jim Cramer that the reason there portfolios are down 35% is because of "bear raids" and not shitty fundamentals. The buy side fund managers you quote are COMPLETELY IRRELEVANT to market liquidity. These guys make their money from charging fees on funds invested with them...not from actually trading profitably. Of course they want the rule in place if it increases the probability that they will get more AUM and thus make more money. Here is why the short sale rule will impact liquidity: The High Frequency prop shops that make up approx 50% of the equity market daily volume (I work for one of them) estimate that their available opportunities will drop by 15-20% if an UPTICK or UPBID rule is put in place. How do I know this? Because, firms like mine are constantly monitoring and lobbying the situation. We can all easily estimate the impact on our volumes buy running the new rules thru a backtest. It is much less likely that a high frequency model will want to hit a bid on an uptick than a downtick. Its pretty simple to understand if you have ANY understanding of short term auto correlations or microstructure arbitrage. Other long/short stat arb funds will not be able to effectively enter quant model driven pairs trades if the rule is in place. They estimate their volumes will drop by the same 15-20%. When you combine the loss in trading volumes across the quant shops (WE KNOW THIS BECAUSE WE CAN MODEL THE RULE SET ON CURRENT DATA) you are looking at a loss of 12-15% of the total market volume from an UPTICK or UPBID rule. This means that when an institutional buy side firm puts a 20,000 share bid out that would normally be hit by a quant shop or group of quant shops arbing microstructure, now that order will take much longer to get filled and will have a greater risk of impacting the market higher, thus increasing their execution slippage and costing them return (NOT THAT THE BUY SIDE FIRMS REALLY CARE ABOUT MAKING MONEY). It is also going to cost the ECNs and exchanges hundreds of millions of dollars to implement and test the new rule set. BATS doesn't even have legacy code for an upbid or uptick rule. Barney Frank and the other morons think you can just make the change and the next day the guys calling out to each other on the floor of the NYSE will just "know the rule and abide by it". The markets don't function that way anymore. The majority of the trades are executed electronically now. It is a VERY COSTLY policy in terms of technological implementation and market liquidity. Also, in this microsecond world, how can INET, BATS or Arca be expected to know the actual tick state across all markets at any given microsecond? The network latency between matching engines is at least 1ms. Of course most people dont trade anywhere near the microsecond world, but 50% of the market volume lives and dies by it. In reality bear raids dont really exisit. The velocity to "fair value" is just much faster than most of the old school guys are used to. You dont see guys jamming CDS's in XOM or any other financially healthy company and raiding the stock do you??? The company and other funds would appreciate the buying opportunity and squeeze them to oblivion. If you are running a highly levered, low margin business with debt covenants tied to your stock price then you are just asking for trouble. If companies were run more responsibly we wouldn't have to create artificial mechanisms to protect them. Why is it that a down tick rule should not also be implemented? Short squeezes create artificial bubbles that are equally detrimental to the capital markets. I love how people want an asymmetrically "fair" rule.
People who caused the market to plunge are the 'long sellers' not the 'short sellers' because the long sellers don't produce any buying pressure. No wonder that so much cash had accumulated on the sidelines during the latest market collapse. SEC should be considering banning 'long selling' rather than reinstating uptick rule.
patchie, The whole problem with the uptick rule is not whether we lived with it before or whether experts can agree if its good or bad. It is about the principle of changing the rules without an understanding of how markets work. Reinstating and/or creating new kinds of uptick rules is inherently against the idea of a free and fair market. Why should short sellers be forced to play by different rules then buyers? The markets are supposed to have winners and losers... investing isn't some 3rd grade spelling-bee where everyone gets a certificate for participating. As part of the public you should be sick and tired of the government trying to regulate every part of your life, I know I am. I don't buy into the idea that investors should be protected, if joe the plumber can't take the heat when his 401k holdings lose value then he shouldn't be investing in the stock market in the first place. But joe the plumber wants all the upside without the risk of the downside, and politicians are pandering to this greed. Don't get me wrong, there is no excuse for fraud like naked short selling, but there should also be no excuse for impeeding me and you from taking a risk on the short side. Markets are about trading, a place where one individual can trade with another, they arose from the need to exchange goods, they were never a guaranteed store of value for joe public. Trading is a price discovery mechanism, nothing more and nothing less, creating rules that benefit one side distorts that process. Each short seller takes the same risk as a buyer, the risk that he will lose money on the next tick. -Neo
Patchie is not actually interested in logical dialogue. He just wants to repeat his New York Times worthy op-ed.