Uptick defenders need psychatric help, here it is

Discussion in 'Wall St. News' started by stock777, Jan 9, 2009.

  1. DJ Some Sort Sellers Thrived In 2008; Uptick Rule May Return

    By Alistair Barr .

    Some short sellers thrived in 2008 as the financial crisis hammered stock markets around the globe.

    Short-biased hedge funds, which mostly use short selling, gained 34% on average last year, according to early estimates from HedgeFund.net, which tracks industry performance. That compares to losses of about 38% by the Standard & Poor's 500 index.

    Ursus, one of the biggest short-selling funds run by Jim Chanos' Kynikos Associates Ltd., returned more than 50% last year, according to two hedge fund investors who requested anonymity.

    Such success is controversial and as equity markets plunged in September, the Securities and Exchange Commission and other regulators temporarily banned short selling of financial stocks. That caused problems for several hedge funds.

    Copper River Management, a short-selling hedge fund founded by David Rocker and run by Marc Cohodes, began shutting down in December after the ban added to problems stemming from the bankruptcy of Lehman Brothers Holdings Inc. (LEHMQ), The Wall Street Journal reported last month.

    The short-selling ban expired in early October; however, calls for more regulation of short selling persist. .

    Uptick rule .

    On Friday, Rep. Gary Ackerman, D-N.Y., a member of the House Financial Services Committee, reintroduced legislation to bring back the so-called uptick rule.

    In a typical short sale, traders sell borrowed shares, hoping to buy them back at a lower price and return them to the lender. The difference is kept as profit. The uptick rule used to require that traders wait until stocks rise before adding to short positions. It was introduced in 1938 in the wake of the stock market plunge that accompanied the Great Depression.

    The SEC rescinded the rule in July 2007. That coincided with the start of the mortgage-fueled credit crunch. The Dow Jones Industrial Average has slumped more than 35% since the beginning of July 2007. That's sparked debate about whether dropping the uptick rule triggered more-aggressive shorting.

    "In the wake of the elimination of the uptick rule, the value of many volatile stocks have plummeted due to an onslaught of manipulative short sale practices," Ackerman said Friday in a statement. "The uptick rule is essential to rein in these abuses and restore much-needed stability and confidence to our financial markets."

    Under the bill, which Ackerman first introduced in July, the SEC would be mandated to reinstate the uptick rule within 90 days of the legislation's passage.

    Ackerman has recruited the help of Charles Schwab, chief executive of Charles Schwab & Co. (SCHW), the largest discount brokerage firm.

    "The SEC should move on its own to restore the uptick rule, but if it won't, this legislation will compel the agency to do so," Schwab wrote in a Dec. 7 letter to Congress. .

    Disclosure .

    The Investment Company Institute, which represents mutual funds in the U.S., and similar groups in the U.K. and Australia, said earlier this week they support "sensible" regulation of short selling.

    The groups stressed that short selling is crucial to risk management, helps promote market liquidity, cuts transaction costs and contributes to efficient pricing of securities.

    Short positions should be disclosed to a market regulator or supervisor. However, that information shouldn't be made public, the groups added.

    Public disclosure "has the potential to increase downward selling pressure, facilitate the front-running of a fund's security positions and reduce the incentive for proprietary research," the groups said in a statement.
  2. AKA more chances for exploiting inside information.
  3. Right. They seem to share it with each other when they gain up on FFH, or VW:D

    But then they say they don't want the competition to know what they're doing. Nonsense. The more firepower they can bring to bear, the better (for them).

    Up 50%. We'll see. And soon.