I think it is funny how everyone is jumping the gun calling these people idiots for wanting to reinstate the up tick rule. Just because it affects you in a negative way, doesn't mean for the whole it's bad lol. The goal of the uptick rule to reduce volatility, at least to the downside. Back when they abolished the uptick rule, they concluded that the rule didn't affect volatility at all. Wel that was back then when the VIX was @ like 17. Perhaps now is a different story, and I have to imagine, that this crazy volatility to the downside would have been minimized had you not been able to short on a downtick.
I'm not sure I understand this here. The person who is waiting at the price "provides liquity" the person who takes it "takes liquity", if the taker is a buy order, it is an uptick, if the order is a sell order it is a downtick. No matter how fast it is now-a-days there is always going to be someone there first who is providing followed by someone who is taking. If what you're saying is true, then the markets wouldn't be able to correctly credit the providers for providing and the charge the takers for taking
Most intelligent post i've seen on this site in a while. Very well said deedee. My thoughts exactly today. It's freaky scary that this is franks contribution to help the economy now after allowing fannie and freddie to wreck the economy.
I think it is funny how people are so eager to give up the ability to short without an uptick. It is a financial freedom that is useful for various things, including hedging. There is not one shred of evidence that the uptick rule affects volatility at all. Everybody wants to feel like they are doing something to make the market seem more welcoming and the reinstatement of the uptick rule is just some BS way for people to feel good for a day even though they are shooting themselves in the foot. If you are really concerned about stocks getting pounded to oblivion, how about actually enforcing the naked shorting rules that are already in existence?
Return of the Specialists. Time for them to buy a couple more homes in the hamptons and a couple Ferraris.
Most self congratulatory peices of asswipeary I have seen in a while. Investors wanted the higher returns associated with sub-prime loans. Barny Frank had nothing to do with it. The loans made under credit assessability acts to actual poor people have a low default rate. Fanni and Freddi did not buy no-doc and liar loans. Private sector loans, not Fannie or Freddie, triggered crisis Sign up for email newsletters now! Sign up for email newsletters now! Never miss a McClatchy story current user avatar current user avatar current user avatar Register Log in logout member center Follow us on Twitter Follow us on Facebook Comments (1) Recommend (7) By David Goldstein and Kevin G. Hall | McClatchy Newspapers WASHINGTON â As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail. Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems. Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis. Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006. Federal Reserve Board data show that: * More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions. * Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. * Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics. The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday. Conservative critics claim that the Clinton administration pushed Fannie Mae and Freddie Mac to make home ownership more available to riskier borrowers with little concern for their ability to pay the mortgages. "I don't remember a clarion call that said Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster," said Neil Cavuto of Fox News. Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans. It's a process called securitization, and by passing on the loans, banks have more capital on hand so they can lend even more. This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families. To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares. But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership. Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble. During those same explosive three years, private investment banks â not Fannie and Freddie â dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data. In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages. Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market. About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve. Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods. Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities. Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac â who in turn pressured banks and other lenders â to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity." Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market. What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans. These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans. In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today's problems. "Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans," she said. "The CRA has increased the volume of responsible lending to low- and moderate-income households." In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, "that this new lending is good business." McClatchy Newspapers 2008 Hope that BRow and DD care enough to do better research for their personal accounts. Or no, I don't.
The fudgepacker finally gets something right. He took the cock out of his mouth long enough to say something useful.
Volatility brings opportunity, for the traders as well as for the investors. It's not the volatility that kills an investor but the leverage. But this is his problem not the market's.
Yes, it was coincidence. Correlation does not mean causation. The removal of the uptick rule did not cause trillions in derivatives trades to unwind. "Without it, a small minority can manipulate prices..." I guess you mean daytraders and retail investors, since WALL STREET CAN STILL SHORT WITHOUT AN UPTICK IF THE RULE IS PUT INTO PLACE. EVEN THEN, I'd say daytraders using bullets, etc. can manipulate far more than daytraders can without the rule. I was trained to trade with the uptick rule, and watching for size to step on the offer, marketing through and whacking all the big bids, sending a 100 share market sell when the stock spreads 20 cents, then covering into the short and going long and posting an offer up immediately on ecns... that's much closer to manipulation than feeling an ecn sell program coming into the stock and shorting with it, without anything visible to lean on. All that happens is daytraders make money, prop firms make more money, and some guy who put in his short order just got front run to all hell. Of course you trade "everyday's markets are open" so I'm sure you know what I'm talking about. I think you need to spend a little more time perhaps watching a stock trade, and less time listening to Jim Cramer.
You either need a lecture on statistics or you are merely intellectually dishonest. When you cherry pick two data points and then ask coyly "coincidence?" the implication is that you think it's not. Judging by what's been crawling out of Princeton lately, I know that intellectual honesty doesn't rank high in the economics department but I had higher hopes for the math department. Incidentally, 1938 was a depression within a depression. Now prove to us that the uptick rule is the reason for stability but not the reason for the periods of volatility and stock market bubbles over the time it was in force. Also explain why it's not necessary in any other market and why stock markets which don't employ it suffer no greater volatility (or at least not for reasons that can't be fully explained by other variables). Perhaps we can blame the uptick rule for stock market bubbles like the tech bubble? Given the irrational exuberance exhibited in markets, we should have a downtick rule for buying so that markets do not become overheated. So messy, isn't it? Markets are notoriously difficult to centrally plan. The point is, they never made the uptick rule "work" - as DeeDee pointed out. If you call Specialists and Market Makers using the rule to abuse customer orders "working", then you're correct. They had much more power when it was in force - mostly in less liquid stocks. I'm very happy for you that you understand the drawbacks of normal distribution used in the black scholes model. Makes pricing teeny options on a normal day a bitch, doesn't it? I'm not a retail trader, so the return of the rule will not negatively impact me. But it will make the market less fair and the country benefits from free markets where fate and skill decides who wins and who loses and not Mary Schapiro. I'm just arrogant enough to believe I can make money in a competitive market where the SEC doesn't hold down retail customer's order while market makers pillage it.