Wednesday, August 20, 2008

Reuters: SEC to Propose Short Sale Rules in Weeks

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This is my favorite quote from the story: He said it is not intended to have any impact on the direction of stock prices.

Sure, of course not ;) Just like the greatest short squeeze of all time did not intend to have an impact on the stock prices of financials a month ago ;)
  • The top U.S. securities regulator plans to propose a new short selling rule in the next few weeks which would be broader than an emergency order covering just 19 financial stocks which ended last week.
  • U.S. Securities and Exchange Commission Chairman Christopher Cox said on Tuesday the proposal "will focus on market-wide solutions." He said it is not intended to have any impact on the direction of stock prices.
  • Cox also said the agency is still considering proposing that investors be required to publicly disclose substantial short positions in stocks. Substantial long positions in stocks already have to be disclosed. (yes, please do - that way when 20 major hedge funds have more shorted stock than is currently available - we'll know its naked shorting - thank you very much - you can bet the political contributions will be coming in hot and heavy from the major hedge funds in the next few weeks to try to fight this one off)
  • Short sellers arrange to borrow shares they consider overvalued and sell them in hopes of making a profit when the price drops. It is a legitimate form of trading but often blamed when a company's shares fall. (this is fine)
  • The SEC's emergency rule was aimed at cracking down on illegal naked short selling, when an investor sells stock that has not yet been borrowed. (this is not fine)
  • Cox said on Tuesday that failures to deliver stock "were reduced substantially" for the stocks covered by the emergency rule. "It was a very effective order from that standpoint," Cox said.
  • He said the SEC's emergency rule was never intended to prop up the stock prices of the 19 companies. "We expected and intended to have no impact whatsoever on the direction of prices," Cox said. "That's not the purpose of regulations." (I'd love to see this quote spoken when under lie detector)
Why don't we protect all these stocks immediately? Regulation SHO Threshold List. That would be a start. Let's make it an even playing field and give some of these small cap stocks a chance.

And with the dominance of computers in this era could you please put in the uptick rule? That way at least the algorithm would need to create at least 1 fake buy order in between each relentless sell order? I have never heard one explanation on why that rule mysteriously disappeared last year. Thank you Mr. Cox.

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