Shortselling nicht immer schlecht, aber nacktes

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24.03.09 18:11

52167 Postings, 5632 Tage LibudaShortselling nicht immer schlecht, aber nacktes

Shorten sollte man verbieten - das ist noch wichtiger als die Uptick-Rule.

U.S. exchanges call on SEC for modified uptick rule
Tuesday March 24, 2009, 9:49 am EDT

NEW YORK (Reuters) - The top three U.S. exchanges want regulators to adopt a "modified uptick rule" and a "circuit breaker" to curb abusive short selling, a trading strategy that profits from declining stocks.

Reuters - Traders work on the floor of the New York Stock Exchange, March 6, 2009. REUTERS/Brendan McDermid ...

Related Quotes
Symbol Price Change
NDAQ 22.64 -1.18

NYX 19.69 -0.76

{"s" : "ndaq,nyx","k" : "c10,l10,p20,t10","o" : "","j" : ""} The Securities and Exchange Commission, the federal market watchdog, is currently working with exchange operators and others on proposals to mitigate the dramatic, mortgage market-inspired drop in capital markets.

The exchanges said in a joint letter on Tuesday that the old uptick rule -- which was removed in 2007 after decades of use -- "would likely prove difficult to implement and enforce" now that trading is far faster and securities are priced in smaller increments.

A short seller sells borrowed shares they expect to fall in the hope of buying them back at a cheaper price. In "naked" short selling, which is illegal, the trader does not borrow the shares.

The original uptick rule only allowed short sales when the last sale price was higher than the previous price.

An updated uptick rule would go further, only allowing shorting at a price above the highest available bid, the operators of the New York Stock Exchange, the Nasdaq Stock Market and BATS Exchange said in the letter to SEC Chairwoman Mary Schapiro.

"It is conceptually simple, likely to be more effective in dampening downward price pressure, and easier to program into trading and surveillance systems than the original uptick rule," the companies, NYSE Euronext (NYSE:NYX - News), Nasdaq OMX (NasdaqGS:NDAQ - News) and BATS Trading said in the letter.

They also called for a so-called circuit breaker that would trigger the application of the new uptick rule "only after the price of a stock has experienced a precipitous decline by a certain percentage, perhaps 10 percent."

Members of the SEC are scheduled to meet April 8 to consider short-sale price test proposals.

(Reporting by Jonathan Spicer, editing by Maureen Bavdek)  

11.04.09 12:37

52167 Postings, 5632 Tage LibudaWhat is wrong is naked short selling.

What is wrong is naked short selling.    

SEC, stop naked short selling!
Posted Apr 8th 2009 5:00PM by Connie Madon
Filed under: Market matters

Short selling has gotten a bad rap lately. If you look at the markets with an open mind you will see that there are people who believe that stock XYZ is going up and Joe the investor wants to buy it to make money. Yet if you talk to a dozen people there will be those among them who say that stock XYZ is no good, that earnings are bad and that the stock will drop further. Here is where the notion of short selling comes into play. If you allow an investor to buy XYZ stock, it is not fair to prevent an investor from selling XYZ stock. Markets are always two sided. There are buyers and there are sellers, otherwise... why have a market?

Short selling by itself is not wrong nor is it illegal. What is wrong is naked short selling. SEC regulation SHO permits naked short selling. Short sellers were supposed to first borrow the stock, usually from a brokerage house before selling it so they would have something to sell. They would then buy it back (hopefully at a lower price) and give that stock back to the lender. That has been the rule as long as we have had short sales. However the SEC enacted regulation SHO the permits naked short selling. Naked short selling is where you just sell the stock without first borrowing it from a lender. This is called a "fail to deliver" trade. The downfall of Lehman Brother was caused in part by the excessive naked short selling of an astounding 38 million shares and the SEC has done nothing to bring the naked short sellers to justice. Now you know damn well that a short seller knows if he/she has first borrowed the stock before making the short sale. If not they shouldn't be trading.

So the first order of business for the SEC is to abolish regulation SHO that permits naked short selling. To restore public confidence the SEC must conduct a thorough investigation or who sold 38 million shares of Lehman stock and "failed to deliver" the stock after buying it back and prosecute these persons for securities fraud.

Should SEC regulation SHO be abolished?  

11.04.09 14:04

52167 Postings, 5632 Tage LibudaFrau Merkel sollte den Obama in A.. treten

Short selling madness is sanctioned by the SEC
Posted Apr 7th 2009 3:00PM by Connie Madon
Filed under: Bad news, Management, Short stories, Market matters

There was a strong outcry last year: "Stop the short selling. It's killing the market." Short sellers were blatantly selling short and then "failing to deliver the stock."
So what exactly was happening? First of all, in order to sell short (sell something you don't have) you must first borrow it from someone else. Usually there are willing lenders at large brokerage houses. What you are trying to do is to sell the stock first and replace it a lower price later on (that is if the market goes your way -- down).

Last year we saw traders selling short without first borrowing the stock. Then, when the buy trade to replace it was executed, there was no stock to deliver. Remember, they were supposed to borrow it first. This is called a "fail to deliver" trade. Former SEC commissioner Roel Campos wrote a letter and posted it on the SEC's website saying: "these companies are instead targets of illegal and manipulative trading with intentional failures to deliver used by traders to extract profits as the share price plummets."

It seems that the SEC knew all about this way back in 2005 with the implementation of Regulation SHO, which mandates "threshold securities" lists daily by the exchanges of stocks that have suffered at least five consecutive days of delivery failures totaling at least 10,000 shares and at least 1/2% of their outstanding shares each day. Once a stock hit the threshold list, traders were required to close out 'failed deliveries' by the 13th day after the trade." These lists normally ran 300 stocks a day. Last year amid the outcry against short selling, the SEC tightened it rule requiring short sellers close out their "fail to deliver trades on the fourth day. Also last fall the SEC restricted short selling in certain stocks. To date it is not clear whether or not the SEC has abolished Regulation SHO.

Can you imagine that the SEC even allowed "failed to deliver" trades in the first place? Whoever dreamed up this scheme of making lists and waiting 13 days before closing out "failed trades" should be summarily fired. In fact, there needs to be a complete housecleaning at the SEC. For goodness sake, stop this madness! First the SEC allows "fail to deliver" trades and then says that you have 13 days to close out these trades. This is sheer folly. When the SEC looked at Lehman's "fails to deliver" trades, there were an astounding 38 million shares of these trades. Where is the investigation of who did this and why are they not brought to justice? Meanwhile brokerage houses were making huge sums of money from short sellers.

Do you have any comments on the SEC rules permitting "fail to deliver" trades?  

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