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SEC Considers Five Short-Selling Curbs


Parsad
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It seems almost impossible to police an uptick rule a no downtick rule has worked in Canada for just about for ever. The naked shorts should be made illegal with zero exemptions the swarming of the naked shorts or FTD's have hastened the demise of a lot of companies they almost were successful with FFH I believe their inability to drive it to zero was partialy a result of the fact that the companies stock was largely held by  a select group of long term value investors who were extremely confident in their long thesis. I suspect the bear raids on Bear Sterns and Lehman was ultimately to trigger the CDS positions where the monetary rewards were much larger than a simple short to zero equity bet.  I do not pass any judgement on the business models or management of either of those companies but they were pushed in front of the bus imo.

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As Lampert hit on in the recent SHLD letter, naked shorting is should probably be considered a violation of property rights.

 

On another note, I would really like to see a 'down-tick' rule for going long on a stock... it might curb the effects of bubbles (which is part of the problem with the market now)!

 

partly serious, partly in jest,

 

-jeff

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They would be far smarter to simply (1) make it illegal to trade a public coy shares on anything other than a public exchange (2) mandate a derivative market for every public coy.

 

Uptick rule ? - just do bulk sales now, at various points below the current market between private parties; then buy 100 shares at various asks to trigger those disguised shorts. Were these private sales public, this would not be possible.

 

Derivative market ? - if you have margined public coy shares, that margin is effectively a kind of long put with a strike price at the margin call; coy stock options are long calls, etc. All of it should be disclosed, & a public derivative market is the place for it.

 

Simple to do, but unlikely untill markets have stabilized & re-writes of the various investment acts can begin. Then? expect to be forced into the 21st century!

 

SD

 

 

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Off market transactions also have to be illegal for public coy. All derivatives should be required to be reported for public coy as well. I can remember back in 2000 and earlier when we were creating collars for nasdaq instant zillionaires who did not have to report these transactions as sales even tho they were insiders effectively unloading all of their positions the tax hit and the reporting requirement only occurred when the collar was unwound.

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Common sense would be refreshing.  Banning short selling on stocks that are down 10%?!  How about just enforcing delivery, like they should have been doing for the past 10 years and not eliminating the uptick rule at the peak of the market based on backtesting the previous 10 incredibly bullish years.  The SEC needs to be dismantled and rebuilt from scratch. 

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