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Regulators Are Killing Me!


Parsad
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In an article today, SEC Chief Mary Schapiro says that they are determined to creat new short-selling legislation.  There are arguments being made on both sides regarding the need for or relegation of short-selling. 

 

http://finance.yahoo.com/news/SEC-chief-says-new-apf-15135872.html?sec=topStories&pos=3&asset=&ccode=

 

This is now driving me absolutely crazy.  Six years after the original attack on Fairfax and all this publicity on short-selling, and the government is thinking about all sorts of rules for short-selling which will do nothing regarding the real problem...naked short-selling.

 

I don't want to see the government enact certain rules they are thinking about instituting, such as banning all short-selling in an issuer if the price falls 10% in a day.  There are some companies where the price will deserve to fall, and perhaps all the way to zero because of fraud, bankruptcy, etc.  What they need to do is enact some sort of requirement so that fail to delivers are eliminated.  Or at least the lag between the short sale and delivery of certificates is minimized as much as possible.  Be it through penalties against the broker dealers or legislated into law.  Cheers! 

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I agree with you 100%.  Selling shares short that you do not own is like selling anything that you don't own. It's fraud.  That is what should be gone after, but otherwise leave the market free to do what it needs to do. Unfortunately once government gets its dirty hands into something it tends to never stop regulating and trying to tinker and control, many times with disasterous results (just look at health care in almost any country).

 

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Guest Broxburnboy

Part of the current problems arise because the regulators don't enforce those regulations we already have.

Let's start with enforcement and prosecution of the obvious fraud, before new regulation is considered.

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Well, Better get used to it.  The long experiment in deregulation is over.  It would have been over regardless of the stripe of government you elected.  Its cyclical.  The populous is fed up and disgusted and everything gets caught in the ensuing melee, the good, the bad, and the ugly. 

 

Just as deregulation overshot, we are now going to overshoot on the opposite side.  Catch you in twenty years when it swings back the other way.  Lets just hope we dont fall into a long period of trade protection with its high inflation, and high interest rates, and sluggish economies.

 

 

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Compliance costs might kill you but the regulations themselves will do nothing of the sort. Regulations are just laws and societies and economies which have rules based systems and fair ajudication of those rules do far better than ones that do no. Reinstating an uptick rule making naked shorts very difficult and regulating derivatives and reintroducing position limits in the futures mkts will go a long way in creating a fairer market place in which we will all benefit.

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