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SEC Cracks Down on CBOE For Naked Short Sales


Parsad
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  • 7 months later...

There's:

 

1- Naked shorting so you can make easy money arbitraging the cost of borrowing stocks to short.  You essentially get to collect the borrow (10-100% interest???) without having to pay the borrow.

2- Bear raiding.  This has very little to do with naked shorting.

3- Driving the price of a stock down by selling the shares without mercy.  In at least one case, the SEC found that somebody engaged in naked shorting to do this.  The selling party benefited from a lower share price.

 

Largely the SEC has found people guilty of #1.  Some people would like you to believe that naked shorting always involves the evils of bear raiding.

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Yes naked short selling is a problem but it largely doesn't have much to do with bear raiding.

 

Suppose naked short selling was completely wiped out.  Would abusive bear raiding still be a problem?  Yep.  If you think that bear raiding is this massive evil, then you should address bear raiding.

 

2- I have a feeling those university professors caught doing naked short selling didn't care whether their stocks went up or down.  They were probably fully hedged and making easy arbitrage money.

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