SEC Short Ban: “Regulation By Placebo”
And speaking about not understanding what caused the bear market, we have this recent SEC action:
“The Securities and Exchange Commission narrowly approved curbs on short selling, addressing what some consider a cause of the 2008 financial crisis despite criticism that there was no evidence to support the move.
The commission voted 3-2 on party lines to make the curbs final, in another indication Chairman Mary Schapiro is having trouble gaining unanimity for her ambitious agenda to toughen the nation’s securities rules.” (emphasis added)
Once a company’s stock price falls 10% from the prior close, traders could only execute short sales for the stock at a price above the market’s best bid. The curb stays in place through the following day.
At least it was a 3-2 vote . . .
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Sources:
Curbs Short Selling, Disappointing Goldman Sachs
Jesse Westbrook
Bloomberg Feb. 24 2010
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aDtSKApox3UM
In 3-2 Vote, SEC Limits Short Sales
FAWN JOHNSON
WSJ, FEBRUARY 25, 2010
http://online.wsj.com/article/SB20001424052748704240004575085344139674042.html
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February 25th, 2010 at 9:22 am
well, that ain’t that bad
February 25th, 2010 at 9:37 am
they should ban all selling when required for NATIONAL SECURITY, after all the Fed ignored FOIL due to NATIONAL SECURITY
February 25th, 2010 at 9:51 am
Barry, is this what you meant when you said “It’s hard to find a short”?
Free money + ban = bullish. :D
February 25th, 2010 at 9:56 am
Free market capitalism sure is wonderful.
February 25th, 2010 at 10:03 am
They should have reinstated the tick test. After all, you can get Lyme disease from ticks.
February 25th, 2010 at 10:06 am
This rule ostensibly attempts to reign in those evil speculators, but really is designed to protect the Tier 1 capital ratios of weakling Banks from future attacks.
This is a standing 8 count rule for banks.
Furthering the protected nature of that industry. Zombi-fication continues.
February 25th, 2010 at 10:07 am
Let’s see.
You can short a stock, but have to stop if the price drops 10% in one day due to the excellent efforts of algos and quants. Then the poor deprived short selling algo or quant has to to wait almost two whole days before setting the dogs lose for another 10%. What a shitty break. They should be allowed to pummel the stock in one day and scare the crap out of everything nearby. That would shake some green from the trees.
Look, the algos and quants can make a market with no or few real buyers rocket up, creating the greatest recovery ever seen. We see that daily. Some good short selling programs among algo shacks engaging in conscious parallelism could send the market for a stock to zero overnight if they wanted. Cha ching.
Short selling is needed to create honest markets. The babies who are whining about how that can’t ruin the world to make a buck, but only temporarily, are starting to look like the jokes of the world.
BR, saw your quote on Yahoo. Are you selling your book and looking for buyers for stuff you want to dump, or do you really think a little more ZIRP is going to make the fundamentals disappear? That dog is not going to hunt much longer, no matter how well you feed it.
February 25th, 2010 at 10:09 am
Orders down, unemployment up, those green shoots are dormant under the snow
Jobless Claims Keep Climbing; Durable Goods Orders Weak
By: Reuters
New orders for long-lasting U.S. manufactured goods excluding transportation unexpectedly fell in January, while the number of workers filing for jobless benefits rose last week, suggesting a loss of momentum in the pace of economic recovery.
The Commerce Department said on Thursday orders excluding transportation fell 0.6 percent last month after increasing 2.0 percent in December. That was below market expectations for a 1.0 percent rise.
However, overall orders jumped 3.0 percent, the biggest gain since July, as aircraft bookings soared. That was well above market expectations for a 1.5 percent rise. Orders increased 1.9 percent in December.
Separately, initial claims for unemployment benefits rose 22,000 to 496,000 last week, the Labor Department said.
Analysts had expected jobless claims to fall to 455,000.
February 25th, 2010 at 10:14 am
They’d better rush quickly. Market showing signs of teetering lately. I’m sure they didn’t notice this at all. Yeah, right.
February 25th, 2010 at 10:18 am
I believe I read a while back that “market makers” can still naked short. Given that, a few good lawyers with the power to find loopholes, plus a few good quants and the lack of a 10% daily limit and you would create the kind of market that only Alan Greenspan could love. (self Regulating)
February 25th, 2010 at 10:48 am
Blaming short sellers for the big bank melt down is kinda like invading Iraq because the Saudi’s flew planes into the World Trade Center. I’m looking for my old copy of 1984. It’s time.
February 25th, 2010 at 10:53 am
If they can’t fix the real problems that afflict the markets and economy, they’ll fix the ones that either don’t exist or don’t really matter that much (meaning, the window-dressing). Big companies do this all the time too. It’s maddening. All a big game.
February 25th, 2010 at 11:04 am
I amm generally in favor of laws that make the market more equal to buyers and sellers. So, if I’m a non-capitalist scum, I’ll take that label. What I’m not in favor of is how government is going about doing it: for political reasons only. We seem to only be focused on the next election now in this country, and it’s feeling a lot like the Fall of Rome around here.
Meanwhile, Nero sleeps….
February 25th, 2010 at 11:13 am
This rule accomplishes two things constructive:
1. It protects those idiots who would be inclined to pile on with a short AFTER price has already dropped 10% within the day from possibly injuring themselves.
2. It should get Barney Frank off Schapiro ‘s back on the issue of short sale restrictions.
I’m curious why two dissented – was it because they felt that no rule was needed, or was it because they thought this rule was mere window dressing and wanted something far more restrictive?
February 25th, 2010 at 11:44 am
If we have limits preventing money being made as a stock price declines, shouldn’t we also have limits preventing money being made as a stock price increases?
Price increases (for stocks in this instance, but anything, really) do not always equate to good, nor declines to bad, and it seems that if they are treated through government intervention at all, they should be treated equally.
February 25th, 2010 at 1:44 pm
The Curmudgeon Says:
February 25th, 2010 at 11:44 am
If we have limits preventing money being made as a stock price declines, shouldn’t we also have limits preventing money being made as a stock price increases?
reply:
——————-
If crooks with computers weren’t in control of the markets then maybe we could coexist with a world like the one Ayn Rand convinced a lot of kooks we should live in. But we have crooks. Self regulation favors the ones who can figure out how to pull fast ones better than anyone else. Yes, markets that bottom eventually rise again and great profitable rallies are the result.
Unfortunately, the stock market is owned and controlled by gang bangers. They use computers instead of other weapons of destruction. Their goal is to become perpetual middlemen and extract a tax off of every transaction they can figure out how to get in the middle of. When they can’t sucker new money in, they fuck with each other, giving the impression of a real and active stock market.
Like commodities, there’s no way to know if any price reflects reality or just the current computerized floor that others can be made to believe is a representation of true value.
Thus, a rule to limit shorts is a small step forward to allowing a real market price to possible show itself. Keeping the computers away for 48 hours can add at least the appearance of honesty to the price of the stock being shorted.
February 25th, 2010 at 1:58 pm
@dh:
Lighten up. I’m not advocating a Randian universe. I’m just saying–who decided, and on what authority, that prices, like time, should have a one-way arrow? Why is a stock-market crash always bad? Why do we protect against falling prices, but not against rising ones?
February 25th, 2010 at 7:22 pm
Better watch out for the naked shorts. You know, the ones that by definition don’t get counted.
February 25th, 2010 at 7:32 pm
So Mary is not totally stupid. Just incredibly well connected.
What? Are they going to bite the hand that feeds them?
And incur BSO’s wrath.
As the right reverend Wright once said: what do you expect he’s a politician.
She has been corrupted.
Well what do you expect? She’s the head of the SEC. Just another one of those incredibly useless government bureaucracies.
We pay. they play.