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Nickelless
Administrator
USA
5580 Posts |
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Country
1000+ Penny Miser Member
USA
3121 Posts |
 Posted - 07/03/2009 : 12:31:08
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The uptick rule was put into place during the depression years to try to combat short sellers (the technique is to borrow a stock you do not have and then sell it) from disorienting free market flow. In 2007, SEC commissioner COX and his cohorts removed the uptick rule. Stock markets in the US have been very volatile ever since.
The SEC is considering reinstating the uptick rule. However, the form of the uptick rule will probably not be the same formula as the old uptick rule. The old uptick rule stated that a stock could not be shorted unless a stock sold for a price higher than previously. Logically this could be short-circuited by buying a 100 shares (uptick) at a price slightly higher than the previous price, and selling 1,000,000 shares short next. The same speculator could do both trades. Further, the SEC has been lax on making sure that the stock shares were actually borrowed, allowing short sellers to sell short more stock shares than the total number of shares that were issued by the company (sometimes by a wide margin). This caused the stock price to precipitously fall; short sellers reaping huge profits.
So, as you can see, a new form of the uptick rule is needed. Different formulas have been proposed, but none have been agreed upon. I guess we'll just have to wait and see what they decide, or if they decide to do nothing. |
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The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
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Edited by - Country on 07/03/2009 13:00:47 |
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Bluegill
1000+ Penny Miser Member
USA
1964 Posts |
Posted - 07/03/2009 : 17:58:09
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quote:
Originally posted by Country
The uptick rule was put into place during the depression years to try to combat short sellers (the technique is to borrow a stock you do not have and then sell it) from disorienting free market flow. In 2007, SEC commissioner COX and his cohorts removed the uptick rule. Stock markets in the US have been very volatile ever since.
The SEC is considering reinstating the uptick rule. However, the form of the uptick rule will probably not be the same formula as the old uptick rule. The old uptick rule stated that a stock could not be shorted unless a stock sold for a price higher than previously. Logically this could be short-circuited by buying a 100 shares (uptick) at a price slightly higher than the previous price, and selling 1,000,000 shares short next. The same speculator could do both trades. Further, the SEC has been lax on making sure that the stock shares were actually borrowed, allowing short sellers to sell short more stock shares than the total number of shares that were issued by the company (sometimes by a wide margin). This caused the stock price to precipitously fall; short sellers reaping huge profits.
So, as you can see, a new form of the uptick rule is needed. Different formulas have been proposed, but none have been agreed upon. I guess we'll just have to wait and see what they decide, or if they decide to do nothing.
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Country
1000+ Penny Miser Member
USA
3121 Posts |
Posted - 07/04/2009 : 08:10:54
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| Most investors have no problems with short selling. However, the glib notariety that the author of Bluegill's article gives to "Naked" short selling is incorrect. It was naked short selling that caused the price of silver and gold to plummet on the COMEX. A structure needs to be in place so that speculators do not get an unfair advantage from naked short selling. Laissez-faire attitudes as regards to leveraged CMOs have been the cause of many of the recent financial problems. |
---> Come to the new and improved realcent: http://realcent.org
The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
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Edited by - Country on 07/04/2009 08:13:03 |
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Bluegill
1000+ Penny Miser Member
USA
1964 Posts |
Posted - 07/04/2009 : 20:47:49
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quote:
Originally posted by Country
Most investors have no problems with short selling. However, the glib notariety that the author of Bluegill's article gives to "Naked" short selling is incorrect. It was naked short selling that caused the price of silver and gold to plummet on the COMEX. A structure needs to be in place so that speculators do not get an unfair advantage from naked short selling. Laissez-faire attitudes as regards to leveraged CMOs have been the cause of many of the recent financial problems.
You know this for an undisputed fact how..? Did you hear it from the Huffington Post, CNBC, MSNBC, FOX, CNN..?
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SEC may reinstate rules for short-selling stocks
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