SEC Extends Order Limiting Naked Short Selling Through August 12
- Thread starter EricP
- Start date
Actually, it isn't "the law". The rule is locate, not borrow.
I think the way brokers will respond will depend on whether you are an institutional or a retail account. My expectation is that that retail brokers will immediately start charging for borrows and you will have to make a call. Merrill Pro pre-borrowed the 19 shares and held them in inventory for customers - which cost Merrill. However, they continued to have a positive rebate and the rebate didn't change. All the stocks were easy to borrow before and after the emergency rule. The options market makers made a ton of money off the rule. All the rule did was create rents for them.
Personally, I don't think the SEC will go that way. It'll be a significant and costly adjustment for the brokers and it'll suck the liquidity out of the market and increase transactions costs - as it did for the 19 stocks. Because neither Toronto nor London have these dumb rules and allow naked shorting (which is really just a future on the stock, btw - the real issue is settlement, not naked shorting, because that's where the possibility of fraud is highest), it'll join Sarb-Ox in making U.S. markets less competitive.
My opinion is based on the assumption that the SEC is not completely stupid enough to try to manipulate price and focus on catching fraud instead. However, it's a political animal and that may be too much to dream.
I've read that one too. He's making a lot of assumptions in that article, based on incomplete data. Thus, his conclusions are suspect.
That said, the problem is still settle. If the SEC just enforced settling, then all the "phantom shares" would disappear in short order. The dog and pony show the SEC is putting is a headline grabbing tactic.
Funny:
ââ¦the most falsely over-weighted topic on Wall Street these days is naked shortingâ¦the concept of not finding shares before you short them, not locating them, is something that happens very rarelyâ¦â
- Jim Cramer, TheStreet.com, February 5, 2006
Think he hears footsteps? Oh well. He's introduced his viewship to the concept. There's another 50 to a 100 folks that would otherwise be in the dark.
Again, naked shorting is not the issue. Naked shorts are like futures on the stock.
Persistent failures to deliver are the problem and the loopholes afforded market makers the main culprit. If the SEC just enforced its own Reg Sho rules instead of oh so visibly shouting that they are going to solve everything with MORE rules.
Persistent failures to deliver are the problem and the loopholes afforded market makers the main culprit. If the SEC just enforced its own Reg Sho rules instead of oh so visibly shouting that they are going to solve everything with MORE rules.
AK-15? How about an AR-47? hahaha
There, that's your AK-15. Or AR-47.
edit: Now new and improved with tacticool accessories!