riskaverse305
Guest
so everybody has a pretty good intuitive idea that when you ban short selling on an asset, the price of said asset goes through the roof. but what is the actual mechanism that really made stocks spike so hard today?
the answer lies in how market makers operate. normally, they have an exclusion from the pre-borrow requirements that apply to mortals like you or i. with the sec 799-stock banned short sale list, however, they effectively revoked this pre-borrow exclusion for any stock on the list that a market maker is registered in. that meant that unless a market maker was already long a particular stock, it could not enter a sell order. This is particularly problematic for market makers, AS THEY ARE REQUIRED TO MAINTAIN TWO SIDED QUOTES AT ALL TIMES if a market maker withdraws quotes, they risk being removed from their privileged status for up to 30 days.
this created an all out rush for the long side this morning from any firm that wasn't already long a stock they were making a market in. it was either bid or lose your status.
this is why we saw such whacky moves this morning (best example i've found is ZION, 50 to 100 to 40 by 10am, feel free to post more)
now which is more damaging to the system as a whole: someone selling short to maintain a fair price, or someone being forced to buy a stock at $100 that will trade for 40 fifteen minutes later because the sec engaged in market manipulation on a massive scale?
for more like this visit my blog @
the answer lies in how market makers operate. normally, they have an exclusion from the pre-borrow requirements that apply to mortals like you or i. with the sec 799-stock banned short sale list, however, they effectively revoked this pre-borrow exclusion for any stock on the list that a market maker is registered in. that meant that unless a market maker was already long a particular stock, it could not enter a sell order. This is particularly problematic for market makers, AS THEY ARE REQUIRED TO MAINTAIN TWO SIDED QUOTES AT ALL TIMES if a market maker withdraws quotes, they risk being removed from their privileged status for up to 30 days.
this created an all out rush for the long side this morning from any firm that wasn't already long a stock they were making a market in. it was either bid or lose your status.
this is why we saw such whacky moves this morning (best example i've found is ZION, 50 to 100 to 40 by 10am, feel free to post more)
now which is more damaging to the system as a whole: someone selling short to maintain a fair price, or someone being forced to buy a stock at $100 that will trade for 40 fifteen minutes later because the sec engaged in market manipulation on a massive scale?
for more like this visit my blog @
