The Uptick Rule - Your Thoughts

Quote from AAA30:

Sounds like it was overleveraged but you still can not say that short sellers led to its ultimate fate. Have any real examples?
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I already gave you one. How about I give you another REAL example. Look up TIMMINCO. This was a highly publicized case as of recent, granted the company had yet to prove itself as really viable and able to meet the markets expecations, but the shorts came out swinging against the company once it's share price reached rediculous proportions. Maybe it was an overpumped stock, but does that mean the shorts should have gone after it like they did? This was once a $40 stock which is now a $3.00 stock, less than the stock was before the big shorts came after the company. I am sure the financial crisis helped play a big role in the stock selloff, but that doesn't excuse the fact that the shorts were actively and very publically attempting to take them down from the onset. I bet this example isn't good enough for you. Next you will want paper evidence to prove how much the short positions hit the stock price. There is no way of proving that. Maybe this is the problem that some people just don't get or understand or maybe they are making good money from short activity and don't want anybody looking into their system gaming.



Timminco shorts face pressure from dealers
Andrew Willis, May 1, 2008 at 7:56 AM EDT

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The roller-coaster ride at Timminco on Wednesday reflects another case of the market's plumbing influencing a stock price.
Timminco shares jumped 5.5 per cent to close at $19.52 on the TSX, and traders say part of the 3.3 million share trading volume reflected buying from short sellers who were being forced by dealers to close positions.
These moves by prime brokerages would be partly rooted in the fact that it is extremely hard to borrow Timminco shares. More generally, closing down short positions in volatile stocks speaks to the more stringent requirements now being placed on hedge funds, which routinely borrow and sell shares they see as over-valued, expected to profit on a falling price.
Timminco's valuation has been the subject of considerable debate since the silicon maker rocketed to $28 in recent weeks, from 40 cents just two years ago.
At $19.52 a share, Timminco is a $2-billion company.
http://www.theglobeandmail.com/serv...treetwise20080501075648/WBStory/WBstreetwise/
 
If company is so sensitive to it's stock price decline in terms of it's ability to continue it's successful operations then it should not go public in the first place. Otherwise it took a very risky move in my book by going public and as a result it deserves to be out of business.
 
Quote from gkishot:

If company is so sensitive to it's stock price decline in terms of continuing it's successful operations then it should not go public in the first place. Otherwise it took a very risky move in my book by going public and as a result it deserves to be out of business.
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Really? Should RIMM delist itself then? People weren't so sure of their success a few weeks ago and slashed the sp from 150ish down to a measly 35. Now the stock doubled from there because all of a sudden the market in all its wisdom decided that the company is still able to make good earnings even in this environment. But the stock was still very sensitive to price decline despite their successful operations, they should probably just go private since they don't need the market anymore.
 
I don't see any problems with RIMM. I don't think that RIMM itself sees any problems with it's stock price either. Good viable businesses have no sensitivity to their stock prices fluctuations. Any company deserves to be out of business for whatever reason.
 
Quote from gkishot:

I don't see any problems with RIMM. I don't think that RIMM itself sees any problems with it's stock price either. Good viable businesses have no sensitivity to their stock prices fluctuations. Any company deserves to be out of business for whatever reason.
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Of course its a viable business. They make oodles of cash yet the market decided to slash their sp by almost 80%. Regardless of how viable a company you are, when that happens it invariably effects a companies fundamentals to no fault of the company.
 
Quote from canuckrookie:

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Next you will want paper evidence to prove how much the short positions hit the stock price.

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In a debate, the onus is on the person making the positive claim to provide evidence to back up their assertion. If you want to have an adult discussion, you will be expected to back up your claims - with evidence. Don't cry foul when this basic requirement of discussion is asked of you.
 
Quote from canuckrookie:

Really? Should RIMM delist itself then? People weren't so sure of their success a few weeks ago and slashed the sp from 150ish down to a measly 35. Now the stock doubled from there because all of a sudden the market in all its wisdom decided that the company is still able to make good earnings even in this environment. But the stock was still very sensitive to price decline despite their successful operations, they should probably just go private since they don't need the market anymore.
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As rimm stands right now nothing that happens to its stock price will effect how it opperates(with the exeception of compensation) or its survival. Timminco, come on, you have to know that if that thing was not pumped up there would never of been a ton of shorts in it (Why has Sprott not been looked at closer for the pump?). And the article you posted only shows that it became a crowded trade on the short side. Did it drop below the low of that day in a fairly short time span? . I have never researched the company so can not really coment on it but I can tell you if fell due to natural sellers not shorts.

GM also was not taken down by shorts. This company has had major problems for a long time and the current economic situation( and lack of car sales) are making it face reality. You are going to have a very hard time finding a company that has not been effected on an opperating basis in this environment. And the ones that haven't still need to deal with the repricing of risks which put preasure on their stock price and their access to and cost of capital. So what I am saying is the blaming of shorts and rules around shorting is a waste of political and public energy and is being used by some to deflect away from what should be done or focused on at this moment.

Bringing back the uptick rule as it was before will not effect me very much because it is very rare for me to short on the bid. But, I do like to have the option to do so like I can lift the offer when I go long if I wanted to.

edit: Timminco was trading in the $19's on the day of that article today the $3,s and it might be worth looking at now but still need to take a closer look at it.
 
Clearly the uptick rule has an effect on the market. It can be reasoned that without the uptick rule, downward price discovery occurs more quickly and accurately than with an uptick rule. This is because the uptick rule decreases demand for available bids and decreases the knowledge base of the sell-side market participants.

If we accept the general statement that the uptick rule slows the process of downward price discovery as true, then the next question is whether this slowing of downward price discovery increases, decreases, or has a neutral effect on the magnitude of downward spikes in price. Clearly the majority of politicians and American citizens have an upward bias for the market. What then would they say if they realized that the uptick rule actually increases the magnitude of downward moves in equities?

It could be reasoned quite logically that the more slowly price falls the larger the magnitude of the fall will be (all other things neutral).

Consider that the short seller will on average cover his short more quickly than the seller who has closed a long position. Once an investor has exited a long position, he is unlikely to buy in the near term unless new fundamental information becomes available to him.

Quick drops in price, like the quick ripping of a band-aid, or less likely to create selling of long positions. Before investors can act on the falling price, it has already discovered the true price it should be trading at.
 
Quote from bellman:


Consider that the short seller will on average cover his short more quickly than the seller who has closed a long position. O
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They don't cover. What do you think ex - clearing is about? They just pass the fails around and keep the money.

You all talk like things that happen have some fundamentals to them. The whole thing is a game to fleece the public, which includes morons at buy side pension funds. It's all one big sleight of hand.

A little jail time, some treble damages, we'll right the ship. But it's going to be like going down Niagra falls in a barrel.
 
Go here, but get a scratch pad out first.

http://investigatethesec.com/drupal-5.5/files/SettlementFailures.pdf

Shares STILL haven't settled. This was a company paying out a special dividend hoping to force the brokers to deliver. They didn't settle. But what was interesting was, the special dividend was only to be paid to the holder of record. It was not to be held in Street Name. It showed up in street name anyway.

Now ask yourself. If itty bitty Jag, which at one time had tv studios, and was ready to broadcast, garnered this much attention, then what is out there in all other stocks, including Amazon, Oracle, etc. Because we know Elgindy was into those big time.

Maybe know you can see whose pocket the SEC was in. Because if all these fails kicked in, the biggest firm out there might be Edward Jones.
 
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