Government bans short selling from midnight ??

esbo

poppy10 wrote: »

Yep - next they will apply this to the housing market. Noone is allowed to sell their house for less than they paid for it. Voila! No house price crash!

The thing is they are actually considering such schemes and their efforts to stop prices droping is what causes these financial crisises

tradetime

cheerfulcat wrote: »

Not quite - from the SEC

The new rules in the US definitely only apply to naked short selling.

My understanding of the naked short selling referred to in this SEC extract refers to the exemption allowed to brokers acting as market makers, or Specialists who have a duty to maintain an orderly market flow by way of making market, and also where some other extraneous circumstance has produced a failure to deliver. Not for the purpose of deliberately selling a stock short with no intention of borrowing it in the first place.

sabretoothtigger

Its temporary and only on financials so that blackrock fund will just have to look elsewhere till jan 09

Seems a decent move till banks figure out their balance sheets. Having only the boe and hsbc in the uk would kinda suck. I just hope they dont waste the opportunity / breathing space

shorters are like termites, essential recyclers of dead wood but when they start eating things still needed, its best to restrict them

Someone made the point that the shorters of fnm were heavily rewarded by the fed nationalising it, sending them into a feeding frenzy it seems

tradetime

esbo wrote: »

They lend it out to all and sundry depending on which earns them the most bonus, it does not matter if it does not get paid back as long as they get their bonus because well, it's not their own money they have lost, it's yours
Heads they win tails they cannot lose.

Yes an if you hold your stock with a broker they do the same thing

aqueoushumour01

it looks like this is only provisional until markets start to recover from what has been a crazy few weeks and months. it clearly states that it is a legitimate activity in normal market conditions. I don't think you can entirely blame short selling for the crisis. Banks took on too much risk and now it has all gone belly up - those who realised that have made some handsome profits in all the turmoil

purch

if you hold your stock with a broker you have no say in who they lend them to or what for

.......and that in a nutshell is the answer !!!!!!!

tradetime

poppy10 wrote: »

Yep - next they will apply this to the housing market. Noone is allowed to sell their house for less than they paid for it. Voila! No house price crash!

Exactly, they spend so much time blah blah blahing about free market efficiency until the free market does something they don't like, then it shouldn't be as free as all that.
You're free to do whatever [STRIKE]we[/STRIKE], I mean you want

purch

shorters of fnm were heavily rewarded by the fed nationalising it

Yes the shorters in Fannie Mae and Freddie Mac won !!!

Lehmans was a 'dead man walking' anyway so the shorters had little effect there, but AIG is a different matter altogether, but after FM & FM the shorters have 'tasted blood' and they know can can win.

cheerfulcat

Hi, tradetime,

I daresay you're right. I was just making the distinction ( going back to Primrose's question ) - the US authority has strengthened the naked shorting rules; the FSA has banned shorting ( of listed financial companies ) altogether.

tradetime

cheerfulcat wrote: »

Hi, tradetime,

I daresay you're right. I was just making the distinction ( going back to Primrose's question ) - the US authority has strengthened the naked shorting rules; the FSA has banned shorting ( of listed financial companies ) altogether.

Yeah, I understand cheerful, just makes me laugh a bit when people get all excited about the evils of short selling, as a full time trader I play both the long and short side of the market.
For traders holding a long position in a stock the ultimate risk is that the value of the position will drop to zero, for those who hold a short position the risk is unlimited as the position can go up without limit.
I see nothing wrong with short selling although I would question the the allowance of wholesale naked shorting, as in theory, provided you have the money there is no limit to the pressure you can place on a stock.