-- Comment At Your Own Risk --
But it's free market capitalist speculating and short selling that caused this economic crisis!
/sarc
More seriously, the Pope did say that rapacious free market capitalists should be reined in by government. They're just doing the moral thing...
That last sentence was sarcasm too. Just in case anyone misinterprets.
The Pope can go eat his silly hat.
There is no such thing as "the common good". I didn't read much, but he sure sounds like a good socialist.
And what is the downside to naked short selling to the marketplace?
That it exposes companies as being worth less than they'd prefer the public thinks they're worth?
I can't imagine it's that folks aren't covering, but even if they aren't, that's only a problem for those fronting them the stocks, correct?
I think we discussed this over at Vox' but I can't remember for sure.
Actually, I think this is a good thing. Naked short selling involves selling shares which don't necessarily exist. It's kind of fraudulent, in my opinion.
If you want another example of government interference in the financial markets, try this one on for size:
Back in May, I got an email from FXCM informing me that the National Futures Association (NFA) had decided to outlaw hedging on the currency market. One could no longer have a long and a short position simultaneously in a currency pair.
Now, this wasn't something I was in the habit of doing, so I didn't think much of it. Then the second shoe dropped.
On July 1, I received another email informing me that the NFA was instituting a "first in, first out" rule. This means if you have multiple positions in a currency pair, you must close them in the order you opened them. The practical effect was FXCM informing me that I would no longer be allowed to use limit orders and stop-loss orders.
This is a huge deal; limits and stops are an integral part of trading, whether it's currencies, stocks, or whatever. The email completely flummoxed me; I simply couldn't believe it.
Fortunately, FXCM offered its customers the option of transferring their accounts to FXCM UK, their British branch. So this is what I did.
Let me say that again - I, a descendant of Revolutionary War soldiers, moved my money to Great Britain in order to obtain the freedom that I would no longer have here. Yes, I appreciate the irony.
Difster - I'm going to have to agree with Triton on this one. Naked short selling was never an indication of a free market, because only certain players could do it (read the big trading houses) and only by being allowed to bend the rules. You or I could not naked short a position. If the shares didn't exist to borrow we would just be denied the ability to short the stock.
Your header point is right on though. We haven't been in a free market for ages. The free market is my wife selling a few eggs without telling anyone.
So they've banned the Iron Condor?
All they're doing is preventing the price correction. This will prolong and deepen the recovery.
This way the misery from the coming depression will ease us into the misery of gov't houseing (we're already 60% there(I'm just waiting for the gov't to start mandating who can live where as part of their loans)), gov't medicine, and, as Ann pointed out last week, and I've mentioned for years, gov't food, cause what good is houseing and medical care if you're starving?
AJW308 - No they're not going after the iron condor or other option spreads. A naked short is when you pretend to borrow stock and sell it on the open market rather then actually borrowing stock and selling it on the open market. Naked shorts are something only the large brokerages can do. The rest of us have to actually borrow the stock in order to short it.
I don't think a free market would actually allow naked shorting. Naked puts sure. But in a naked short someones getting screwed. If you take the opposite side of the transaction which would be buying the underlying security you got nothing, because nothing was borrowed to sell you.
Given the fact that the big houses are the only ones able to do this, I won't consider it much of a loss. From the description that Triton gave of it, it sounds to me like this is actually a case of the SEC preventing fraud.
I find it hard to believe that folks will so willingly participate if there is a high rate of fraudulent behavior.
Where do the lenders get the dough to make themselves whole if the "borrowers" default?
I'm no expert, so take it easy on me.
Commenting by HaloScan
