Put your trenchcoats away, folks. Yesterday the SEC elected to make the temporary restriction on naked short selling permanent.
The regulator introduced a rule last year to limit naked shorting by requiring broker-dealers to promptly purchase or borrow securities that they would use to deliver on a short sale. That was set to expire July 31, and the SEC said Monday it made the rule permanent.
And with a whole three days to spare! This government of ours works at lightning speed, let me tell you. Also, gripes about the rule came pretty quickly, too, but not what you’re thinking.
However, [Sen. Ted] Kaufman and a group of lawmakers argued that the SEC’s steps to rein in naked short selling aren’t effective at clamping down on naked short sellers. They are hoping the agency considers a pre-borrow requirement that they believe could end the problem of naked short selling.
With a pre-borrow requirement an institution would be required to arrange formally to borrow shares, or “pre-borrow” before engaging in a short sale. Without a pre-borrow requirement it is generally enough for a broker to determine that it has a reasonable basis to deliver the securities when an investor seeks to borrow shares for a short sale.
So basically, the rule now is that you can still nakedly short stocks, but you have to promise to either borrow or buy those stocks like quick after you do so, rather than potentially waiting out the entire term of the short agreement or shorting the stock even further to drive down its price and make you rich. Adding a pre-borrow requirement would ban the practice of naked shorting altogether, which would bring the US market more in line with the rest of the world.
The SEC has agreed to a roundtable discussion about it in a couple of months, if that’ll shut you up. We ain’t promisin’ we’ll DO anything, but we’ll pretend to listen to your pithy complaints. Ah, who am I kidding, they’re totally going to go for it, just like they’re going to reinstate the uptick rule by the end of summer as well. Hooray, the market is saved!
BB2 // Jul 28, 2009 at 9:10 pm
Off Topic:
Like this is actually news to anyone…
http://news.yahoo.com/s/usnews/20090728/ts_usnews/wherebailoutmoneygoestodie
Sorry I haven’t been around, but you know me- I’m hanging out in the wilderness with limited connectivity.
BB2 // Jul 28, 2009 at 9:31 pm
Also, just so you know, Bernanke is hurtin’, too.
http://news.yahoo.com/s/nm/20090729/pl_nm/us_usa_fed_wealth_1;_ylt=AsBB6I705dlW50sO9yC1P8lH2ocA;_ylu=X3oDMTE2NzY1b3BnBHBvcwMxBHNlYwN5bi1yLWItbGVmdARzbGsDZXYtZmVkY2hhaXJt
Yeah, I feel his pain.
wild // Jul 28, 2009 at 10:23 pm
NY AG Cuomo, is going for toy gun ban, today…which is directly related to Fail, trenchcoats, & lame attempts for personal image building. I heard they got the ‘tip off on dangerous toy guns~~~from the offices of AiG’.
wild;)
mr_clueless // Jul 29, 2009 at 1:20 am
>>>>
Also, just so you know, Bernanke is hurtin’, too.
>>>>>
He’s not hurting. He took a good chunk of his money and bought gold and has hidden it in his backyard.
BlueMonkey // Jul 29, 2009 at 12:46 pm
I have to say I’m not a fan of the naked short sellers.
1) The term “naked short sellers” seems misleading. I may be standing around, naked and short and selling stuff, but I don’t think that makes me a naked short seller. Kind of like that history channel show “The Naked Archeologist” – not that I want to see that guy naked, ever, but it’s surely a misnomer for a show that rarely, if ever, has any nudity and certainly does’t feature archeologists prancing through ruins in the buff.
2) If the term isn’t misleading, well, ewwwwwe. Yuck. That gives me visions of fat, sweaty bastards sitting around, scratching their business, etc.
Maybe if a different terminology was used I could stand to think about this.