SEC to Limit Short Sales of Fannie, Freddie, Brokers (Update1)

[endarkenment]

Source: Bloomberg

By Jesse Westbrook and David Scheer

July 15 (Bloomberg) -- The U.S. Securities and Exchange Commission will take emergency action today to the limit the ability of traders to bet on a decline in the shares of Freddie Mac, Fannie Mae and brokerages, the agency's chairman said.

Christopher Cox told the Senate Banking Committee that the SEC will issue an order today imposing a ``preborrower requirement'' on short sales in the mortgage-financing companies and Wall Street firms. The requirement would prohibit the practice known as naked short selling, in which traders avoid the financial burden of borrowing shares when betting they'll fall.

``In addition to this emergency order, we will undertake a rulemaking to address the same issues across the entire market,'' Cox said in his remarks to the committee.


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aPokh6La9.HY&refer=home

---

More socialism for them, free market fundamentalism for us. I'm fine with rescuing Freddie and Fannie, I just want the same courtesy extended to us peasants in the form of a real safety net, real unemployment benefits, real home owner protections, real universal health care, real occupational safety protection, real environmental protection, real living wages and pensions for all of us. Not just the Maes and the Macs.

[aspergris]

1. Short selling has ZERO to do with "socialism" for anybody

Fwiw, naked short selling is ALREADY verboten, it just isn't ENFORCED.

What they are doing is attempting to rein it in.

Also note that several markets:

South Korea, Pakistan, Hong Kong, and Malaysia

have all banned short selling at times in the past.


Again, this is not even a ban on short selling, just trying to reign in the naked shorts

and has ZERO to do with socialism

[endarkenment]

2. Regulating their market to protect them from their own idiocy

has everything to do with socialism for them, free market fundamentalism for us. And in this specific case, they are desperately attempting to prevent the market from declaring their bailout bullshit right from the start.


We must suffer our moral hazards, them: not so much.

[aspergris]

3. No, it's not

It's not "their" market. It's OUR market.

I short sell all the time. I made several short trades today.

but NAKED short selling is ALREADY prohibited, which you seem not to understand

Also, note that the NYSE recently got rid of their downtick rule for shorts.

It sounds to me like you don't know what short selling IS, nor the fact that ANYBODY can do it.

I certainly do

Almost every day

[Robbien]

5. Naked short selling

may be illegal, but is done all the time. Half the hedge fund articles one reads talks about the naked short trade.

It is so common, the people over at Bloomberg just had an article up today that said

In traditional short selling, traders borrow stock through a broker and hope to profit by selling shares high and later buying them back at lower prices to repay the loan.

Naked short sellers do the same thing, with one difference: They don't borrow any shares. Naked short selling isn't illegal in most cases, unless authorities can prove fraud, such as a scheme to manipulate stock prices.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5pFHH4_r.jc&refer=home

Now SEC enforcement against naked short traders is almost non-existent since most of it is done by hedgers who don't have to report their activity to the SEC.

[truedelphi]

9. I had wondered abt that - Thank you for the one sentence explanation

You said: Now SEC enforcement against naked short traders is almost non-existent since most of it is done by hedgers who don't have to report their activity to the SEC.

[aspergris]

12. i am aware of that

I have a few friends who are traders with hedge funds.

my point is that

1) naked short selling has always been against the rules
2) this OP referenced article mentions that they are now CRACKING down on it.

and this of course has ZERO to do with "socialism" which was his erroneous claim

[endarkenment]

6. Actually it is their market. They just allow you to play in it.

But that is not really the point. Nor is my expertise in short selling relevant. Perhaps you can figure out what is relevant? How about the hypocrisy of their touted ideology, the one they insist on applying to us peasants else we become shiftless and unworthy, vs their actions when their own vital interests are threatened by the current reality?

[aspergris]

13. what is relevant

Is that your claim about "socialism" is nonsensical

fwiw, there are literally thousands of vehicles that a retail investor can use to short w/o even getting involved with naked shorts

for example

short ETFs
buying puts
selling (writing ) calls
double short ETFs (double leveraged)
shorting long ETF's
shorting double leveraged long ETF's
and my personal fave- shorting index futures (ER2, ES, YM, NQ)

etc.

[SlipperySlope]

11. Bullshit - if they cared they would reign it in for ALL stocks.

If the SEC wasn't just promoting socialism for their cronies, then they would act to block naked short selling for ALL publicly traded stocks.

Instead, they are only acting to control it for a handful of financial company stocks.

Why is that?

[aspergris]

14. you don't understand what SOCIALISM means

ignoring (or not ignoring) naked shorting has ZERO to do with socialism

That's the point

you sound like a right winger. they also consistently misuse the word "socialism"

iow, "you're doing it wrong"

[RUMMYisFROSTED]

16. "...unequal distribution of goods and payroll..."

Highlight on "unequal." (As in: The PTB will move to protect various financial interests-That's them! and totally ignore others-That's us!)

That's fine when one is leavening social injustice. Not so fine when propping up the elite.

I understand the counterpoint to your point completely. It is not a perfect analogy, but the basic point is easily understandable.

[aspergris]

17. ok

I grok your point. I don't AGREE with it. But I get it now :)

[SlipperySlope]

18. My point is satire

These companies want to keep their profits private, and they want to be free to profit.

But now they want their losses absorbed by the taxpayer, and they want loss-inducing activity to be restricted.

It is some bastard half-ass socialism, where the capitalists keep all the good, but they socialize all the crap.

[Tandalayo_Scheisskopf]

4. For more on Naked Shorts...

Read these:

http://www.overstock.com/Patrick-Byrne-and-naked-short-selling.html

http://www.deepcapture.com/

http://en.wikipedia.org/wiki/Patrick_M._Byrne

[Trillo]

7. You can make any bet you like, so long as your bet is the price will increase!

Welcome to the real Vegas, where the house always wins!

[Indenturedebtor]

8. Speculative Markets and Casinos are almost indistinguishable

The Oligarchy always wins.

When stock prices are nearly completely removed from actual business performance the market is simply a rigged casino.

[Hugin]

10. Please add Consumer Protection and maybe a little

dignity for us to your list.

Thanks. :)

P.S. Of all the things the Neo-Cons have taken from me, I think I miss my dignity the most.

[ozone_man]

15. Could this be the beginning of a trend?

Maybe they will make shorting stocks illegal next, so that it only goes up.