The SEC is currently seeking comments regarding Short Sale Price Test and Circuit Breaker Restrictions.
I encourage urge traders and investors to comment on the SEC’s website linked here:
http://www.sec.gov/news/press/2009/2009-76.htm
After reading through a vast majority of the comments, it is obvious that the most of the people leaving comments are not stock traders and have little investing knowledge other than what they have been told by the guy or gal who sells them their 401K products. This is a very dangerous situation. The SEC is being swamped by citizens who are responding emotionally to losing much of their retirement funds over the past year or so while actual traders and active market participants are leaving very few comments.
I’m sure most of the readers of this blog agree that short selling (note: NOT naked short selling) is beneficial to the marketplace. You really must let the SEC know your opinions, and it will help for them to hear from actual traders and informed market participants.
In case anyone needs any ideas to get started, here are some of my thoughts, written pretty much off the top of my head.
1. There are already rules in place about naked short selling. Enforce them!
2. Do we want the retail trader or average investor to have to buy an egregiously over-valued stock, which will eventually fall far below the price they paid for it?
3. The SEC already studied this issue and found that the uptick rule had no benefit.
4. Market crashes like the one in 1987 happened with the uptick rule in place.
5. Innovation will eventually find a way around regulation.
6. In the SEC meeting minutes, they note the market has changed since 2007. I recommend then that they complete another study to determine how the market has changed, in order to better make an informed decision about whether or not to reinstate the uptick rule.
7. Why is manipulation not investigated as long as a stock is rising?
8. Further regulation making it harder to short sell will actually make things worse for the retail trader or average investor as professionals will have methods to circumvent the regulations (options, for example). This will mean an even more complicated marketplace will have to be navigated by average Janes and Joes in order to gain equal footing with the professionals.
9. If a company and its business model is sound, short sellers should be applauded as they make it possible to pick up shares of such companies at prices beneath fair-market values.
10. Most average investors do not actually understand how a short sell works. They do not understand that these shares must be bought back, and when they are bought back, it cause the price to rise.
I could go on and on here. Hopefully this has given you some ideas. Again, please leave a comment. Also, I recommend that any iBC fan leave the word “egregious” somewhere within your comments.
Below I have pasted an actual comment left by a Mr. Ben Dover. It is a must read. H/T Zero Hedge Blog.
Mary L. Schapiro, Esq. Chairman Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 [email protected] April 20, 2009 VIA EMAIL Re: File No. S7-08-09Chairman Schapiro:
On behalf of the great silent majority of American investors, I must point out that none of your proposals to reinstate the “uptick rule†goes far enough toward ensuring a perpetual rise in stock prices. Rather than tinkering with ad hoc half-measures, the SEC should be proposing the only practical, efficient and final solution to market volatility: a ban on stock selling altogether. A review of six time-honored truths makes this solution self-evident:
Truth #1: Stock Market Crashes Are Caused By Stock Sales.
It should be painfully obvious by now that the market’s decline since November 2007 was caused by stock selling. Not even pernicious speculators like George Soros would dispute this basic truth. Similarly, the market’s steep fall after several large bank failures and the deepening of the economic crisis in September 2008 also was the result of stock selling. We can safely conclude, therefore, that had stock sales been banned in 2007 the stock market crash of 2008-2009 never would have happened. Logically, it follows that banning stock sales would also prevent future market crashes.
Truth # 2: True Investors Buy And Hold. Forever.
Equities markets were never intended to be casinos where gamblers make wagers on or against a particular outcome. They are the mechanism for long-term investors to provide the capital that investment banks and brokerage firms need to grow profits. The only justifiable investment strategy from a policy standpoint, and the only strategy that any right-minded investor — as opposed to speculator — would employ, is the tried and true “buy and hold†strategy. Speculators trade; investors buy stocks and maintain them in their portfolios in perpetuity. As the Oracle of Omaha, Jimmy Buffett, has famously declared, an investor’s time horizon should be “forever.†Thus, there is no legitimate reason for an investor ever to sell a stock.
Truth # 3: “Buy And Hold†Guarantees An Ever-Rising Market.
A large and growing part of individual Americans’ wealth is composed of equities. If all investors were simply required to adhere to the “buy and hold†strategy as they should, the market would rise without the interruption of “corrections†and bear markets. As all buyers hold, and new entrants buy, stock prices would move upward in a linear trajectory. Extensive research studies by large brokerage firms have proven that, over time, stock prices rise. For example, an investor who had bought the Dow Jones Industrial Average in 1932, when it was at 50, and sold it in November 2007, when it was over 14,000, would have realized a gain of approximately 28,000% — an annualized return of over 370%. A ban on stock sales would ensure an ever-rising stock market and thus greater wealth and prosperity for all Americans. Stock sellers, by contrast, are interfering with the market’s natural tendency to ascend.
Truth # 4: A Rising Market Makes People Happy.
Studies have demonstrated a marked correlation between the level of the Dow, on the one hand, and consumer and voter sentiment, on the other. The most recent University of Michigan Survey showed improving consumer sentiment as the Dow rose sharply after the announcement of the proposed re-instatement of the uptick rule, the modification of mark-to-market accounting, and the Treasury’s plan to subsidize the sale of banks’ toxic assets with taxpayer leverage. Similarly, polls have shown that voters are often less happy when the stock market crashes. They are also less likely to re-elect incumbents, including those who appoint the heads of regulatory agencies. A rising market also pleases investment banks and other firms in the financial services industry, including those that routinely hire former heads of regulatory agencies. Enough said.
Truth # 5: The SEC’s Job Is To Stay Out Of The Market When It’s Rising And Step In To Appropriately Alter The Rules When It’s Falling.
The SEC’s regulatory mandate in a laissez-faire economy is two-fold. When stock prices are increasing, the SEC’s role is to ignore the market and market participants, thus allowing the invisible forces of the market to work their unregulated magic. When stock prices are decreasing, however, the SEC must intervene to stanch the loss of wealth that flows from a declining market. There is nothing “artificial†about selectively modifying rules that interfere with the market’s natural upward trajectory.
Truth # 6: Stock Sellers Are Short On America.
Speculators, short-sellers, long-sellers and other suspicious elements will spuriously claim that stock sales (and even short sales) are necessary for the efficient functioning of the market, and that asymmetrical transaction rules might actually exacerbate the problem by facilitating stock market bubbles. It suffices to note that these are the same people who caused the recent stock market crash (as well as every previous stock market crash in history). They are also the ones who sold stock in the wake of theSeptember 11th attacks, thereby profiting from the nation’s tragedy. It is no exaggeration to say that those who oppose a stock sale ban are advocating nothing less than a form of economic terrorism.
I have no doubt that, as a patriotic American, you will see through the terrorists’ chicanery and lay the groundwork for a safe and prosperous America by banning stock sales.
Benjamin N. Dover III
At the risk of being accused of a snide robot, that would be just about the easiest trade ever should they institute the uptick rule.
Large quantities of FAZ, DOG, and any other leveraged bearish ETF.
Shiny metals ETFs might also be good too.
Wood, I have to read this in the morning again, with some coffee, but I am in agreement with you and will support.
Cuervos, you a snide robot? You crazy British Canuck. I mean Canut. LOL How I miss my beloved Canada, although I do love wild and beautiful Savannah. Like night and day, though. I am so fortunate to have experienced them both.
Chanci, I am a Charleston native…Savannah is beautiful. You must know that it has dodged hurricanes very well over the past 100 years, allowing those live oaks to become magically beautiful.
Love Savannah. Flannery O’Conner’s birthplace.
____
BenndOver … nice.
let them have their stupid rule. it is not going to matter, it did not matter before, it wouldn’t now. with narrow spreads and liquidity you will get filled at about the same price. if you are trend following or swing trading the few pennies variance in fill is not going to matter.
Traders will adapt just fine. Buy and Hope morons will be the ones to suffer as always as insolvent companies will not have a bid under the price due to lack of short covering.
So far, none of you have left a comment. Get off your arses. Please. Look at what you are up against- here is a comment left just yesterday:
Subject: File No. S7-08-09
From: David G Haney
April 20, 2009
The Return of Uptick or Son of Uptick or Uptick II whatever:
The uptick rule (established in 1938)needs to be reinstated. It should never…. and I mean NEVER been removed in 2007. BAD and uninformed decision (Better known as a massive “screw-up”).
I would not hesitiate to say that the absence of the uptick rule played an important part in the Bear Stearns and Lehman Brother collapse. “Bear Raids” should never be permitted. Unless of course you are doing someone a favor by permitting them to do so. Gee…. Could that possdibly be??? Don’t be stupid.
As you are aware, during the financial collapse Britain was intelligent enough to ban short selling of financials. We did not do so. The return of the uptick rule was called for but was ignored. Now with the market in the 8000 range it is being called for again. I wrote my congressman about this over three months ago. Got the usual “reply letter number 6” answer. Not surprising.
The House Financial Services Ccommittee chairman, Barney Frank, has stated that it may be reinstated in a month. You folks need to get your head out of the economic sand and get the job done. Should have done so about 3000 points ago. You can analyze this until forever but unless you have enough strength of character to admit the 2007 decsion was wrong we will continue to have the wild swings in the market where short sellers can hammer stocks with impunity. That is insanity at best. Put the uptick rule back and be sure to require an uptick of at least 10-25 cents as before. Do it now.
Unfortunately, I majored in Economics (the dismal science) and I feel like I am marching uphill in a mudslide with you people. It gets pretty dismal STANDING STILL IN THE MUD out here. Let us get on with it. And do not send me reply number 6. We will know if you are doing your job.
Born2, that Ben Dover comment is hilarious!
I’ve read several comments that mention Jim Cramer for various offices in the SEC.
Wood, you asked nicely so – done.
Pretty easy anyway.
Done. Spent about 15 minutes leaving a good comment for the gummint.
You guys are awesome!
Lazy, finished up with the profit targets and stops tonight.
I’ll give you a teaser as I won’t have the post up until tomorrow.
PT = 250
Stop = 900
Makes 60% winners, profit factor of 1.39
The interesting thing is the stop has only triggered twice, in over 6 months worth of testing.
Eh?
Gonna keep me up all night.
here ya go, just submitted this to them (sorry about the grammar, was multi-tasking and did not proof read it):
You need to eliminate all short selling.
That’s the only way for the system to purge the buy-and-hope crowd.
Imagine had Citi not caught a bid at $1 due to short covering? Citi would’ve gone to zero and we would’ve save on all the bail out money we handed over to them.
The world of full of morons that believe in buy-and-hope. Eliminating short selling would help bankrupt them and leave the stock market for hard working speculators like myself.
Case in point, the Chinese market. A ton of middle class useless people in China bought stocks during the boom in that market. The market, lacking the ability to short sell, proceeded to drop 80% and wipe out all these morons. Had China had short selling, the short covering would’ve placed a bid under the market giving false hope to those morons and falsely allowing them to think they are smart.
Short selling and the ensuing short covering is the best tool that buy-and-hope idiots have. As a Capitalist pig and a Darwinian die-hard I implore you to ban all short selling so that we can thin the herd, cleanse the gene pool and have the best thrive.
Once you have completed this mission I would like to ask a special permission to join Goldman Sachs in the exemption for Naked Short Selling. Naked Short Selling is extremely profitable and I would like part of the action.
Also I would appreciate a special exemption from any leverage restrictions. I find it limiting to day trade with only 4-1 leverage. I would 100-1 leverage and then to match my skills against the GS quants to see if I can best them.
Thirdly, I would appreciate if you allow me to mark my House to Model and then have the Fed buy it. I have a pretty spiffy Model to mark to and that would guarantee me quick riches. Maybe then I can hang out with Paulson and Cheney.
Finally, if I may. I have sustain heavy losses being long during the bear markets that followed the dot com bubble and the sub prime bubble. I would like to enter in contracts with AIG whereby you would pay them shitload of tax payers money and then would in turn funnel the money to myself. I would be very happy to pay myself a bonus on those “profits” if that would make it easier for you to make such decision.
In closing, I very much appreciate your hard work and focus on the real problems that we face today, such as the uptick rule, instead of wasting your time on frivolous issues such as Cheney’s role in weakening the dollar and the ensuing oil bubble that enriched all of his terrorist friends.
Kindly yours.
Born2, that is fucking awesome! Hilarious!!
More more! We need more comments like this!
17K visitors a day on iBC….Imagine if only 25% left a comment.
I did my part. I left the sarcasm out of my comment though, because I do not think 2 people in the SEC have a sense of humor – those poor miserable fucks. Thanks for pointing this out Woodshedder.
****
The point at which a regulatory agency decides to identify “good” speculation from “bad” speculation or “good” risk from “bad” risk, the agency should step back and examine the problem at hand. A “bad” risk or speculation will always be one where the investor lost his or her money. Does the SEC really want to create rules whereby the implication is that the investor will never lose money?
Would the uptick rule have prevented the collapse Bear Stearns or Lehman Brothers? Would the uptick rule have magically erased the loses in the retirement accounts of many Americans? Bringing back the uptick rule tells investors that the answer to these questions is “yes”.
If the SEC is concerned about preventing market manipulation via short selling, the SEC should enforce current laws concerning naked short selling and insider trading. The Uptick Rule is not a magical lever that the SEC can force on exchanges to regulate investors by some invisible hand. Instead it sweeps the problem under the rug, putting the burden and cost onto the exchanges (and the cost will probably be passed onto the investors) while telling the investors that the problem is fixed.
Good times reading some of the illiterate nonsense in these comments.
And you want to know why banks are screwed:
The markets need to be places the retail investor feels are fair or he will not participate. I can tell you that most retail investors absolutely to do not “trade the marketâ€.
Dave Gerrish
Branch Manager for Wachovia Securities
And some other broker:
A better product is destroyed so a few can make money shorting and help the competitors. I am surprised that such a system is even allowed as it hurts the competitive capitalist system unfairly and limits advances in technology simply due to those who have the most money ie. in monopoly nothing is created except the one and only winner.
Michael G. Filip, Investor and former broker, Mount Shasta, California
And this guy is smart enough to remain “anon”
I don’t trust the stock market after the SEC approved all these new ETF (i.e. double short).
Some chick from Spain:
is time for pay us (cmkx)
And, Spain okay but CANADIANS??? STFU!
Please reinstate the uptick rule..at its most severe..
Nice work Redshark.
I’m having a hard time deciding whether my comment will have any sarcasm or not. I guess it probably won’t but it is hard to leave it out.
lol Lazy Man. I’ve spent an hour or more reading them. Now you know why I was sooooo afraid!
By the way, here is an EXCELLENT comment from the Security Traders Association
http://www.sec.gov/comments/s7-08-09/s70809-91.pdf
UpTick isn’t stopping shit – big money will just move to dark pools and leave this crap behind.
It’s amazing how far this socialist sentiment has spread on both sides of the aisle in Washington (okay maybe it is not). I just watched a YouTube video from Newt Gingrich from about a year ago concerning the high price of oil. One of his very first sentences was, “Here is how you punish the speculators.” Then he went on to carry water for his political party.
This stuff scares me ten times more than any market crash.
edit: And yes Lazy they will, and then they will figure out how to leverage those assets to the moon so that the next crash can be larger than the previous one. Rinse and Repeat.
Redshark,
Only after some spectacular black-box arb action between all of the dark pools and the open markets.
And, Spain okay but CANADIANS??? STFU!
You think that those of us abroad don’t invest in the Wall Street buffonery?
Pshaw!
Cuervos,
Cheese, it was only a joke.
In closing, I very much appreciate your hard work and focus on the real problems that we face today, such as the uptick rule, instead of wasting your time on frivolous issues such as Cheney’s role in weakening the dollar and the ensuing oil bubble that enriched all of his terrorist friends.
Oop! There’s goes all that good credibility you built up in the previous paragraphs…
Unless this is meant to be sarcastic too (and you dont’ take the moonbat jibjab on Cheney), and then it’s just going to confuse the phuckers.
________
Thanks for bring this up Woodshedder. I will leave a comment soon.
There is no down tick rule so why consider an up tick rule?
For example, an investor who had bought the Dow Jones Industrial Average in 1932, when it was at 50, and sold it in November 2007, when it was over 14,000, would have realized a gain of approximately 28,000% — an annualized return of over 370%.
I indecently pissed myself when I read that. Indeud.
Rob, I’ve found myself reading it over and over and having a good laugh each time.
High Quality Replica Vacheron Constantin Watch
What Can we common Poeple do about the Bailout? Nothing.. we just have to wait and see if the company comes up and develops new cars and prototypes to please the americal consumer