How will ASX ban on short selling affect trading?

[Wysiwyg]

Personally I have no issue with short selling. Improves liquidity and increases price transparency

I'm only familiar with CFD short selling which is synthetic and derives price from an under-lying equity. Could you briefly explain how liquidity is improved with short selling and where the increased transparency comes from.

Note I have only ever used CFD to short sell.

 

[Aussiejeff]

Overnight the SEC brought in new rules "restricting" short selling of US stocks. http://www.thebull.com.au/articles_detail.php?id=9696

I would expect ASX to follow shortly.

The only way is up....

 

[Trembling Hand]

Overnight the SEC brought in new rules "restricting" short selling of US stocks. http://www.thebull.com.au/articles_detail.php?id=9696

I would expect ASX to follow shortly.

The only way is up....

It only reinstating the uptick rule. No big deal.

I'm only familiar with CFD short selling which is synthetic and derives price from an under-lying equity. Could you briefly explain how liquidity is improved with short selling and where the increased transparency comes from.

The increase liquidity comes from the fact that you have to borrow the shares first. Where you borrow them from, or your broker borrows them, is from long term institutional holders who buy the shares and aren't planing to offer them back to the market.

So you have the short seller selling them which is added liquidity at the top then you also have the short seller buying them back when he wants to close the trade. That's two trades that the market would never see. Importantly when the rest of the world is losing its head and dumping stock, such as March 08, you have short sellers placing buy orders. This is a very unrecognised benefit from shorting. When all the peanuts that buy at the top and then spew up their orders at the bottom creating cascading falls it's the shorts that slow the falls by placing buy orders.

 

[Aussiejeff]

It only reinstating the uptick rule. No big deal.

Wouldn't it be fairer to introduce at the same time a counter rule to prevent "speculative buying", of shares that suddenly jump by +10%?

At least that way some "balance" is brought back to the trading equation?

Yeah, I know.

That just won't happen.


Party on....

 

[Trembling Hand]

No Lindsay Tanner, Minister for Finance and More Regulation, told me yesterday when I was doing some insider trading for him that they are bringing in a FTPG.

First
Time
Punters
Grant

They will give any punter that hasn't taken their first trade $9000 to take the first step. That should get another bubble on its way.

 

[Aussiejeff]

No Lindsay Tanner, Minister for Finance and More Regulation, told me yesterday when I was doing some insider trading for him that they are bringing in a FTPG.

First
Time
Punters
Grant

They will give any punter that hasn't taken their first trade $9000 to take the first step. That should get another bubble on its way.

Just a thought...

With the 'uptick' rule helping to reduce the risk of a sudden fall in share price by effectively "stopping out" all shorters of shares at the -10% per day drop level, might this then lead to a significant increase of speculation and "pumping" of "penny dreadful" stocks - much more so than for the big caps where % moves are generally much smaller, since a lot of the "dreadfuls" can move up AND down by much more than the 10% drop level just mandated by the SEC.

Now it seems in the US the risk of doing your dough by buying into a "penny dreadful" have been greatly reduced??

Interestink. Is that a good thing or setting the market up for trouble down the track?

 

[satanoperca]

No Lindsay Tanner, Minister for Finance and More Regulation, told me yesterday when I was doing some insider trading for him that they are bringing in a FTPG.

First
Time
Punters
Grant

They will give any punter that hasn't taken their first trade $9000 to take the first step. That should get another bubble on its way.

What a brilliant idea.

Ever thought of getting into politics?

But would they be able to short the market or would they have to go long so that the old timers can get out before the market falls over?