Should shorting be suspended/banned?

[nioka]

You are a moron outright.
Move on grandpa.

Guess it takes one to know one. I'd like to think I have been/are a successful moron. If you ever reach the stage I have reached then you can claim success too. (and I haven't had to take anyone down to get there.) I hope you can claim that when you "move on"

My, isn't this thread getting personal when anyone with a different point of view is a moron.

 

[nunthewiser]

LOLOLOL just had a thought.. LOL whats twiggy gunna blame his companies poor share price on now ???? not the truth surely !

 

[chops_a_must]

My, isn't this thread getting personal when anyone with a different point of view is a moron.

No, it's just when people comment on things they know nothing about, which makes them morons.

Your comment was one of astounding stupidity.

 

[Trembling Hand]

Selling anything you do not own is FRAUD. If it is not then I have a harbour bridge in Sydney for sale. Any takers?

Nioka this is where you are Blindingly wrong, IMHO .

The problem with this thinking is that If I did buy the harbour bridge off you (your short sell) the problem you have is that your broker will ask you at some time to return it(close the Trade).

And that just anit going to work. Because I know you have to and simply not sell it back to you. To short sell you have to have a LARGE Liquid market.

To compare short selling to stealing......

By the way. You ever used credit in any of your business?????????

 

[subi1]

No, it's just when people comment on things they know nothing about, which makes them morons.

Your comment was one of astounding stupidity.

I agree with Nioka.

You shouldn't be able to sell something that doesn't exist. If a company has a certain amount of shares they are the ones that should be traded not some that some big shot is allowed to add on to the market .

How can it be fair if extra shares a created out of thin air which all market participants don't have equal access to.

There were reports of the big funds shorting a stock and then not having the stock to pay back. when they were overdue a small fine was imposed. How is this an equal market?

 

[chops_a_must]

I agree with Nioka.

You shouldn't be able to sell something that doesn't exist. If a company has a certain amount of shares they are the ones that should be traded not some that some big shot is allowed to add on to the market .

How can it be fair if extra shares a created out of thin air which all market participants don't have equal access to.

There were reports of the big funds shorting a stock and then not having the stock to pay back. when they were overdue a small fine was imposed. How is this an equal market?

Christ.

They are breeding.

Naked short selling accounts FOR LESS THAN 1% of all short sales, and it is ALREADY illegal!

The derision levelled at Nioka is about his comment about hedging to Delta, which is absolutely essential for all markets. Got it?

Without delta hedging, there is no market.

 

[mazzatelli1000]

My, isn't this thread getting personal when anyone with a different point of view is a moron.

Not when you call people frauds and cheats while making a point (which was incorrect in relation to delta hedging).

 

[Timmy]

Wow – stunned by the news from ASIC. Highlights a big challenge for regulators. An activity regulated/banned in one market can switch to another market very quickly. I think ASIC, reading their statement, may have thought they didn't have much choice but to suspend short selling as they have done.

Amazing to be a witness to this. This is huge.

Who has a YouTube link for The Lunatics Have Taken Over The Asylum song.

 

[skyQuake]

Devils advocate - I say excessive shorting should be banned.

If say a healthy financial company with moderate leverage gets pushed down 30%, that wouldn't affect its operations. But when its down 80%, debt covenants may get triggered, credit spreads will widen as the credit market starts to distrust the company, forcing it to borrow at higher costs, which scares investors into selling etc, forming a vicious cycle.

The example is extremely hypothetical as I don't see how you can have enough resources to push down a company so much that it gets completely screwed, but it would be nice to a limit on how much of a company can be shorted.

 

[Shrewd Crude]

Shorting must not be banned... shorting is a way for Investors to Reduce their risks of their portfolios by hedging bets...
by taking away this ability for investors to short sell, The FED and other Central banks have taken away the opportunity to reduce portfolio risk profiles...

.^sc

 

[Datsun Disguise]

Seems that the world gov's aren't logging on to ASF..... Yes, shorting is now built into the financial systems and mucking with it might not be the smartest thing to do - bit like an eco system, kill the rabbits with mixo or caleysee(sic) and then your native birds of prey starve to death...

I wonder if this move, for nothing other than to label a scapegaot, will be looked upon in future as the catalyst for something bigger and badder...?

But still, I am not a supporter of short selling, it can and does have a massive impact on markets. Changes happen faster and it turns holders into sellers, even if they don't want to be or even know they've become a seller. Sure the shorters have to become buyers again, but at what point? I think it all drives unheatlthy volatility- great for scalpers, not for orderly markets.

A question that I struggle with is why my super fund (and yours) takes a fee and lends their shares to a hedge fund who is going to sell those shares, therefore putting downward pressure on the very asset that the super fund is holding on my behalf? Something I am going to put to my trustees this week - members best interest? Doesn't sound like it to me.

Now an actual question - what happens if a short seller sells shares in a company that subsequently goes under? I suppose that is it, holder gets nothing, (except the short fee) shorter gets the profit?

Interesting times

 

[chops_a_must]

Now an actual question - what happens if a short seller sells shares in a company that subsequently goes under? I suppose that is it, holder gets nothing, (except the short fee) shorter gets the profit?

How?

If the shorter can't close out it means they get nothing.

 

[skyQuake]

A question that I struggle with is why my super fund (and yours) takes a fee and lends their shares to a hedge fund who is going to sell those shares, therefore putting downward pressure on the very asset that the super fund is holding on my behalf? Something I am going to put to my trustees this week - members best interest? Doesn't sound like it to me.

Most super funds have a constituion that doesnt really permit them to sell. Maybe to rebalance, but straight position exiting is difficult. Eg. A conservative fund will have 50% in cash +-10%, and their trust deed or even legislation that wont allow them to sell. Since they're holding for the long Long LONG term.
I guess its fair to say they might as well lend it out and make some extra returns off the side.

 

[Datsun Disguise]

How?

If the shorter can't close out it means they get nothing.

Makes perfect sense now you say it. So then as a dying company that's been shorted all along it's fall nears the end we would then see the shorts being closed, perhaps causing appreciation of the share price. Trap for T/A's and bottompickers!

 

[Datsun Disguise]

Most super funds have a constituion that doesnt really permit them to sell. Maybe to rebalance, but straight position exiting is difficult. Eg. A conservative fund will have 50% in cash +-10%, and their trust deed or even legislation that wont allow them to sell. Since they're holding for the long Long LONG term.
I guess its fair to say they might as well lend it out and make some extra returns off the side.

Thanks for the detail - brings something else to mind, if the trust deed says 'CAN'T SELL' then could shorting be argued to be against the trust deed as well? have to re-draft my letter now.

Last comment - early start tomorrow - this is all going to be very interesting over the next week or so as the consequences of shutting down one part of the fin mkts become more apparent. I don't know enough about it to look in the crystal ball but I will be watching closely to learn a thing or two - this thread has already helped out hugely!

And remember, if you've called someone, or been called, a moron there's always the PM's to make up nice and proper like. Peace and love to all.

 

[IFocus]

Nioka this is where you are Blindingly wrong, IMHO .

The problem with this thinking is that If I did buy the harbour bridge off you (your short sell) the problem you have is that your broker will ask you at some time to return it(close the Trade).

And that just anit going to work. Because I know you have to and simply not sell it back to you. To short sell you have to have a LARGE Liquid market.

To compare short selling to stealing......

By the way. You ever used credit in any of your business?????????

I wonder if the stocks Futs might see more volume the SPI might also get a bit more

 

[Smurf1976]

Those pesky fire engines blocking the streets, wasting water and so on are a nuisance threatening us all.

I propose to overcome this problem by banning the use of fire alarms in all major city buildings, particularly theatres, department stores and anywhere that petrol is stored.

This measure will greatly improve safety and the orderly running of the city through the avoidance of dangerously parked fire engines, hoses left where pedestrians can trip over them and so on. We'll get rid of all that by simply removing the alarms which are responsible for fire brigades turning up all over the place.

Now, the above load of stupidity is comparable to banning short selling to prevent share prices falling. There's a reason why fire alarms go off and that reason is much the same as why stocks get shorted to oblivion - there's something more fundamentally wrong. Short sellers have, in practice, done little more than hurry up the activation of the alarm in a financial system that was already on fire.

A better target would be to point the finger at whoever spent the past few years filling the place full of explosives and other highly flammable stuff in the first place. Oh, that's right, they're the ones going broke now the whole lot's blown up in their faces - a situation that anyone with even a basic grasp of risk should have known was likely at some point.

It's a classic case of short term pursuit of profit that was near certain to end in disaster at some point. That's what happens when you scale up the consequences of even the slightest mishap to the max (filled with explosives / massive leverage / liar loans). Sooner or later you get that mishap and then it all blows up real quick.

Sooner or later, something goes wrong. Always has and always will. That's the lesson to be learnt here - never bet the farm or one day you'll lose it.

 

[misterS]

Christ.

They are breeding.

Naked short selling accounts FOR LESS THAN 1% of all short sales, and it is ALREADY illegal!

The derision levelled at Nioka is about his comment about hedging to Delta, which is absolutely essential for all markets. Got it?

Without delta hedging, there is no market.

Chops - Where can I find this fact that naked shortselling is less than 1% of all sales - haven't seen your reference or the date.

 

[cordelia]

I agree with Nioka.

You shouldn't be able to sell something that doesn't exist. If a company has a certain amount of shares they are the ones that should be traded not some that some big shot is allowed to add on to the market .

How can it be fair if extra shares a created out of thin air which all market participants don't have equal access to.

Look herein lies the problem...NOT ALL SHORT SELLING IS ABOUT SELLING SHARES THAT DON'T EXIST....PLEASE FOR THE LOVE OF GOD WILL SOMEONE EXPLAIN THIS!!!!!!!AND I AM NOT RELIGIOUS BTW

 

[cuttlefish]

Chops - Where can I find this fact that naked shortselling is less than 1% of all sales - haven't seen your reference or the date.

The asx web site has a list of short positions on approved short selling stock:

http://www.asx.com.au/data/shortsell.txt

Most are under 1%, highest is around 2.5%