Should shorting be suspended/banned?

[Timmy]

i am puzzled about how this very sudden development will:

a) affect DMA CFD providers and users.

A question that has occured to me too. I think, given the bulk of trading is on the long side then DMA CFD providers are always naturally long (given they transact each trade straight into the ASX market) and so those using DMA CFD providers to short sell to will be hedged by the provider merely selling out some of their long holdings. This is just conjecture on my part, I don't know a a lot abouth the CFD industry.

ps. Thanks for your clarification of an earlier post awg (#45), I misunderstood your point somewhere there.

 

[Trembling Hand]

Now, whether such manipulation is wrong or right ... the point is it is happening, and it is natural (ever haggled for anything?), my job is to try and recognise it and turn it to my advantage. Even better if I can recognise when this manipulation is indicative of much large capital flows behind it, so seeing the driver of the next 'trend'.

Yeah Timmy this is what ultimately puzzles me. Things are pushed and pulled. Some times buyers are stronger 02 to 07, some times sellers (not just shorts but all sellers) are stronger 08. People seem to be able to blame others before they will admit they have it wrong themselves.

Then even more perplexing is that they don't direct their anger at the true cause of the situation. Funny games go on in our heads. No wonder its so hard to stay profitable.

 

[cordelia]

So you just proved my point. People are not objecting to naked short selling, they are objecting to a ban on short selling. But is everyone objecting to short selling on ASX listed companies or are they, as the opening posts suggests commenting on short selling worldwide? You are the one who has confined the context to the ASX. In case you hadn't noticed, the UK and US have banned any type of short selling on selected stocks. I think some people are objecting to the ban on short selling in those countries and yes some people do seem to be confused about the ban in Australia being only confined to naked shorts.

oh dear!......too hard

 

[dhukka]

oh dear!......too hard

Never mind, you might get it one day.

 

[cutz]

So does commsec refer to naked short selling as day short selling as opposed to term short selling with i assume is covered by stock lending in the latter case, please correct me if i'm wrong,

cutz.

 

[Buster]

Hey Cordelia,

oh dear!......too hard

Yep, give it up Cordelia.. Some here just have to be right all the time and seem to expertly manipulate the context of posts to continually 'prove their point'.. then loudly proclaim it to be so..

Hats off to whiskers too, for not delving into the 'tit for tat' name calling drivel that some here seem to view as necessary to deliver the point they are trying to make.. Sadly, it seems that some members here can only make themselves look good by attempting to belittle others that have a differing opinion.

On topic though, I'm with you.. No problems with shorting, but the nakeds need to be sorted..

Regards,

Buster

 

[Whiskers]

Some poeple don't appear to know the difference between naked and covered shorts. They are completely different...clearly you haven't even read what the ASX has decided to do and are commenting based on second hand knowledge or more than likely complete ignorance

Here you go...straight from the horse's mouth....The ASX is banning naked short selling not all short selling.....

http://www.asx.com.au/about/pdf/mr_190908_abolition_naked_short_selling.pdf

and you can learn about it here

http://en.wikipedia.org/wiki/Naked_short_selling

and which type of short selling would that be? That's the whole point......I can't vote because I don't agree with banning covered shorts but I do agree with what the ASX is doing...banning naked shorts......
everyone seems to have missed that point....

Well, for what it's worth....I have been watching four stocks that I had positions in very closely over the last few weeks...

These stocks have all had the same thing done to them....

Their prices have been deliberately driven down by platforming the ask with huge sell orders. 1 million to 3 million.....on stocks that have an average daily trading volume of 6 - 10 million.....

These orders are just far enough away from the action to never get filled. If they get close to that point they are quickly removed and placed on again at the back of the cue.

This effectively means panicked sellers, wanting to close out their positions, have to jump over them and place their orders ahead on the ask otherwise they never get closed out...As soon as they do this guess what....the big orders move down behind them.....

More and more sellers leap frog over these big orders in a slow, progressive downslide......until the selling slows down.....The big orders on the sell dissappear and the shares have changed hands at very cheap prices...

Then big orders platform the bid and the reverse happens......that's when I bought back my positions....

Now, this may not exactly be short selling......because those big orders were never traded but the process of naked shorts gives market manipulators the tools to push down prices for their own purposes.....They effectively use shares that don't exist to destroy legitimate people's lives.....

I have nothing against covered shorts......but the above is nothing short (pardon the pun) of criminal behaviour......

I'm completely with you Cordelia.

OMG this is truly getting ridiculous.

TH, this exact illegal activity has been warned against by ASIC and even people on this forum have said they have had orders cancelled and been warned for 'suspected' such behaviour.

 

[Whiskers]

I don't think everyone has missed that point. I haven't seen anyone object to banning naked short selling. However claims that naked shorts are responsiblefor large downward movements in stock prices are unfounded. As stated above, less than 1% of daily transaction volumes of short sales in the US fail to deliver.

Dhukka, by dumbing down the numbers and the readers of this forum you are only highlighting your own self righteousness and disrespect for others.

Obviously if those numbers were strategically placed they are quite large enough to have an impact.

Just in case your bias is so encompassing of your cognitive processes... have a think about a parallel scenario.

Two armies of 1,000 men with 1,000 bullets face off. Lets call one army the buyers, the other sellers.

One army (buyers) decides to set up an ambush, positions snipers (naked shorts) to weaken the targets defences, cause a decoy (romours and media speculation) then send in a small strike force (shorts that don't settle untill a couple of days later than should) to further weaken the defences before launching a full frontal assult (legal shorts). Clearly the ambusher is going to have ammunition left after the ambushed has run out.

Now that's not too hard to understand is it?

Hey Cordelia,

Yep, give it up Cordelia.. Some here just have to be right all the time and seem to expertly manipulate the context of posts to continually 'prove their point'.. then loudly proclaim it to be so..

Hats off to whiskers too, for not delving into the 'tit for tat' name calling drivel that some here seem to view as necessary to deliver the point they are trying to make.. Sadly, it seems that some members here can only make themselves look good by attempting to belittle others that have a differing opinion.
On topic though, I'm with you.. No problems with shorting, but the nakeds need to be sorted..

Regards,

Buster

Thanks buster, I do my best, but there are many rational and fair minded people like you and cordelia on the forum.

Sometimes one needs to just walk away when the conversation is becoming too disrespectful and insulting to reasonable human intelligence... and I believe that time has come for me now.

 

[dhukka]

Sometimes one needs to just walk away when the conversation is becoming too disrespectful and insulting to reasonable human intelligence... and I believe that time has come for me now.

Best decision you ever made.

 

[cordelia]

So does commsec refer to naked short selling as day short selling as opposed to term short selling with i assume is covered by stock lending in the latter case, please correct me if i'm wrong,

cutz.

I am not familiar with Comsec's policy as regards to short selling but the term of the trade is not the difference between a naked short and a covered short...

Simply put, a covered short is one where a seller borrows the stock from a broker, prior to the sell, in anticipation that the price will fall. He then purchases the stock and returns it to the broker.... The broker has actually borrowed the stock from an investor who is "long".....The broker, ie Comsec, is the middle man.....of course the real securities never physically change hands but they do exist......So if you are long 10000 shares on CBA you have purchased through Comsec, the broker can lend these out for covered short purposes....

I am not sure of the rules here but in the states the broker has to request the permission of the holder before they can lend out the stock....If on the other hand the customer has borrowed money to purchase the shares the broker does not require permission....

There's nothing wrong with this process. In fact covered short selling actually enables other investors or traders to go long......

Naked shorts, on the other hand are very different. These are sells without first arranging the borrow. This means that ficticious shares can be sold in a deliberate attempt to drive down the price....

This is an abusive practice because the trader or syndicate involved has no intention of ever delivering the shares.....that's the crucial difference....the failure to deliver ultimately creates the phantom shares.... By placing a sell order, large enough to move the share price ,it is likely to succeed. Once they cover the short they then short it back into the market, further driving down the price....The price keeps dropping but none of the shares sold actually ever existed....

The penalities for fails to deliver are far outwighed by the profits to be had and despite claims by some that "failure to delivers" are minimal the problem is important enough for the US Securities Exchange to create the "Threshold Security List" under Regulation SHO. This list reports any stock where more than .05% of a company's total outstanding shares failed delivery for five consecutive days....

 

[chops_a_must]

Sometimes one needs to just walk away when the conversation is becoming too disrespectful and insulting to reasonable human intelligence...

I find most of your posts insulting to human intelligence.

 

[Julia]

I find most of your posts insulting to human intelligence.

Just wondering why you felt it necessary to make such an unpleasant post?
It doesn't contribute to the discussion, and simply seems like nastiness for its own sake.
I'm not sure you'd be very pleased if everyone on this forum who happened to disagree with various comments you may have made were motivated to express that disagreement in the form of a wholly unnecessary personal attack.

 

[chops_a_must]

Just wondering why you felt it necessary to make such an unpleasant post?
It doesn't contribute to the discussion, and simply seems like nastiness for its own sake.
I'm not sure you'd be very pleased if everyone on this forum who happened to disagree with various comments you may have made were motivated to express that disagreement in the form of a wholly unnecessary personal attack.

Time and time again Whiskers is shown to be abjectly incorrect on any basis you want to look at it.

Just like in this thread. Despite having the facts spelled out quite clearly, it seems quite beyond the dogmatism of Whiskers to take them on board, or to even be cognisant of them.

It's not a matter of making poor calls, it's a matter of having to read the regurgitated bollocks from the likes of typical media outlets and the muppets running the economy.

 

[subi1]

lol, yep the media and general public have fallen for it hook line and sinker.

This correction is purely because of unregulated short selling, nothing to do with fundamentals or big companies losing billions and going broke - I mean why would that drive share prices down.

Yeah I guess thats why BHP has been going down.

Even though it has record profits ,heaps of cash, increasing production and a diversity of product lines. I am pretty sure it was going up 8% one day,down 8% the next bexcause it was losing big.

It appears to me as though there might have been an effect on its price from shorters. The shorters don't only pick on companies with bad fundamentals. It is all just a game to try and shake ordinary investors out and take some percentage along the way.

I just can't see that the way shorting is being abused is good for anyone in the markets.

DYOR

 

[chops_a_must]

Yeah I guess thats why BHP has been going down.

Even though it has record profits ,heaps of cash, increasing production and a diversity of product lines. I am pretty sure it was going up 8% one day,down 8% the next bexcause it was losing big.

It appears to me as though there might have been an effect on its price from shorters. The shorters don't only pick on companies with bad fundamentals. It is all just a game to try and shake ordinary investors out and take some percentage along the way.

I just can't see that the way shorting is being abused is good for anyone in the markets.

DYOR

Um.... what?

In case you haven't noticed, a lot of commodities have had a star picket banged up their arses.

I can't see the way hedge funds were long in commodities was good for our markets.

But you go on thinking shorters determine whether a company makes or loses money...

 

[cutz]

Sorry cordelia,

I think my question was incorrectly worded, i understand the mechanics but i was pondering on the following items.

Comsec have a product called Term Short Selling, you have 11 months to close out after setting up a trade, i am assuming this form of short selling is covered,

Their other product is Day Short Selling, you have to close out position within the day so i am assuming this is naked and it will be banned as of Monday, no news on their website yet on what will be happening.

I was just wondering if the first product, Term Short Selling will still be available on Monday as it appears to be covered shorting.

cutz.

 

[cordelia]

Sorry cordelia,

I think my question was incorrectly worded, i understand the mechanics but i was pondering on the following items.

Comsec have a product called Term Short Selling, you have 11 months to close out after setting up a trade, i am assuming this form of short selling is covered,

Their other product is Day Short Selling, you have to close out position within the day so i am assuming this is naked and it will be banned as of Monday, no news on their website yet on what will be happening.

I was just wondering if the first product, Term Short Selling will still be available on Monday as it appears to be covered shorting.



cutz.

I'm sorry I can't answer your question..I don't trade through Comsec.. and I don't trade short because I have never felt comfortable doing so...that doesn't mean I am against it...I like to fully understand something before I put my money into it...


Who knows what will happen Monday as this action by the ASX is unprecedented....but rest assured, the open, is going to be the best show in town....

 

[Trembling Hand]

TH, this exact illegal activity has been warned against by ASIC and even people on this forum have said they have had orders cancelled and been warned for 'suspected' such behaviour.

Xcatly my point Whiskers. Its been happen for 200 years. Spoof orders have been just as much part of the game during the bull market from 03 to 07 as they are now. So whats your point? Because your longs have been getting the cucumba rumba that's not fair.

Its just plain dumb to blame shorts on stuffing the order book. Anyone who knows how to trade loves that kind of stuff. Doesn't give a toss who it is, they know they will always be there and trade the game. They look after their own actions and don't shift responsibility for there own failures onto the villain De jour.

The comment above about BHP just shows the hysteria about shorting. I mean western economies are on the edge of meltdown and some punter reckons a stock price shouldn't fall because last year it posted a profit.

 

[psychic]

Going by the poll results, one would suggest that 65% of investors or more are short in this current market. No wonder we have been slipping into the black hole. Bad rumours get spread, companies collapse, people lose their jobs, and people suicide, how can shorting be good for the common person.

Glad shorting is being banned:

 

[cutz]

i hate to break this to you but it's not being banned :