Shorting forbidden?

[Splitlink]

I don't think that you can compare selling houses from one person to the next, a process that takes its time, which is a built-in safety measure on its own, with the globalised selling of shares on the internet, whuich is done at the press of a button.

I wonder if brokers and banks which, as we all know, are upright pillars of society and would not dream of doing anything underhanded, sell more futures than actually exist? Short selling of shares, as defined by the BBC for the layman, consists of the lending of shares, for a fee, by the owners. The borrower then sells them high to buy low later. As I see that definition, the shares cannot be sold more than once at the same time.

I, as the owner of a portfolio of shares, do not possess certificates, as they are held nominally by a holding (I forget the exact word) company to which, my broker, by law, has to pass them for safekeeping.

What goes on with this huge number of shares owned by a large number of investors? I, certainly, have no knowledge of what happens. But what happens if our HBOS shares are dumped on the market without our knowledge? I can tell you. When we, the owners, decide to sell them they will be a fraction of what we paid for them.

All this, and a lot of other matters in the running of our business affairs, requires legislation. The idea that our economic wellfare can be left in the hands of bankers and free market forces is all BS.

You and me, with our relatively small blocks of shares, don't know a fraction of what goes on, I can assure you.

Split

 

[Trader333]

So no one, here, thinks that speculative shorting can bring a company to its knees?

In most cases there is a maximum number of shares that can be shorted. I seem to remember that it was around 20% on Nasdaq stocks. I read elsewhere that there was only around a 4% holding of Short interest in HBOS which is hardly enough to bring it to its knees. It has been said many times elsewhere and a view that I hold that prices fall because of a lack of buying support. If people wont buy then prices keep falling. Even the public who are usually the ones who keep believing when everyone else had jumped ship lost confidence in HBOS so there was no one anywhere wanting to buy their shares. It was this that made the price collapse and not Short selling (in my view).


Paul

 

[new_trader]

I don't think that you can compare selling houses from one person to the next, a process that takes its time, which is a built-in safety measure on its own, with the globalised selling of shares on the internet, whuich is done at the press of a button.

I wonder if brokers and banks which, as we all know, are upright pillars of society and would not dream of doing anything underhanded, sell more futures than actually exist? Short selling of shares, as defined by the BBC for the layman, consists of the lending of shares, for a fee, by the owners. The borrower then sells them high to buy low later. As I see that definition, the shares cannot be sold more than once at the same time.

I, as the owner of a portfolio of shares, do not possess certificates, as they are held nominally by a holding (I forget the exact word) company to which, my broker, by law, has to pass them for safekeeping.

What goes on with this huge number of shares owned by a large number of investors? I, certainly, have no knowledge of what happens. But what happens if our HBOS shares are dumped on the market without our knowledge. I can tell you. When we, the owners decide to sell them they will be a fraction of what we paid for them.

All this, and a lot of other matters in the running of our business affairs, requires legislation. The idea that our economic wellfare can be left in the hands of bankers and free market forces is all BS.

You and me, with our relatively small blocks of shares, don't know a fraction of what goes on, I can assure you.

Split

The problem as I see it is that the government feels that mum and dad investors need protection from the 'evil' greedy capitalist pigs. Mum & dad investors are ethical, so they are entitled to make money because after all, they are struggling to get by in life aren't they? Mum & dad investors don't want to get rich like those 'evil' greedy capitalist pigs, they just want enough money to pay for their childrens education, and perhaps a new car, and a 50" HD plasma TV with a Dolby surround sound system, but they don't want to be rich like those 'evil' greedy capitalist pigs who keep shorting the companies they had invested in.

Anyone with any brains could see what was going to happen at least 5 years ago. When companies like Ocean finance were constantly advertising the fact that they are willing to lend money to people who can't afford it, so that they can buy things they don't need and have enough left over to go on a holiday they don't deserve. People who have CCJ's and poor credit ratings, people who were turned down by responsible lenders..

The concept of borrowing money to get out of debt is still beyond me :-0

Maybe I am missing something...

 

[Splitlink]

No, I agree, 4% of shares in short positions would not have brought HBOS down, but I find it difficult to believe, nevertheless, that only that amount of shares was being sold. I would have thought that all the world and his wife was getting out!.

In any case, this is just a point. I believe that shorting should be curtailed for a while until this gets stabilised.

Split

 

[barjon]

In most cases there is a maximum number of shares that can be shorted. I seem to remember that it was around 20% on Nasdaq stocks. I read elsewhere that there was only around a 4% holding of Short interest in HBOS which is hardly enough to bring it to its knees. It has been said many times elsewhere and a view that I hold that prices fall because of a lack of buying support. If people wont buy then prices keep falling. Even the public who are usually the ones who keep believing when everyone else had jumped ship lost confidence in HBOS so there was no one anywhere wanting to buy their shares. It was this that made the price collapse and not Short selling (in my view).


Paul

Paul

Yes, but when no-one wants to buy it doesn't take much selling pressure to turn a snow slide into an avalanche. And don't forget the naked shorting that was going on which would not feature in the 4% figure I think.

jon

 

[new_trader]

No, I agree, 4% of shares in short positions would not have brought HBOS down, but I find it difficult to believe, nevertheless, that only that amount of shares was being sold. I would have thought that all the world and his wife was getting out!.

In any case, this is just a point. I believe that shorting should be curtailed for a while until this gets stabilised.

Split

Shorting and selling are two different things though aren't they.

 

[gooseman]

exchanges have position limits to ensure there is not an excessive exposure to one particular trader/house. this applies to derivatives too.

 

[Splitlink]

The problem as I see it is that the government feels that mum and dad investors need protection from the 'evil' greedy capitalist pigs. Mum & dad investors are ethical, so they are entitled to make money because after all, they are struggling to get by in life aren't they? Mum & dad investors don't want to get rich like those 'evil' greedy capitalist pigs, they just want enough money to pay for their childrens education, and perhaps a new car, and a 50" HD plasma TV with a Dolby surround sound system, but they don't want to be rich like those 'evil' greedy capitalist pigs who keep shorting the companies they had invested in.

Anyone with any brains could see what was going to happen at least 5 years ago. When companies like Ocean finance were constantly advertising the fact that they are willing to lend money to people who can't afford it, so that they can buy things they don't need and have enough left over to go on a holiday they don't deserve. People who have CCJ's and poor credit ratings, people who were turned down by responsible lenders..

The concept of borrowing money to get out of debt is still beyond me :-0

Maybe I am missing something...

There are an awful lot of people out there who believe what a salesman tells them and, remember, most of them do not look on bank managers as salesmen. We have plenty nearer home, on this site. Just go to the boiler room forum. I believe that ordinary, "dumb", mums and dads should be protected in the same way as people are by speed limits on roads and food inspectors in food shops.

 

[Splitlink]

Shorting and selling are two different things though aren't they.

Yes, I admit.

I probably have not got everything right, but I believe that there is an awful lot of legislation needed . It's one, big, jungle.

 

[new_trader]

"dumb", mums and dads should be protected in the same way as people are by speed limits on roads and food inspectors in food shops.

This isn't the same. It would be like the Government banning the sale of cars because too many people are being killed by drunk and speeding drivers.

 

[springheeledjack]

I'm amazed that the prohibition of shorting has a basis in law.

Often the government brings in 'rules' which actually have no basis in law but are in fact, merely the government's interpretation of the law and when challenged either in the UK courts or the ECJ are overturned.

To me it would be an obvious case of 'restraint of trade' and market distortion.

 

[counter_violent]

There will be no escaping all this smoke and mirrors when unemployment really starts to kick in.....all this manipulative poncing about will ultimately be seen for what it is !!

 

[Bladerunner]

Not sure about this Split

I don't think that you can compare selling houses from one person to the next, a process that takes its time, which is a built-in safety measure on its own, with the globalised selling of shares on the internet, whuich is done at the press of a button.

I wonder if brokers and banks which, as we all know, are upright pillars of society and would not dream of doing anything underhanded, sell more futures than actually exist? Short selling of shares, as defined by the BBC for the layman, consists of the lending of shares, for a fee, by the owners. The borrower then sells them high to buy low later. As I see that definition, the shares cannot be sold more than once at the same time.

I, as the owner of a portfolio of shares, do not possess certificates, as they are held nominally by a holding (I forget the exact word) company to which, my broker, by law, has to pass them for safekeeping.

What goes on with this huge number of shares owned by a large number of investors? I, certainly, have no knowledge of what happens. But what happens if our HBOS shares are dumped on the market without our knowledge? I can tell you. When we, the owners, decide to sell them they will be a fraction of what we paid for them.

All this, and a lot of other matters in the running of our business affairs, requires legislation. The idea that our economic wellfare can be left in the hands of bankers and free market forces is all BS.

You and me, with our relatively small blocks of shares, don't know a fraction of what goes on, I can assure you.

Split

Hi Split

"What goes on with this huge number of shares owned by a large number of investors? I, certainly, have no knowledge of what happens. But what happens if our HBOS shares are dumped on the market without our knowledge? I can tell you. When we, the owners, decide to sell them they will be a fraction of what we paid for them"

If its manipulated to less than or more than fair value...........won"t somebody buy it or Sell it :?:



"I, as the owner of a portfolio of shares, do not possess certificates, as they are held nominally by a holding (I forget the exact word) company to which, my broker, by law, has to pass them for safekeeping."

Are you not entitled to rent if somebody wants to borrow them to short :?:

Is it not up to the individual to protect himself or herself when investing or trading :?:

Goverment banned the ownership of small firearms in the GB to cut down on the use of firearms related crimes. Did not work because the kind of chaps who go round shooting people don"t apply for firearms certificates or bother raiding private houses etc to obtain them. Only losers were the ordinary citizens who used them for sporting use in a responsible way.

Then there was the endowment mortgages sold to unsuspecting home owners = GREED

Quite a few of my mates did well out of the compensation, everyone of them new what the details were and understood that they were only paying off the interest part of their mortgage and the other was an investment that they HOPED would amount to enough to pay off the outstanding mortgage and SOME

I did"nt no my house could go down in value, can I have my money back please mr Goverment.

Rant of the day over look at that, the Ftse Fut have moved about in a 10 pt range while I have made this post, volume = none

I ask you Split......whats the use in that


Off out on my bike to save some fuel / C02 and save the planet


Andy

 

[Gumping]

Hey check this out:

From my inbox today....

XYZ Spreadbetting Company (Note - name changed to avoid advertising) would like to inform you that the Financial Services Authority in the UK, the Financial Regulator in Ireland, the SEC in the US and the Australian Securities and Investments Commission have in effect banned the creation of new short positions in certain stocks.
As a result, clients are not allowed to open any new short positions or increase any existing short positions in these instruments.
UK Instruments
US Instruments
Irish Instruments
Australian Instruments

If you currently hold an open short position, you are not forced to close this and if you need to sell in order to close a long position your order will be accepted.
It is your responsibility to remain appraised of these developments as the obligation regarding the creation of new short positions are obligations that the relavant regulators are imposing on you.

 

[Trader333]

I probably have not got everything right, but I believe that there is an awful lot of legislation needed

In what way ?


Paul

 

[dick_dastardly]

Anyone with any brains could see what was going to happen at least 5 years ago. When companies like Ocean finance were constantly advertising the fact that they are willing to lend money to people who can't afford it, so that they can buy things they don't need and have enough left over to go on a holiday they don't deserve. People who have CCJ's and poor credit ratings, people who were turned down by responsible lenders..

You know, come to think of it, I can't remember the last time I saw that TV advert.



Split ( Hi, yeah, it's me again :cheesy: )

I was going to post this in the Your favourite quote thread but I'll post it here instead.



When asked " can you tell me, what rights does someone have when they buy shares ? "

I replied " yes, they have the right to sell them "




I'm not sure if that's an accurate quote, I think it comes from At the Crest of a Tidal Wave by Robert Prechter.

dd

 

[Splitlink]

Hi Split

"What goes on with this huge number of shares owned by a large number of investors? I, certainly, have no knowledge of what happens. But what happens if our HBOS shares are dumped on the market without our knowledge? I can tell you. When we, the owners, decide to sell them they will be a fraction of what we paid for them"

If its manipulated to less than or more than fair value...........won"t somebody buy it or Sell it :?:



"I, as the owner of a portfolio of shares, do not possess certificates, as they are held nominally by a holding (I forget the exact word) company to which, my broker, by law, has to pass them for safekeeping."

Are you not entitled to rent if somebody wants to borrow them to short :?:

Is it not up to the individual to protect himself or herself when investing or trading :?:

Goverment banned the ownership of small firearms in the GB to cut down on the use of firearms related crimes. Did not work because the kind of chaps who go round shooting people don"t apply for firearms certificates or bother raiding private houses etc to obtain them. Only losers were the ordinary citizens who used them for sporting use in a responsible way.

Then there was the endowment mortgages sold to unsuspecting home owners = GREED

Quite a few of my mates did well out of the compensation, everyone of them new what the details were and understood that they were only paying off the interest part of their mortgage and the other was an investment that they HOPED would amount to enough to pay off the outstanding mortgage and SOME

I did"nt no my house could go down in value, can I have my money back please mr Goverment.

Rant of the day over look at that, the Ftse Fut have moved about in a 10 pt range while I have made this post, volume = none

I ask you Split......whats the use in that


Off out on my bike to save some fuel / C02 and save the planet


Andy

It's a bucket of worms and bigger than both of us!

Everyone is right, but the pieces of paper that we get in return for handing over our cash are getting to be not worth the match used to burn them with-

Split

 

[new_trader]

You know, come to think of it, I can't remember the last time I saw that TV advert.

They are having trouble borrowing the money they need to put it on TV.

 

[stevespray]

I don’t often read the newspapers but on Sunday I bought three tabloids. I bought them so I could specifically read the articles pertaining to the recent stock market ups and downs. Never have I seen so much rubbish written about a subject. I have concluded that the ‘short seller’ is clearly being made scapegoat for the recent market down turn. One paper even goes to the extent of constantly referring to the short sellers as ‘spivs’ – people who go about their business with absolutely no regard for anyone else. It did make me laugh. Of course the people who write this nonsense have pretty much zero experience of actually trading. Instead they have their own, sometimes hidden, agenda’s. It appears that our dear government have scored well in the spin stakes on this one as the papers have bought into their ‘devil-hedgie-who-short-sells’ flight of fancy. It appears, at least for the moment, that the various governments have shifted the blame away from themselves and onto this mysterious boogieman that speculates and aims to make money on shares which go down in value. Obviously they are keen to make the connection between traders making money whilst the rest of the ‘investment population’ suffers.

The truth is that there is no meaningful evidence that short selling depresses markets. The market is about value. So many of the papers which I read at the weekend had clearly lost sight of this fact. I’m not sure if this is down to ignorance or perhaps their agenda. The general commentaries appeared to suggest that prices would not have fallen to these levels if short selling had not occurred – the suggestion is rubbish. Prices fell because no one was prepared to pay higher prices for these particular stocks. More importantly the market has not been proved wrong on a single occasion yet. Originally the US government blamed short selling for the sharp price falls in Fannie, Freddie and Lehman Brothers but on each occasion the fall was justified as the businesses all went belly up. The same thing happened with HBOS over here – again the short sellers were blamed but ultimately, given the governments lightening fast intervention, it is clear that all was not well with HBOS – again the market was proved correct.

The truth is that the prices on better run companies remain higher because the people who matter recognise value. If prices fall too low insiders buy and also tell their family and friends to buy to. Fundamental analysts also spot value.

What the governments and the papers fail to really grasp here is that markets will fall (sometimes very sharply) when economic times worsen. This is because people are prepared to pay less and less for stocks.

Steve.

 

[Splitlink]

Steve,
I think that what the government and serious public thinking wants to prevent are runs on banks and funds. That's why restrictions have been placed on the financials.

Whatever ,and whoever, has caused this is known to us. Credit abuse. We have been living beyond our means for years. Brown and company should have seen this coming five years ago but he chose to sit on his ass, picking his nose, behind Blair all this time. Anything to stay popular.

Now he is going to do some good, oldfashioned Labour stuff-- legislate-- but, let's face it, if we don't like it, we've asked for it. Unfortunately, shortsellers are going to get some insults thrown at them but I feel that , if these restrictions help, just a liitle bit, then they are justified. I, for one, am not going to go broke by not doing it.