Short Selling is healthy for the markets

[safvan]

I do not think banning short selling would help the European bank stocks. Short sellers help prevent massive crashes with their covering rallies.

They also help to stop bubbles from happening quickly. Without them there would be massive V shaped ups and downs in prices.

Do you think they are going to enable short selling soon or just keep the ban even though they said it was temporary. :whistling

Thoughts please...

 

[Martinghoul]

They will lift the ban sooner rather than later.

 

[BeginnerJoe]

Perma-ban it until I get my money back.

 

[Ross Spur]

Lifted as soon as they remember it's never worked before.

 

[greigmcl]

I think the ban on short selling is a bad move in a number of ways. They seem to only be looking the first trade (the sell) in what is actually a sequence of trades. The last trade (the buy-back) is the one they want. The buy even happens at a good time as it will tend to be at (or just above) a support line and that encourages others to come in as they see the support happening.

The other message it sends is that these shares are so badly affected that the price must go down. Not a great message to send if you're trying to support that company and get people to keep buying its shares.

 

[Splitlink]

There was a ban on short selling of British banks a few years ago, wasn't there?

If the powers that be decide to ban it, let them do it. They are the ones that are going to carry the can---not us. All we do is put a short bet on and they are preventing us from doing it. There is nothing moral, or right, in what we do so what are we protesting about?

 

[counter_violent]

There was a ban on short selling of British banks a few years ago, wasn't there?

If the powers that be decide to ban it, let them do it. They are the ones that are going to carry the can---not us. All we do is put a short bet on and they are preventing us from doing it. There is nothing moral, or right, in what we do so what are we protesting about?

Given that short selling is not normally seen as un-lawful then why do the govt's feel the need to ban it. Unless of course, the short selling traders are correct in their assumptions. It's also never mentioned anywhere that short selling traders are the ones running the risk of "getting it wrong" and losing money on the buy back. No logic here is there !

Morality has got nothing to do with it.

 

[TimYoung]

Relevant

http://www.zerohedge.com/news/here-what-happened-when-sec-banned-shorting-financial-companies-2008

 

[Splitlink]

Morality has got nothing to do with it.

That's why they are banning it,

 

[Atilla]

What if one has large % of company shares and you short the market with high leverage first and then you sell your holding?

If one gets a few large players and one considers colluding then one can effectively manipulate markets.

Let's throw in the media puppets and rumours in there too and the stage is set for a right old assault. Rumours around Soc Gen and more recently around France which S&P have denounced are key reasons. People don't know what is true and what is not anymore. Panick is gripping the markets.


One suggestion which may help markets is instead of these derivitives beings so highly leveraged why not reduce it to 1:10 or 1:20? Or even 1:1 as in regular share trading.
My concern is that risk is very difficult to manage and exposure and clarity is virtually impossible to calculate.


Using futures markets for commodities and FX helps with uncertainty but highly leveraged short selling of bank shares simply doesn't help with the current market turmoil and rapid falls. Imho it is reasonable to try and alleviate volatility created by these short selling which aggravates the issues.

Three weeks is not a long time. If the fundamentals are still bad in three weeks perhaps then relevant parties can place double the bets placed on ice as they culminate.

 

[Splitlink]

The stocks in question are the financials. There is no big deal in banning the trading of them for a few weeks. Its similar to the near extinction of the bison by Americans in railway carriages in the 19th century and the overfishing that we have today.There's, always, an indignant squawk from the righteously indignant who want to keep on doing it and there never is anything immoral about it.

 

[counter_violent]

The stocks in question are the financials.

Yes, the traders will be right then.

 

[greigmcl]

There was a ban on short selling of British banks a few years ago, wasn't there?

If the powers that be decide to ban it, let them do it. They are the ones that are going to carry the can---not us. All we do is put a short bet on and they are preventing us from doing it. There is nothing moral, or right, in what we do so what are we protesting about?

There was a short selling ban and as I recall there was a point where there were was no bid price for NRK. Literally no buyers in the market. It wouldn't have saved them, but with short sellers in the market there would have been take-profit and stop-loss orders in place if nothing else.

I agree there's nothing moral or right in what we do, but there's nothing immoral or wrong either. I remember when the ban came in before, the media were painting traders (and anyone short-selling particularly) as evil. In my view intentionally taking liquidity out of the market is evil, short-selling is just a market function.

 

[Atilla]

Derivitives like second life is purely a fictitious market. Has little or no use other than give people useless jobs that create nothing and serve no purpose.

The US have been contemplating how to approach these markets for quite some time...

Think of a ship in big ocean. Small volume of water slushing about in the hull can destabilise otherwise a totally sea worthy boat.

Tail wagging the dog... We have real markets and now derivitives supposedly based on the real markets.

During the Bear Sterns crises there were many players who took huge short bets on it and made an absolute fortune. It was self perpetuating. So in order to hedge against your portfolio deteriating you'd take out a short. Then all that was left was to sell your shares.

Normally in the US with chapter 11 the onus is to save the company and jobs. In this case the greater emphasise and the money to be made was to sink it. Self perpetuating.


It is in the interest of Governments, markets and exchanges to control this kind of behaviour. System is clearly tipping in favour of all these sharks and investment bankers who really know no bounds and morality has no part in it. I'm not saying it should either.

Pure financials.


Just saw this... http://www.bloomberg.com/news/2011-...id-rout-after-bans-in-greece-south-korea.html

You know it makes sense

 

[Pazienza]

You really do come out with some nonsense.

 

[greigmcl]

Think of a ship in big ocean. Small volume of water slushing about in the hull can destabilise otherwise a totally sea worthy boat.

Tail wagging the dog... We have real markets and now derivitives supposedly based on the real markets.

During the Bear Sterns crises there were many players who took huge short bets on it and made an absolute fortune. It was self perpetuating. So in order to hedge against your portfolio deteriating you'd take out a short. Then all that was left was to sell your shares.

Normally in the US with chapter 11 the onus is to save the company and jobs. In this case the greater emphasise and the money to be made was to sink it. Self perpetuating.

If the boat's truly seaworthy then the market will correct even a massive amount of short selling. Maybe I have too much faith in that, but you can see it happening already. If you have a look on the Motley Fool boards, for example, you'll find lots of retail value investors filling their boots with 'cheap' shares (yes, even bank stocks) and I'm quite sure some of the big boys will be at least planning the same.

I'm not sure about shorting as a portfolio hedge. I'm not sure how many investors would have that capability, although the big institutions probably do.

I haven't followed the full story with Bear Stearns, but I would expect a firm in chapter 11 to have its shares suspended on the market. You can't sink what you can't trade. Also any one of these firms can voluntarily suspend trading in its shares at any time. It's very unusual, but it does happen and it's hard to see how a derivative market could function if there's no primary market to refer to.

 

[Splitlink]

There was a short selling ban and as I recall there was a point where there were was no bid price for NRK. Literally no buyers in the market. It wouldn't have saved them, but with short sellers in the market there would have been take-profit and stop-loss orders in place if nothing else.

I agree there's nothing moral or right in what we do, but there's nothing immoral or wrong either. I remember when the ban came in before, the media were painting traders (and anyone short-selling particularly) as evil. In my view intentionally taking liquidity out of the market is evil, short-selling is just a market function.

My opinion is that we are here for one thing. To make money if we can. Where we live and how we live is decided by the people with whom we live. If they go down the pan, we do, too. So, if the powers that be decide to ban short selling for a while, so be it. It is no skin off our noses for a while. Spain has serious financial problems, so does the UK, although less so but I do not think that the markets give a **** about that, so someone else has to. If their decisions are wrong at least they tried something and I am willing to go along with it.

 

[counter_violent]

Wev'e been "going along with it" keynesian economics for far too long. This is the big one that will not be re-inflated and that hopefully debunks that particular brand of cure all, bubble creating nonsense forever.

Instead of nonsense how about some common sense.

 

[Splitlink]

Wev'e been "going along with it" keynesian economics for far too long. This is the big one that will not be re-inflated and that hopefully debunks that particular brand of cure all, bubble creating nonsense forever.

Instead of nonsense how about some common sense.

Give us some ,then. There is no guarantee that this will not be re-inflated. I cannot see that happening in my lifetime, certainly, but someone said that the human being is the only species that trips over the same stone twice. When it happens, though, it won't be the same, it never is. The 1929 crash could never happen again because of Keynesian--so we were told- but it has.

 

[Atilla]

Here is a good solution. :idea:

Raise taxation, reclaim bonuses and bailout the banks not a good idea...

If existing shareholders do not step forward to maintain their assets then government can buy shares to raise necessary capital and then sell back to market once environment is stable again. Similar to Brown's excellent idea. Nationalisation... OMG :-0

This is free market risk capital right! Shareholders either stump up more monies or put up and lose current investment. After all they vote in every bleeding layer of management and give the nod to their stupid pay structures.




If Soc Gen is fed to the jackals and hynias only going to take rest of the markets down. We shouldn't be like the US. EC will survive this fiasco and come out stronger.

Soc Gen and the 6bn trader loss was a cover up imho. More to do with junk they bought from US banks. (yeah I know another crazy idea).

However, point objective is to repair the situation not capitulate to the benefit of a few hedge funds.


Free market my ass - is no different to the looters out there... They can see booty and they all coming out to play.