SEC Protects Primary Dealers From Naked Short Selling - Update
It's funny how many came to the defense of short sellers when the SEC reported it was attempting to limit naked short selling in primary dealers - enforcing an existing law. My initial and subsequent conclusions appear to be accurate based on a Reuters' story late last night. And, against all of the ridicule by many, it appears the SEC had a legitimate concern as to whether there were illegal activities involved in the trading of these stocks.
Naked short selling in order to drive prices down is against the law. The Reuters story reports short selling on Freddie and Fannie fell 90% and on the other primary dealers fell 70% after the SEC made their announcement. Given this data what other conclusion can one draw other than professional traders and Wall Street firms were illegally shorting these institutions? Of course, I welcome other perspectives to enlighten me but if one wasn't doing something wrong, why did such a massive drop in shorting volume occur?
This doesn't take away from the fact that banks are in serious trouble but it does add to a position that the SEC has lost control of its mandate. Markets don't need regulated? I think we've put that position to rest long ago.
Naked short selling in order to drive prices down is against the law. The Reuters story reports short selling on Freddie and Fannie fell 90% and on the other primary dealers fell 70% after the SEC made their announcement. Given this data what other conclusion can one draw other than professional traders and Wall Street firms were illegally shorting these institutions? Of course, I welcome other perspectives to enlighten me but if one wasn't doing something wrong, why did such a massive drop in shorting volume occur?
This doesn't take away from the fact that banks are in serious trouble but it does add to a position that the SEC has lost control of its mandate. Markets don't need regulated? I think we've put that position to rest long ago.
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