Well, we all knew they blew it, the only question was how long it was going to take them to admit it. And given that the rule was only scheduled to last ten days at first, we might have endured the entire thing without so much as a “woops.”
Of course, I mean the SEC’s reversal on several provisions of their short selling restrictions. The Wall Street Journal reports:
WASHINGTON — The Securities and Exchange Commission said shortly after midnight Monday that it would revise rules to curb short selling that it had issued just three days before.
The SEC’s latest change of direction on short selling caught some market participants off guard and prompted criticism that the agency has miscalculated the impact of its rulemaking.
The SEC, in a release issued at 12:26 a.m. EST Monday, reversed a position it had taken Friday when it said that market makers couldn’t short financial stocks after Friday. The new rules as of Monday: Those engaged in bona fide market making and hedging activity, including in derivative contracts, could continue to short.
I’m utterly fascinated to see what “bona fide market making and hedging activity” is.
This, of course, is the problem with hasty rules squeezed off to quiet the rambunctious third graders quickly. You impose restrictions based on no data at all that they might help the market, but that have a psychological “we’re in control” feel to them. Action is taken. Confidence is restored. That is, unless the rule is so moronic that it causes more problems than it solves. So then what do you do? Backtrack halfway and open some more loopholes? Now you look like the bumbling idiots we always knew you were. The problem is, now everyone knows, and everyone feels more than a little bit molested.
SEC Quickly Revises Short-Selling Rules [Wall Street Journal]
BUMBLING MAYO
The Securities and Exchange Commission’s ban on short sales extends to the stock of publicly listed hedge fund managers Fortress Investment Group, GLG Partners and Och-Ziff Capital Management. Yet they all run funds that sell stocks short to make money for investors.
We agree, Cox is a moron, we’ve said it many times before. But this reversal is not “news” anymore.
Can’t wait for Cuomo to clean this up.
I feel like i should sit on the floor of the shower, run cold water, and cry.
McCain is right. SEC head should be canned.
naked shorting was the problme dumbass
no wonder so many marginal people make money on the street – it is like the special olympics out there
JPM voluntarily withdraws from the short ban.
“I’m utterly fascinated to see what “bona fide market making and hedging activity” is.”
uh, look on a trading screen and when you see bids and offers for calls and puts in every strike, month, and underlying symbol you are witnessing bona fide market making.
There’s been an inordinate amount of punditry in recent days linking the rise and fall of US equity prices to the prospects of Wall Street bailout legislation in Congress.
I was just listening to such talk on morning television, along with admonitions that “bailout” isn’t the right word. It’s a “rescue.” Well … excuse me.
Either way, I’d like to interject some skepticism about that link. The market didn’t rise Friday, I submit, because it had decided that the “Paulson plan” will pass and prove wonderful. The market rose Friday because, as you’ve rightly observed, the SEC rather petulantly banned short selling on a wide range of stocks.
If you arbitrarily exclude a certain class of sellers, then you’ve jiggered the prices in favor of a rise. How complicated a concept is that?
Likewise, I submit, the market didn’t fall Monday because the market has suddenly become worried Congress won’t pass the bill after all.
More likely, it fell because evidence accumulated over the weekend that the SEC isn’t all that serious about the short sale ban, and that it won’t last. That, by the way, is very good news and we should welcome Monday’s decline as part of the natural equilibrium-seeking process for unjiggered prices.
@Anal_Yst…
Are you on here today? I have a question for you.
The Guy from Delaware
Cox is simply incompetent. He should be fired – today!
Bone fide market maker is nothing new. They have always been granted certain lattitude but also have certain requirements which don’t apply to others.
wtf is this, the Onion online?
the moratorium on short selling saved your ass. there wouldn’t have been a market write about, nor idiot sycophants to come here and read this barbaric advertising, without it.
was it perfect? NO. did it work? YES. That’s life, bozo.
no good deed ever goes uncriticized by those whose biggest accomplishments are on par with learning to tie their own shoes.
OK, so what’s “bona fide hedging activity”?
this is not the place for arcane technicalities, so I’ll give you Cliff’s notes.
A b/d who agrees to publish public quotes on the specific security for which he is a market maker. They must have sufficient inventory and turnover, there’s an increased capital requirement, and they must stand ready to buy or sell.
#14, As #8 pointed out, market makers wouldn’t have bid/offers posted in every month at every strike price if their systems couldn’t immediately lay off risk in the underlying stock. In the simplest of examples, if you buy two “at the money” puts the market makers system will immediately sell 100 shares of stock. Presuming the market maker isn’t already long that stock it would be a short sale. That’s bona-fide hedging.
13, then let’s just ban all selling. Would it be perfect? No. Would it “work” (subject to ones own definition of work, in this case assumed to mean “stop stock prices from going down”)? Yes. Fire it up.
@Everyone.
You’re retarded…if people sell stock to buy GOld etc. the price goes down…regardless
#2
Peter Briger of Fortress – ex Goldman
Driss Ben-Brahim, new arrival at GLG – ex Goldman
Daniel Och – ex Goldman
This Paulson plan just reeks………..