You can read the article here
Demanded by investors and corporations, the SEC is trying to put resistrictions on Short Selling saying that this trading practice “gutted” vulnerable companies and “worsened” the market’s downward spiral.
So let me get this right…
Corporations, specifically in the financial sector, are blaming us short sellers for their downward spiral. The article even goes as far to say that the Lehman Brothers collapse was caused by short sellers. Please tell me how that makes sense. Maybe the Lehman Brother’s collapse has do to their ridiculous leveraging and sub-prime interest rates? Huge leverage=huge risk- it’s as simple as that. All these financial companies took huge risks and lost plain and simple. So why blame the fall on us? Aren’t we just traders and investors doing our job, by capitalizing on potentially profitable situations? In these cases shorting stocks that we felt were bound to go down.
So what kind of changes is the SEC mulling over?
Option #1: The Uptick Rule- which requires short sellers to wait to sell shares until a stock trades at a price above its previous trading price.
Option #2: The Upbid Rule- which would allow short sellers to enter only at a price above the current bid for that stock.
As pointed out in the article I really think these rules won’t solve Wall Street’s flaws, as it will definitely take money out of the market, which is exactly what we need don’t need at this point.
So what does this mean for us short sellers?
Honestly it will have more of an affect on us poor penny stock short sellers if these “rules” are implemented than it will on any other short seller. As you know penny stocks tend to have some wide spreads between the bid and ask sometimes and this rule is solely based on spreads. Simply put the bigger the spread the bigger the effect these rules will have.
I’m tired of reading about bitter companies and investors blaming this fall on the short seller. Blame it on the ignorance of over-leveraged hedgies.
What do you think?