“A European market regulator is considering recommending a temporary ban on negative bets against stocks across the Continent in an effort to stop the tailspin in the markets,” Stephen Castle and Louise Story report for The New York Times.
“The European Securities and Markets Authority, a body that coordinates the European Union’s market policies, has been requesting information from member states about such bets against stocks, known as short-sales,” Castle and Story report. “In such deals, a trader sells borrowed shares in hopes that they will decline in value before he has to buy them back to close out his loan. The difference in price is his profit, or loss.”
Castle and Story report, “Critics say short-selling encourages speculation and pushes stock prices down, sometimes feeding on itself in a panicked market, while advocates say it keeps the market honest and maintains liquidity… Two people with knowledge of the discussions, who declined to be identified by name because the talks are confidential, said the authority might propose a ban on betting against all stocks or just financial stocks. The authority may also propose a ban on a certain type of short-selling, known as a naked short, in which the party making the negative bet does not borrow the share it is shorting first. The bans would probably be temporary, with the aim of calming the markets.”
Read more in the full article here.
Frankly, they should eliminate all of the “casino” aspects of the stock market – short selling, hedge funds, etc.
absolutely. the current “market” has been gamed to privatize gains and socialize losses. it can’t go on.
That’s not the market, that’s the government mandating banks make loans to people who can’t repay, and then bailing them out when they go under doing that.
Don’t see the government covering people’s stock loses.
But hey, who cares what the facts are, lets spread that hatred of anyone whose not a financial ignoramus, amirite?!
I wonder which european government you’re speaking of…
Mike could only be talking about the US government…
In europe, the government spent all the money, until the countries were bankrupt, one by one, and then socialized the losses onto other european governments. There were no private gains, it was completely public looting.
Amazing that people can witness this happening and think of government as anything other than a bunch of looters.
You are dreaming, aren’t you?
Anything any government does in regards to financial markets, the overpaid and overly smart MBAs and lawyers will quickly device a work around. It has happened with every change made to the security laws in the past, and will always happen again in hte future.
It is the government’s mission to watch over such excesses. The stock market mainly serves to allow investments in the economy. If the stock market becomes a tool to feed private interests (collateral damage: small investors, pension funds are set up to absorb most of the losses) to the detriment of the companies who, in the end, do the actual work to keep economy alive, then something should be done against the leeches.
However the government should think careful about how they devise the regulations. They should not play panic football, because workarounds will see the light quickly, as pointed out earlier in this thread. They should make it such that the goals of the stock market are achieved, and that eventual gains from it are fairly spread, and wind up in the pockets of those who deserve it.
Actually, no, it is not government “mission” to watch over “excesses”! Of course, I find it hilarious that people are calling a basic market trade “excess”. But then the people are as ignorant and incompetent at these issues as the people they would have regulate the market.
Of course, we all know whose pockets you think deserve the gains and whose pockets you think don’t deserve the gains, right?
Why still call it a market at that point?
The REASON we have problems like the stock market dropping dramatically, is because government is screwing up the economy with out of control spending.
It isn’t “speculation” that is the problem, it is the government destroying economic value that is the problem.
And, as ever, government is a disease masquerading as its own cure.
Bullshit.
The problem today, just as it was two years ago, is inadequately regulated market greed, combined with unscrupulous operators that are willing to do whatever they can, even sabotage the economy, to ensure that Obama loses in 2012.
Until the Bush tax cuts, there was no issue with debt or spending – Bush spent at a rate that made Clinton look like a piker. Don’t forget that the initial bailouts were signed BY BUSH!
What the hell happened to the Republican mantra about “jobs, jobs, jobs”, that we heard before the election? Since then, all we’ve heard is crap about social issues and spending – especially social spending! Not so much about military spending, huh? THAT kind of spending is ok… especially if it is off the budget!
The stock market is dropping because the Republicans are not serious about solving the economic ills of the economy today, but want to use them to kill a second Obama term – and EVERYBODY KNOWS IT. We know it because Eric Cantor and other Tea Party idiots are telling anybody that will listen exactly how they are going to do it!!
Spending my ass. The whole problem is that Republicans have no balls to go toe to toe with the Tea Party, because they are funded by the same corporate sponsors the Republicans are!
Put people back to work so they can pay income taxes again and you can sit back and watch government revenue go back up.
But that would be a Democratic victory that would help Obama get re-elected, so we can’t have that, now can we?
Morons, the lot of them.
The problem is the vast swaths of ignorance you display, due, no doubt to your partisanship.
I love how, whenever government regulation screws up a large segment of the economy, people such as yourself can be counted on to claim that it was a lack of regulation.
It wasn’t regulation that forced banks to make loans without regard to whether they could pay, it was the clinton era changes to the “community reinvestment act” regulations that were made based on the claim that banks were engaging in racism… .later, after the regulations changed, a study showed that the banks were doing it without regard to race, but only ability to repay. But that was too late.
Every dollar government spends destroys jobs. It is government spending that hurts the economy. Where do you think the money comes form? It comes form taxes which reduce funds for expansion, it is expansion that creates jobs. If you just inflate the dollar, you cause other problems, and you also reduce the value of every dollar, again, reducing profits.
The republicans are no angels when it comes to spending. We should cut the military budget by %90 and reduce our efforts to just what it takes to defend us against an invasion.
But the republicans are out of power right now… and despite Obama making all the wrong economic choices, you’re going to blame the republicans– who are out of power– because you don’t understand things well enough to be able to even think about it critically.
Sure, Bush was bad, you’re right. Never should have run the deficit up as much as he did. And the exact same goes for Clinton, Bush, Reagan, Carter, etc. But Obama has topped them all.
Obama deserves the blame for his actions, not because he’s a democrat.
your partisanship blinds you to science, to reality, to critical thinking!
The only thing that makes the stock market a “casino” is your ignorance.
Anyone who approaches it with seriousness does not use it for gambling.
Damn straight. Long overdue here too.
Bring back the uptick rule too.
Why don’t we just ban the selling of stocks completely? That way there can only be buy orders?
(If it isn’t obvious I’m being sarcastic, while illuminating how profoundly ignorant your position is… but I guess you have to understand how markets work to recognize my point, in which case you wouldn’t have said what you said.)
Yes. This is a good idea. No one should be betting against the success of our economy. Gives too many people reasons to try and subvert it for their own gain.
Yes, it couldn’t be the gross mismanagement and massive damage the government does to the economy— it has to be “subversion” from people “betting against our success”.
Idiot.
lets just make this site Mac/political/financial/news.com
This is the single best thing that could happen to the stock market. Betting against peoples success has killed momentum over and over and over. Not to mention it would stop collar trades and all that. Get rid of shorts.
Right, because we can’t have people protecting their wealth, can we?
Why don’t we just ban selling of stock completely? In fact, what if we made it a crime to ever sell a stock for a lower price than you bought it? This way, stocks would only ever go up!
Imagine how much better things would be then!
You sir, are an argument against democracy!
It’s the best thing that could happen – that’s why it never will.
I’m not betting against Microsoft when I short it. I’m betting FOR Apple.
Sorry dude, you’re really betting against Microsoft. If you meant to bet for Apple, you only had to buy their stock.
Banning short selling makes a great deal of sense when you look at the wider picture, but too many people have a vested interest in this sort of speculation, so there is no way that the regulators will ban short selling of general stocks.
The regulators are too closely aligned with the speculators.
You say “speculator” like its a bad thing.
Also, you don’t understand how markets work, do you?
We do understand how the “markets” work. That is why we would like to see change. The speculators just skim money from the system. Go to freaking Las Vegas if you want to gamble, but be careful: in Vegas, fixing the game is a knee-busting offence.
So, you’re saying speculators “just skim money from the system” making some sort of risk free return? Exactly how do they do this?
I think you don’t know the first thing about markets, you’re just full of partisan nonsense….
Ownership of our country should be on a cash basis. All the shorting and margin buying merely creates volitility. Insiders make money while the poor bloke who invests his retirement assets gets jerked around, scared out and stolen from.
That’s right. Get rid of credit completely! You should have to buy your house with cash, all up front, and the builder should have to pay for it all up front before he builds it!
The reason “poor blokes” lose out is because they are financially ignorant and listen to other financially ignorant people.
As someone whose profited very handsomely as the “little guy” in that pool of “sharks”, I can assure you, it isn’t market mechanisms that hurt you, but ignorance.
I used to try to make suggestions to my co-workers about how they might manage their money better… but they will believe some idiot salesman who wants to sell them, because “why not let the professional handle it?” I’m sure they buy their cars at full price.
Ignorance abounds…
I would simply ban all margin transactions. No investments on credit at all. Done. Bubbles would be largely non existent and volatility would be greatly reduced. Most of this crap is due to margin calls and leverage. So get rid of it. Put up your own money and that’s it. Also eliminate automated computer trades.
Agreed! And I’m pretty sure this would be endorsed by the entire political spectrum, except for those who are employed by — or bought by — Wall Street banks.
So, all of them.
You backed into a good point. At least I can count on wall street banks to oppose profoundly ignorant ideas like this. They’re good for something after all! (Besides taking people public, providing liquidity, underwriting efficient markets, allowing the trading of otherwise difficult instruments like corporate bonds, etc. etc. the scumbags!)
And……. Eliminate computer auto trades.
Eliminating derivative trades would eliminate volatility, and I am convinced that there would still be plenty of liquidity. Owning stocks should be a way to generate capitol for a company, give founders a way to cash out, and give long term investors a way to invest for the long haul – all valuable tools for society. Derivative trading and computer micro trading does not add any value to any aspect of the socio-economics that has built the US economy (Western Economy) These two practices are now doing great harm IMHO.
So, because you don’t understand it, you want to eliminate it?
Options allow people with large stakes to protect their stakes. They also allow people with small stakes to participate in the upside of companies who don’t split their stock, like Apple.
Buying 100 shares of Apple would be $37,370. Do you have $37,370 to put into a single position? Many don’t.
I’ve sat there, looking at the order book, and seen the bid and ask spread be $0.60 on something that really should be closer. I decide to split the difference, and a computer- its obviously a computer- comes in and takes the other side of it, then the order book goes back to where it was.
Literally the computer was adding liquidity by making a position viable for me that otherwise wouldn’t be. Literally, being able to sell puts on Apple stock lets the other party insure their long term Apple stock, while letting me profit from Apple’s upside. Literally the computer traders increase liquidity when otherwise there would just be the large orders and a gap in the bid/ask spreads.
Yet, I’m pretty sure you’ve never really traded at all, and you think that you have the right to use violence to ban people doing something that actually ads a lot of value, simply because you’re ignorant and fearful.
Hmmm, is this David Rocker? Your postings sure read like him.
You are wrong on so many levels but I’ll stick to my one point.
Naked short selling (counterfeit stock) is the single worst action right now. It should be banned and anyone caught doing it should be hanged.
For those that don’t understand:
You want to short a stock (legal) but you don’t actually own the stock (illegal). You “borrow” shares from somewhere else and sell. You don’t deliver the actual shares. How is that good?
Now multiply this counterfeit stock action times a few hundred thousand to a million and a small company can be taken to it’s knees or even put out of business. Then these same guys buy up the entire company for cheap and sell off all the pieces for more money.
What a swell group of people.
They would screw anything that moved, even their own mothers.
Please “engineer”, get back to me on this.
Naked Short selling is ALREADY banned in the USA, and Europe. You aren’t even familiar with the terms you’re talking about, yet you’re saying I am wrong on many levels?
Borrowing shares from someone else is not naked short selling. Naked shorts are entering the trade when you don’t have the actual stock to sell. You do have to deliver the actual shares, when you close out the position, but you buy them on the open market when you do so.
This is illegal, not allowed, already banned, etc. You don’t know what you’re talking about yet you are smugly superior in your ignorance?
Short selling is when you borrow shares held on account with your brokerage and sell them into the market. Short selling is legal, and it is not a problem and it is what they are talking about. The shares actually exist, they are not counterfeit. The person you borrowed them from consents to the transaction, as part of their brokerage agreement, and if the trade goes the wrong way, the brokerage is on the line to provide the shares to them (at whatever cost it takes.)
What you’ve given us is an ignorant fantasy based on the typical paranoia of a clueless leftist who is regurgitating nonsense he’s read from other clueless leftists. If you knew anything about economics or understood finance, you wouldn’t be a leftist in the first place.
I’m happy to get back to you and point out how ignorant (or dishonest– your choice) you are.
Its a shame you’re not embarrassed by it, though.
Oh, as to “Buying 100 shares of Apple would be $37,370. Do you have $37,370 to put into a single position? Many don’t.”
I don’t buy based a nice round number of shares. I buy based on what amount of money I have to invest.
So if I have $5,000 to invest in Apple, I buy $5,000 worth of shares.
So what’s your point?
My point is beyond you and doing anything other than mocking you is just a waste of time.
Really, why is it those who know the least about how these things work are the most strident in demanding that they be regulated according to nonsense…. which of course, inevitably causes problems, and then the know nothings turn around and point to the problems they caused as proof that there needs to be more regulation!
It’s like a conspiracy of the ignorant!