Lots of excellent commentary in the past 10 posts with many aspects of the issues covered.
One thing I'd like all to keep in mind is that absolutist arguments are not the best way to eliminate manipulation in the market. Those who are self-styled "cybersleupps" do this by claiming that all stocks (particularly that of smaller companies) are overpriced scams. Many of us over here, on the other hand, often think that one aspect of the market is to blame.
In reality, there is plenty of scamming to go around and when an opportunity to scam the market arises, a scammer will take advantage of that, irrespective of whether he is long or short, hedged or naked, etc.
To that end, an overall reworking of the regulatory environment and trading practices is necessary to bring our markets into this new century and to make them fair for the public.
For consideration as part of a comprehensive package of change
1. MM, specialist and intermediary function brought into the best practices and technology of auction markets. Emphasis on service and reasonable payment, not for lining of pockets of broker-dealers and close associates.
2. Reasonable efficient and effective registration and regulation of hedge funds and other pools of money, associated and coordinated traders, with rules that are easy to understand and hard to circumvent offshore or through paper shuffle.
3. Elimination of naked shorting and very strict limits on option and stock MM failures to deliver on all sides of trades, long and short.
4. Strict elimination of vulture financing, toxic convertibles, PIPE's, insider dumping, promotional dumping without full publication in advance (perhaps 7 days) on Edgar. Although this may seem extreme and harmful to the toxic financiers and their targets, unless one admits that the real victim is the public, why should any company be able to blindly dump without advance notice huge percentages of the float?
5. Clear and effective enforcement of manipulative schemes irrespective of whether the same is on the short or long side of the market.
6. Disclosure requirements that are similar to those who promote on the long side. That is, if someone is publishing and is affiliated with a hedge fund or other potentially large holder or shorter (with definitions linked to float percentages for simplicity), then the disclosures should be very similar to those who are paid to promote on behalf of companies and insiders. Again strict enforcement on both sides of this equation should cover message boards, blogs, e-mailings and other communications to the public.
7. Clear and defined limits to manipulative trading, e.g., painting the tape with spoofing, uptick provisions that are reasonable with respect to shorting, etc., and tied to clear definitions. |
