Ya know...I always try to keep an open mind and listen to learn. I learn new things every day thanks to people like you. This is my 4th response to you, but the only one that I will hit the send button on.
Fact is...yes, I lost some money today. Take a guess?? Yeah, it was CNCT. I was a premarket dip buyer. Bought my initial position at 7, then 6-1/2, then 5-1/4, until I was sitting on 20,000 shares all in the red. Perhaps I am a fool. And maybe I underestimate what a firm or a trader is willing to do to get out of a position. Yup, that's probably it. Just a bad day to try to sell a disappointing stock. And no, I certainly would not have proof that anyone was naked shorting it today, or any other day. I am just a peon in this market, and I wouldn't have access to such information. So, let's just say, I made a mistake today, did a bad trade, and I overreacted.
I can see why a market maker or trader would use naked shorting to try to maintain an orderly market. And I realize that it is risky for these traders to initiate this type of position. But I also feel it is being abused in some (perhaps rare)cases. And if it is abused by one, it can be abused by all. And since the door is open to the abuse, I feel it should be banned altogether. I just don't beleive a market maker should have this advantage over the individual investor. It creates an uneven playing feild, and like I said, it just leaves the door open for abuse. I am sure 99% of the market makers that use naked shorting as a tool for maintaining an orderly market, do it in an ethical and legal manner. It's that 1% that use it to "squash" a rally or "kill the dream". Who is telling these market makers to deplete their inventory anyway? I don't tell them when or where to sell. Sometimes, they just plain sell too soon. Who's fault is that? If I sell my inventory too soon, I have to think quickly and adjust my strategy. I either buy back, or I sit it out, or I wait till it's gone too far, and I short. But I don't have the luxury of just shorting at will to kill a rally, so that I can get my inventory back from traders I have scared away. You say we would have total chaos in these stocks if the market makers couldn't use naked shorting to maintain an orderly market? Well hey, guess what, we already have that. And the fact is, sometimes it is naked short positions that actually add to the chaos. I beleive that at the end of the day, all stock in a given company should be accounted for, whether it is a crappy company or not.
You know, when the SEC was working on the selective disclosure rule, there were a lot of analysts/firms (all of them I'm sure) that really opposed the ruling, because it basically took away their right to trade on what I consider insider information. But the rule was passed, and it was a small step toward leveling the playing feild. Will it be effective? You bet, unless someone breaks the law, which will happen.
I don't think any trader should be allowed to short a stock unless the stock is borrowed and accounted for. Hey, if they have something in the wings, like an upcoming secondary or private placement or something where they know the stock will be made available to them, that's different. But then, it should be disclosed publicly before the naked short position is initiated right?
Like I said, I am learning every day. Sometimes, I just plain spout off before I have my facts straight. But this naked shorting....I don't like it. I don't like the idea that I have to trade against other traders that have this advantage over me. And I don't like that it creates additional volatility in an already volatile market place. These guys are profiting from an advantage that I do not have. No good.
I don't beleive changing this rule would affect more than maybe 1% of the market makers out there, since like I said, most are probably doing it in an ethical manner. It's that 1% that spoil it for the rest of them I guess. You know, the one that really screws up, then has to run around town trying to figure out a way to cover his position. He adds volatility and disturbs the marketplace. He often interupts a company's normal flow of business as well. How do you get rid of him? You get rid of the rule.
And by the way, we are talking money here, not shooting people. |
