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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (21593)	7/28/2009 7:21:09 PM
From: ayn rand	1 Recommendation Read Replies (1) \| Respond to of 71429

SEC doing a job on propping up the market: MARKETWATCH FIRST TAKE Jul 27, 2009, 5:28 p.m. EST Be careful what you wish for... Commentary: Banning naked shorting may have unintended consequences By MarketWatch ANNANDALE, Va. (MarketWatch) - On the surface, of course, banning naked short selling is a no-brainer. And that is indeed what the Securities and Exchange Commission did today, making permanent a temporary ban instituted last year that would otherwise have expired on Friday of this week. Short selling that is "naked" occurs when the short seller fails to secure the shares that he is shorting. Prior to the SEC's ban a year ago, short sellers had up to three days after selling a stock short to get those shares delivered to him. In practice, however, some short sellers never end up doing so. Seems outrageous, for sure. Nevertheless, according to Adam Reed, a finance professor at the University of North Carolina in Chapel Hill, it is very possible that this ban will have unintended consequences. That's because, according to any of a number of past academic studies, including several conducted by Reed, the market's efficiency has suffered when short selling has been made more difficult. In essence, restrictions on short selling make it less likely that a stock's price reflects all available information. This research therefore makes naked short selling appear less evil than it otherwise might. It especially can play an important role in the case of stocks that would otherwise be very difficult or expensive to sell short. For such stocks in particular, banning naked short selling means that a major channel by which negative information makes it to the market has been clamped down. You might celebrate this turn of events. But the truth of the matter is more nuanced, Professor Reed insists: The ban on naked short selling also makes it more likely that these stocks will be mispriced. The bottom line: However good it may feel to ban naked short selling, doing so will bear a cost.