Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Final Frontier - Online Remote Trading -- Ignore unavailable to you. Want to Upgrade?

To: steve goldman who wrote (6522)	2/20/1999 6:02:00 PM
From: Tai Jin	Respond to of 12617

Steve, I've read about this issue, and I think it would be difficult for NASD to enforce it completely. It's certainly possible for brokers to enforce this rule for accounts at the brokerage. For example, Datek does not allow both short and long positions in the same stock so they don't have this problem (well, I suppose you can still do it with two different accounts), but E*Trade does allow it which means they will probably have to change their policy to be like Datek's or ensure that their software prevents selling on a downtick. What is difficult to enforce is the situation where a trader has accounts at multiple brokers. Then there is also the situation where you can box your short position with a similar stock (say, with the warrant of the shorted stock). I understand that the purpose of the rule is to prevent a severe selloff of a stock. This rule is intended to protect the investors who are long. So what about protecting those with short positions? Since shorting is a legitimate form of investment, why don't they also protect their investments by applying the same rule to buying a stock - that is, you can only go net long on a downtick. I think the rule is also intended to reduce the volatility of a stock, but as everyone has seen with the Internet stocks, volatility includes the severe moves up as well. And I think my suggestion about applying a similar rule to going long would help reduce such volatility. They worry about volatility and people losing their investments, but they only address half the problem (the downside). If they also address the other half (the upside) then they would be able to keep volatility in check. ...tai