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Here Comes The Short Selling Ban, More Money Market Restrictions
More from Dow Jones:
U.S. Securities and Exchange Commission Chairman Mary Schapiro on Friday said final rules reining in short selling are expected
"in the coming weeks" and the agency will begin examining marketing of retirement products that offer a "sell it and forget about it" mentality.
On short selling, Schapiro told reporters, "Hopefully, you'll see something in the first quarter."
Schapiro also said SEC staff will begin setting up a new system to consolidate market data across a range of exchanges and other trading platforms, which will give the regulator a powerful tool in detecting illegal activity.
"The past year has witnessed one of the most significant rule-making agendas in years--an agenda that shows we are willing to address challenging issues and make the tough choices. The year ahead will be no different," Schapiro said in a speech before the Practising Law Institute.
Regarding short selling, the commission is close to finalizing a rule to rein in short selling. The SEC has asked for comments on whether it should reinstate a short selling restriction known as the "uptick" rule, in which investors can only short a stock after it rose or ticked higher.
Regulators and industry insiders agree that the previous uptick rule isn't workable with current lightening speed trades. But the SEC is expected to approve a modified rule designed to put a stop to short selling as stocks are falling. That rule is expected to be the next major action taken by the SEC.
The other major rule on track to be finalized by the SEC would give shareholders greater access to the proxy voting process. The SEC is mulling whether to give shareholders an automatic inroad to the proxy system under certain conditions or simply allow them to vote for such a plan.
"I'm hopeful over the next several months that we'll be able to conclude on proxy access," Schapiro said after her speech. The SEC has received hundreds of comment letters on the idea with very diverse viewpoints, she said.
On retirement products, Schapiro said she wants SEC staff to look into different kinds of "target date funds" that contain a target retirement date in their names.
"In the year ahead, we are going to confront the issue of the potential for target date fund names to confuse investors, or lull them into a false sense of security. I have asked the staff to prepare a rule proposal to provide additional information to investors when a fund includes a date in its name," Schapiro said.
Schapiro also said she wants to implement fundamental changes in the money market industry, moving it away from the current $1-per-share standard to a floating number that she believes would more accurately reflect funds' fluctuations, an idea unpopular with most funds.
The SEC approved rules last month to require funds to disclose fluctuations around the $1-per-share standard on a monthly basis after a 60-day lag.
Schapiro also said SEC staff this spring will make recommendations on creating a consolidated audit trail for orders and executions across all markets.
"Currently, the self-regulatory organizations have their own separate audit trail systems to track information relating to orders in their respective markets. But, it is difficult to connect the dots and ferret out wrongdoing as trading activity frequently occurs across various markets," Schapiro said.
Schapiro last year created a task force to study how such a system would work. The acting head of the trading and markets division said last year the system would require "substantial coordination" among various exchanges and other trading bodies.
But the consolidated system also would be invaluable for exchanges and the commission to detect illegal activity across multiple markets.
The new surveillance system will be part of a state-of-the-art data collection, surveillance and analytics room envisioned by the Enforcement Division.
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Hardly matters when you're on the Titanic. The trick is getting on the few life boats available.
Cindy, what do you consider liefboats these dayz?
LIfe boats indeed.... the only sure thing in my awareness is that I have a lifespan and when it's over it's over and I don't want to die in poverty. However the crazy people in D.C. are making dying solvent problematic.
A relative of mine is currently in a nursing home. Walking the hallways and psych wards (dementia and alzheimers) of a couple of nursing homes I can tell you it won't matter if you're pennyless or flush with 52 million in cash that you just swindled off of Jay-Z when the endtimes come.
You may think having 52 million in cash will buy the best nursing home care money can buy, but it won't matter if you're laying in bed all day drooling out one side of your mouth while soiling yourself in a diaper.
My advice is to move to Oregon, make friends with Kevorkian, and asked to be put on the conveyor belt to the Soylent Green factory when you've lost your senses.
A lot of the people I've seen wouldn't know the difference between a turd and a diamond necklace. Both contain carbon but somehow there seems to be a difference.
Lief? A sharp ax, heathen attitude, and a Swedish black metal instead of John Williams to get you through the day.
http://www.youtube.com/watch?v=sfcc_laLVR4
The Americans had a more "assertive" attitude when it came to lifeboats so a lot more chivalrous Brits went down with the ship. "God save the Queen."
No queens in America. Maybe Nancy Pelosi. She needs to go.
oh, a Magnolia Pictures release... loved "The American Ruling Class" - 2007. However, I cried a little at the ending with the kid's singing... don't think it's gonna end that way.
I feel like that girl from the Truman Show lately, watching the "show" and wondering.... How's it going to end?
.
OK, I'm an ignoramus with a short memory. Someone explained this a while ago and I forgot. What's the dot-thingy again?
Thanks...
It's kind of like an 'I agree, but I don't really have anything else to say so here's this dot to show you've said all that needed to be said.'
Minimalism at it's finest.
More likely a duplicate post. But hey, what are the unknown unknowns in your life?
http://www.zerohedge.com/article/china-between-rock-and-hard-place-after...
Sounds like the Staff Captain wants to rearrange the deck chairs since there's nothing she can do about the shortage of common sense.
the mkt top is in :)
And watch the market tank with no corrections.
Too stupid to not be deliberate...
In before the ban?
Gee...I feel like I am the one being regulated.
+100
uhhh, so short now and ask later?
God these people are dumb.
Absolutely!
Consider those phrases 'short selling ban' and 'money market restrictions' as a leading indicator.
They know whats comming next, and that was the tell.
Ponzi. unwind
... just laying the groundwork for the removal of government life support for the markets
Has anyone told the sheeple that their MM funds and sweep can already be locked up via SEC ruling 22E (3a)?
This is probably the most important piece of investment news for most sheeple & no one I've spoken with as heard about it.
It's pretty damn serious if both your powder and sweep are locked up when you need to deploy or you want to get the phuck out of the dollar.
How the hell did we come to this?
I googled SEC ruling 22E (3a) and nothing specific came up. Is there a subpart to 3a?
http://www.hedgeco.net/blogs/2010/01/28/sec-approves-new-money-market-re...
Thanks, I remember reading this now, last week. My brain is like a sieve.
RE: SEC RULE 22e-3(a)
http://www.zerohedge.com/article/suspending-money-market-redemptions-now...
As this article stated, "The SEC passes regulation that only STRENGTHENS the case to own Gold."
"Anyone who sees this regulation and feels safe leaving their money in money market funds needs to have their head examined. The “intent” is to prevent a “run” on money market funds when the next crisis hits. Essentially the passage of that regulation signals the high probability of such a crisis happening."
Edited...
"How the hell did we come to this?"
Slowly forcefully and under duress. With long patient stops to make things workable acceptable practices and traditions before fucking everyone from within a tradition fortress.
+1000
I like that description "slowly, forcefully, and under duress"... with the addition of "acceptable practices" and "tradition". That could be filed under how to establish a neo-medieval society.
CG, it is very significant!
But the market is strong and things are so great with the green shoots and all. Why would anyone want to short stocks, are they insane? [/sarcasm]
How do you fix 1.5 million jobs revision? (And all the other bs data we've been force fed) Why ban evil short selling of course.
I think, they think that by banning short selling they will prevent reality from happening.
Institutionalized market manipulation. Free markets are good as long as they're working in the elite's favor...
I'd like to short GS at $151. 'course, they're probably only going up as they short the shit out of the markets themselves. In fact, if they knew they were going to take a big hit somewhere, these bastards would short themselves, which is actually all hedging really is, in the end.
Yeah... the international options and futures markets will become happy campers, being the incremental source of price discovery for U.S. investors. Brilliant thinking there, Mary.
Perhaps the SEC should be spending all their time and money on enforcement.
Now that would be a novel idea...
They've already handled the "jobs" revision.
While "admitting" that 2009 unemployment was "undercounted" by 1.5 million, they have already compensated by making the "adjusted" job creation figure for January to be +5,000.
And, after further "adjusting" both the payroll model and the discredited B/D model for unemployment to "better fit the new curve" created by the initial undercount, the new official U-3 figure for January 2010 is ...hold on to your tinfoil hats... mirabile dictu..... 9.7 % !
If I had tried to pass this off as a Statistics project in the Academy, I would have been given an "F" and dropped from the program.
Lies, Damned Lies, and Statistics....
KptLt. laughing swordfish
9er Unterseeboote Flotille
Tells me that the Fed has probably been in talks with the SEC and is possibly giving them a heads up that something stinky is coming soon. More than likely the ban will center on the financial stocks.
What a stupid bitch!
Chinaguy, please elaborate on SEC Rule 22(e)(3a)? I can not find any reference to it.
Try this link to an earlier in-depth article on ZH from Jan. 03:
http://www.zerohedge.com/article/government-your-legal-right-redeem-your-money-market-account-has-been-denied
http://www.zerohedge.com/article/government-your-legal-right-redeem-your....
I contacted Vanguard about this over a week ago. So far....nothing......
I did get a reply from Vanguard:
"Thank you for your e-mail.
In light of recent events, we have prepared some thoughts regarding the recent rule changes to money market instruments.
The SEC recently struck a balance between investor protection and the efficient management of money market funds, further strengthening a savings vehicle that has served investors incredibly well for nearly four decades.
Given the industry's outstanding track record over time, we believe that some of the rule amendments regarding average maturity and liquidity requirements are more restrictive than necessary. With respect to the management of Vanguard's funds, the rule changes will not fundamentally
impact the conservative, high-quality approach that we have long followed.
In response to your concerns on limiting redemptions, Vanguard's policies addressing these practices are outlined in the fund Statement of Additional Information (SAI). Provided below is an excerpt from the Vanguard Prime
Money Market SAI regarding purchase and redemption of fund shares.
Each Fund may suspend redemption privileges or postpone the date of payment for redeemed shares: (1) during any period that the Exchange is closed or trading on the exchange is restricted as determined by the SEC; (2) during any period when an emergency exists, as defined by the SEC, as a result of which it is not reasonably practicable for the Fund to dispose of securities it owns or to fairly determine the value of its assets; and (3) for such other periods as the SEC may permit.
Each Trust has filed a notice of election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of the net assets of a Fund at the beginning of such period. If Vanguard determines that it would be detrimental to the best interests of the remaining shareholders of a Fund to make payment wholly or partly in cash, the Fund may pay the redemption price in whole or in part by a distribution in kind of readily marketable securities held by the Fund in lieu of cash in conformity with applicable rules of the SEC."
Buy gold.
Compare the DJI index chart of mid-June 2009 through mid-July 2009 with the same interval six months later, mid-January 2010 through mid-Feb 2010.
Same pattern... almost exactly six months later... hmm, what instruments would make *that* possible. Let me think... hmm... six months ... hmm...
The Rope-a-dope market continues.
The SEC just wants to restrict the pissants from legal shorting while they allow the squids to naked short up the wazoo. They'll invent some BS about primary dealers or market muckers to put a g-string over it.
I hear the announcement now - "In order to maintain balance in the markets the BD's will be the only ones allowed to short the market." LOL, just wait and watch.
If they ban short selling, this market will collapse worse than 2008. I'm sure they don't know this. The fact that they're talking about it now tells us the bell has been rung.
old news. been in official progress for weeks.
Banning short selling is bullish right? After all it shows that the market can only go up! Buy! Buy! Buy! /sarcasm off. Bet Cramer will love this, really sticks it to the bears.
Why don't they just prohibit market falls?
Redefining market: in the market there is demand, demand raises prices.
Isn't she gone yet? WTF
Ok so I read the above - why is everyone talking about banning short selling? An uptick rule is mentioned but I don't see mention of anything you can call a 'ban'.
Why the excitement about a ban? In the article above the thing being mooted is an uptick rule (or some variant), not a ban.
About 18 months ago we had a money market run on overnight wire transfers.
Bush quickly backstopped the entire mm with a 1.3 trillion dollar guarentee.
It stopped.
I became curious and checked with my money market. The guy at Dryfus told me that it contained treasuries ( longer than 30 days), 25% CMOs, F&F, and other trash. Wow.
This last summer the govt was going to borrow 100 billion from money markets. After about three days - silence. They had looked and saw what I saw. Nothing there.
So I looked up three of the biggest mutual funds money market accounts. All were like Dryfus except for different percentages.
September 30 of last years the Administration dropped the guarentee on money markets.
Jan, first week, ZH had an article on the mm's being able to be closed by the managers.
A week ago we had the SEC pass the law. No bank runs ever again. Just close the mm's and make distribution in a safe way.
This means the treasuries do not get run in a redemption crash, and the "trash" does not cause the banks problems in marking to the market the stuff that the banks hold.
So, what do you get. Just what is left. The new law does not provide for "repairs" to the damaged holdings.
The money markets are now Ponzi schemes. They float until the outgo exceeds the intake. Then its over
Oh yes, mm's account for about 3 trillion dollars.
Allowing MM Funds to deviate from $1.00 per share would be like screaming fire in a crowded theater. You conceivably could have a run on the entire financial system if they were to make that allowance and declaration.
Resign or try Mary.
Oh, for a moment there I thought you said Barry. Lot's of empty suits in control these days.
Hey! Mary got 85% on the True/False final quiz:
http://www.zerohedge.com/article/ladies-and-gentlemen-bank-fed-provides-...
welcome to the abyss
The market can never be allowed to go down. That is not good.
The Central Planner's motto. Beatings will continue until morale improves.
now its only a theory,
that naked shorts are okay, because a short sale is a third party transaction, a side bet on the real action. the laws of physics when applied to the field of economics do not necessarily apply,
money can be neither created nor destroyed. False
we know that in a deflationary event cash simply disappears, it was never real in the first place, those assets were ponzied one on top of the other, as an expression of government policy to create the illusion of progress and wealth.
Suppose a tree falls in the forest, one no one hears it?
Suppose a stock goes down and there are no shorts on the other side of the trade??
Now what is the difference between the two events?
Nothing really. ergo, borrowing stock is a an arcane rule put in place by the forces of government who want the market to go up. Buyers are allowed to run up the price of a stock on margin.
1) Short sales allow someone to capture the money which disappears when the market collapses and the ponzi scheme along with it, and
2) Selling is an natural as buying, why do buyers enjoy the regulatory advantages?
As long as there is someone on the other side of the trade, naked shorting is a non sequitur. can you short a stock you own? TRUE
it's called short against the box.
finally the difficulty with banning short sales is the law of unintended consequences. Think of those options specialists, who have to price put options, and no possible way of hedging their risk?
additionally to further punish short sellers they are expected to pay the dividend to the owner of the stock, which i contend really has no part in this transaction, but it proves how much the perma-bull establishment is committed to making the thing go up.
TD, thanks. This is a very significant development. Both Short Selling Ban and More Money Market Restrictions, means that another crisis could happen soon.
Isn't she on her way to jail for being a dirty whore?
You know, there's really no need for that. There are so many things to be said about Schapiro's gross negligence and incompetence already; are you really incapable of looking any of them up? To resort to sexism and call her a "dirty whore" when there's so much other low-hanging fruit available is just pathetic.
Oh, come on. Bernanke's a dirty whore too. A whore is someone who sells what shouldn't be for sale. No PC police here, please. Next we'll have some nanny nagging about swear words.
I re-edit some of my potty-mouth posts at times - it's catharsis for some. But you are right, there is better forbidden fruit to talk about out there.
If the "ban short sales" talk is back on the table, they (the so called administration) must be scared shitless over the inevitability on another March meltodwn.
Shhhh ... Whatever you do, don't anybody tell them about inverse leveraged ETFs.
Gutting the inverses would sure be a bummer.
Will Mary get to them before FINRA gets to her? Seriously a question.
Politically it would make more sense to allow the upcoming market collapse to occur without any new short selling rules because they could then blame said collapse on the "evil short selling" bogeyman. You remove short sellers from a market and you remove a bid at the bottom and stocks that belong at $0 like Cramer favorites Citi and CIT end up at $0.
Uh Huh..........
Let's wait and see who they make exceptions for. Market Makers may well be excluded from this, especially in the gold and silver pits. You know who I mean.....goldman, JPM, HSBC et.al.
That's a given.
Populist solutions to structural problems.
How would this affect short- and ultra-short ETFs?
Not sure, since they use a mix of futures options, depends on which ETF you're talking about, be sure to re-read the prospectus.
Last December I emptied all my long equity positions that I took before the rally, and began limping into a few leveraged ETFs to capture some of the correction.
I understand what you're saying though, it is a concern for me too.
How would this affect short- and ultra-short ETFs?
Not sure, since they use a mix of futures options, depends on which ETF you're talking about, be sure to re-read the prospectus.
Last December I emptied all my long equity positions that I took before the rally, and began limping into a few leveraged ETFs to capture some of the correction.
I understand what you're saying though, it is a concern for me too.
Re: Short Sales:
Actually, it's a FREE SPEECH issue as much as anything else.
Short Selling is a way to "Vote With Your Feet" as well as your fiatscos on the New Economic Landscape proposed by Mary Shapiro and her handlers at The Squid.
Once the new "Uptick Rule" is put in place, expect it to apply only to retail traders and small investors.
TBTF institutions with prop desks, Market Makers, Primary B/D's, and "qualifying" hedge funds will, of course, all be exempted.
They will be permitted the privilege of expressing a negative opinion on TPTB's handling of the economy, but the rest of us will not.
Just a thought... and, FWIW, thanks to yesterday, my 3 short positions are carrying me against my currect 7 longs, all of which have turned to dogs overnight.
KptLt. laughing swordfish
9er Unterseeboote Flotille
It is the CDS's not Short Selling that has taken the Market Down. They are ruling the market. Like they did with Bear Stearns, Lehman, Aig, Fnm, FRE. It was the Credit Default Swaps betting against these Firms that destroyed the Market. Short Selling just followed. Rating Agencys played a huge role by Downgrading Debt of the Target Firms. Just like they have done with Greece, etc. Debt Downgrades GUARANTEES that the CDS's pay off.