Sell Regulation Short Because of the Losses

Market Exchange floors carry more gossip than the Back Fence. It is why a ban on Short-selling, and even the Up-Tick Rule, will always prove to be a disaster. The Gossip is vital to the Markets, and the elements which they center around also need expression to All. Every Short-Sell is quickly spread across the back fence of the Exchange floor, with the Position taken known with Carry prices, even though it might be months before it can be determined Who made the exact play. The total volume of Short Sales, and the Prices paid for them, will travel through the entire Market floor (even when Electronic) within the Market Day. Guess What: everyone on the Exchange floor concerned knows the current Price, know the amount of bet decline, and start making a determination if the Short made Sense.

Readers would think this was the Final Step, but it has only began to effect the Market. This following is all called the Institutional Buying, though established Stockholders also play an important part in the resultant action. Institutional Managers consider the level of Shorts volume, and ask themselves whether there is Cause to support the Stock price by Stock purchase, to forestall loss of Stock Equity to themselves. In other Words, the Short-Selling generates its own cadre of Stock Buyers, or equally, the decision not to support the current Stock price. Either Option functionally sets a floor upon each Stock sold Short. It is a quite sophisticated Floor as well, based on Stock Expectations, volume of Stock sold Short, and the dedicated Stock price of the Short. It is a simple, though complex network which establishes maximum and minimum Value for Stocks in the Market.

The Up-Tick Rule is equally stupid, because Institutional Buyers and ordinary Traders cannot fix an Expected floor for the Stock. Soon experienced Traders are asking what are the new Rules, and where can the Value of Stock be pinned. Uninhibited Short-Selling is actually more important to Market structure than is Long positions. Long purchasing is always an Unknown, and incredibly Confusing without an established floor for the Stock; nobody able to determine the degree of Loss they might endure. The truly Good Buys in the Marketplace today with wonderful P/E ratios, comes simply because the Stock Exchanges prohibited the mechanism which set a dependable floor for the various Stocks in question. I hope Regulators quickly realize their Stupidity, and forestall further action to restrict Market reactions. lgl