The Short Selling Ban – Regulator Legal Liability?
Stop feeding the bears cry the Zookeepers!!!
When regulators ban short selling do they have a legal liability to the mum’s and dad’s, fund managers and traders who lose money from this almost instant change in regulated markets? I’d love to see what some of the big legal firms think on this.
(Update: Just read Sean’s Stubborn Mule blog which has has a good post on short selling.)
It is in effect the banning of an instrument used to hedge, used to remove risk. A reasonable person could argue they wouldn’t expect a regulator to do this surely?
I’m not saying this out of anger as I haven’t had shorts in the market for a long time. We closed all our trading book positions back in April. However I am angry that free trade and capitalism is at risk here of being hurt by short-term decision making by people in a panic to cover themselves in their regulatory roles. The same people who actively encourage openness in markets, hedging to create stability and improved liquidity.
In addition you could argue that a reasonable person expects regulators to announce major reforms well ahead of time so that organisations can adjust their business models and risks. Imagine if a government made sweeping company tax changes today and implemented them tomorrow. Why are rules around the trading of equity via stock and futures markets any different?
Mum’s, dad’s, traders, and fund managers all engage in short selling. Many trade CFD’s to achieve the shorting effect. The larger players borrow the stocks they are going to sell short.
These market participants were busily operating in the market on the premise that short selling is a part of market operations and provides liquidity to markets. In many cases shorting is a hedge against illiquid assets they own and can’t sell because liquidity has dried up.
Below is my Macquarie Bank Prime Trading Platform account rules received as a result of the change. It highlights how little I can now do when I do go back into the market. I can only buy companies. That doesn’t feel liquid to me and it feels very inflationary. Neither is good for markets.
Share Positions
Opening New Positions
- Short Prohibited
- Long As Usual
Closing Existing Positions
- Short As Usual
- Long As Usual
CFD Positions
Opening New Positions
- Short Prohibited
- Long Prohibited
Closing Existing Positions
- Short As Usual
- Long Phone Trades Only
Photo: Wili Hybrid
Google Maps X-files
A friend of mine bought a property up at Old Bar in northern NSW and told me that he noticed some strange features in the landscape up there. Here they are and the links to check them out yourself.
I love Google Maps, it reveals so much. Yes there is a privacy cost but if you have nothing to hide don’t worry it can’t hurt you.
Google Snapped
Treat with a dash of skepticism:
Stingray at Bondi Beach
Shark at North Styne Manly
Crop circle in the USA
Find any more?
As for Google Streetview, watch out for strange cars in your driveway, the milkman might be visiting home without you knowing it.
Capitalism or Protectionism?
American tax payers are about to start bearing the burden of bad credit bets placed by big banks and insurance companies.
I have been more than amazed by the events in the US in recent weeks during the financial crisis. Creating a pseudo guarantee structure for big American companies like AIG is just pure protectionism. This is capitalism gone wrong and it feels like it is just the start of placing losing bets into the hands of taxpayers who never participated in the upside of those companies during the boom. What do you call that? What kind of social justice is that?
By doing this the US government is sending a signal to stock holders that their bets have an implied guarantee to some degree. Last nights massive stock market rally was just that. It was the market starting to price in protectionism into US banking and insurance equity valuations. If you can buy into a big insurer like AIG and have some certainty that they might be bailed out then it’s a damn good bet.
America’s corporate obese won’t be helped by feeding them more liquidity biscuits.
Link Mezza Plate #8
The Myth of The Launch Seth Godin
Transliteration – the Babel fish is here Alturnal
Gen Y loves banking online using Web2.0 apps Fin Extra
Setting Firefox to launch Gmail for mailto links Life Hacker
Surfing Mice YouTube
Google Apps Premier adds Google Video
Google Apps has added Google Video to the Premier paid version. Secure and private video sharing being the main pitch. This could be quite useful for Saasu given we have videos managed internally and would much prefer them to be managed by Google now that access controls look like being in place. Lots of implications for companies looking to provide restricted or paid video content to their customers.
Aside: I love it how Google always throws up a New! in nice red text to teach customers about their latest Labs output.
Mixmeister iPhone App Idea
I was playing with my iPod tonight moving the volume up and down with my thumb while I was listening to a Moby track. It was pure boredom that had me do it and it felt like working a turntable a little. My startup shoulder devil whispers two words to me. iPhone app. A DJ turntable set using the touch screen that actually had impact on tracks you play through your iPhone. I think it would get traction with anyone having even a remote interest in DJ’ing. Well then I did some quick checks and it’s been done. Don’t ask me how well I’m no expert. Check out Mixmeister Scratch
