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Not only it's a bad idea to ban shorting, but it's almost impossible to do outside regulatory action by the SEC and even then. Shorting is essentially borrowin
by yholio 6y ago
Not only it's a bad idea to ban shorting, but it's almost impossible to do outside regulatory action by the SEC and even then.
Shorting is essentially borrowing the control of stock to some other party. That's it. It doesn't have to be done on the market, it can be done in a private, confidential contract where I oblige myself to sell my stock when directed to do so by yourself, provided adequate warranties exist that you will cover the price difference when I want to purchase it back.
For this ceding of control, I get paid. The market only "sees" regular buying and selling of stock.
- vlovich123 6y agoIgnoring the SEC for a moment, I don’t follow your reasoning. Why couldn’t buying shares require you to sign a contract that you’re not going to engage in various activities such as shorting? That would preempt any private arrangement you attempt to make. You of course could make an illicit secret agreement but you’d still be breaking and invalidating the contract you bought your shares under exposing yourself to various risks and penalties
- nine_k 6y agoHow would you detect that, though?
- vlovich123 6y agoExercise to be left to the reader. How is collusion and conspiracy detected now?
- captaincrisp 6y agoI believe that's the SEC's job.
- nine_k 6y agoI suppose, mostly by chance, or by technical mistakes if the perpetrators?
- andrewjl 6y agoPresumably by auditing all the prime brokers.