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> If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of sufficient magnitude to justify

> If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of sufficient magnitude to justify the associated costs Agreed. > Evidence or reason hasn't been provided that this is even a problem Strongly disagree. I realize there's lots of noise right now, but the signal is starting to shake out in the news. > let alone a problem of any meaningful magnitude deserving of regulation This is the interesting part I'm hoping is actually debated. But somehow I don't think it's ever really going to be discussed by the SEC, the same way I feel like 2008 was just a bunch of slaps on the wrist (what happened in 2008 was much, much, much worse than what happened recently with GME to my knowledge and I am not saying they are equivalent).

hntrader 6y ago
Putting analogies aside, what I'm saying is that regulating this would be extremely costly to industry and for extremely little (or no) benefit. Stocks with a short interest over 100% almost never happen, and in the rare case that it does, nobody has provided a sound rationale about why this is a bad thing and not even a good thing. If you think you have a rationale as to why it's a bad thing, please present it. I tend to lean towards the idea that naked shorting should be allowed and encouraged. I believe we'd have a healthier market with less pump and dumps, since retail won't be able to lock the float on penny stocks and cause a squeeze, because borrow supply would be greater which (i) reduces the cost of borrow, and (ii) allows large institutions to take the other side effectively and maintain efficient pricing.
- Judgmentality 6y ago
  > I tend to lean towards the idea that naked shorting should be allowed and encouraged. I believe we'd have a healthier market with less pump and dumps, since retail won't be able to lock the float on penny stocks and cause a squeeze, because borrow supply would be greater which (i) reduces the cost of borrow, and (ii) allows large institutions to take the other side effectively and maintain efficient pricing. Interesting. I'm not sure I agree, but I appreciate the perspective.
- rantwasp 6y ago
  i like your optimism, but here is the thing: shorting is not valuable to society. if a company sucks their stock will go down. if it’s a good company their stock will go up. shorting just puts artificial pressure on the price. it’s a practice that i believe has no place in the market. the same way that HF trading is just a big scam dressed up nicely. we need things that bring value, not scams
  - deleted 6y ago
    [deleted]
  - Judgmentality 6y ago
    > shorting is not valuable to society. Why is shorting any less valuable than investing in a stock? You can speculate it will go up or down. Both are bets, both have incentives to manipulate the stock price, and without both you remove a downward pressure that stops stocks from skyrocketing like in 1929 (where a short is what crashed everything). https://www.cbsnews.com/news/short-selling-evil-or-necessary-evil/ https://www.cbsnews.com/news/short-selling-evil-or-necessary... I think the stock market would be much less healthy without shorting than with it.
  - hntrader 6y ago
    Chesterton's Fence applies. (1) Shorting is necessary for the operation of the derivatives market due to the need to hedge Greeks. (2) Shorting is necessary for market makers to provide quotes on both sides, which is why spreads are so tight. (3) Shorting is a natural part of any market for a fungible product. We can't short houses (this was Elon's flawed example) because they're not fungible. We can short commodities that are fungible (which includes stock) because it's possible to create a contract where repurchase and return of said commodity by the borrower makes the lender whole. Banning shorting is an authoritarian move which says "an owner of a commodity (gold, silver, stock) is disallowed from arranging a voluntary contract to lend it to someone for a fee". (4) Shorting is to the benefit of longs that lend stock due to borrow fees, which benefits the lender in excess of the adverse market impact. (5) Shorting is opt-out. The float owner can prevent their float from being shorted. (6) Shorting is fundamentally healthy for the capital markets. NKLA was only revealed as a fraud because of an incentive created to find downside possibilities in stocks. If you remove that downside incentive, you get more bubbles because everyone is incented towards hype and promotion.

hntrader 6y ago

Putting analogies aside, what I'm saying is that regulating this would be extremely costly to industry and for extremely little (or no) benefit. Stocks with a short interest over 100% almost never happen, and in the rare case that it does, nobody has provided a sound rationale about why this is a bad thing and not even a good thing. If you think you have a rationale as to why it's a bad thing, please present it. I tend to lean towards the idea that naked shorting should be allowed and encouraged. I believe we'd have a healthier market with less pump and dumps, since retail won't be able to lock the float on penny stocks and cause a squeeze, because borrow supply would be greater which (i) reduces the cost of borrow, and (ii) allows large institutions to take the other side effectively and maintain efficient pricing.

Judgmentality 6y ago
> I tend to lean towards the idea that naked shorting should be allowed and encouraged. I believe we'd have a healthier market with less pump and dumps, since retail won't be able to lock the float on penny stocks and cause a squeeze, because borrow supply would be greater which (i) reduces the cost of borrow, and (ii) allows large institutions to take the other side effectively and maintain efficient pricing. Interesting. I'm not sure I agree, but I appreciate the perspective.
rantwasp 6y ago
i like your optimism, but here is the thing: shorting is not valuable to society. if a company sucks their stock will go down. if it’s a good company their stock will go up. shorting just puts artificial pressure on the price. it’s a practice that i believe has no place in the market. the same way that HF trading is just a big scam dressed up nicely. we need things that bring value, not scams
- deleted 6y ago
  [deleted]
- Judgmentality 6y ago
  > shorting is not valuable to society. Why is shorting any less valuable than investing in a stock? You can speculate it will go up or down. Both are bets, both have incentives to manipulate the stock price, and without both you remove a downward pressure that stops stocks from skyrocketing like in 1929 (where a short is what crashed everything). https://www.cbsnews.com/news/short-selling-evil-or-necessary-evil/ https://www.cbsnews.com/news/short-selling-evil-or-necessary... I think the stock market would be much less healthy without shorting than with it.
- hntrader 6y ago
  Chesterton's Fence applies. (1) Shorting is necessary for the operation of the derivatives market due to the need to hedge Greeks. (2) Shorting is necessary for market makers to provide quotes on both sides, which is why spreads are so tight. (3) Shorting is a natural part of any market for a fungible product. We can't short houses (this was Elon's flawed example) because they're not fungible. We can short commodities that are fungible (which includes stock) because it's possible to create a contract where repurchase and return of said commodity by the borrower makes the lender whole. Banning shorting is an authoritarian move which says "an owner of a commodity (gold, silver, stock) is disallowed from arranging a voluntary contract to lend it to someone for a fee". (4) Shorting is to the benefit of longs that lend stock due to borrow fees, which benefits the lender in excess of the adverse market impact. (5) Shorting is opt-out. The float owner can prevent their float from being shorted. (6) Shorting is fundamentally healthy for the capital markets. NKLA was only revealed as a fraud because of an incentive created to find downside possibilities in stocks. If you remove that downside incentive, you get more bubbles because everyone is incented towards hype and promotion.