May 4, 2009
I have no problem with the institution and practice of short selling in general. I'm not even sure that an uptick rule is necessary. What concerns me most is the widespread practice of "naked short selling". This abuse of the financial trading system MUST BE STOPPED. All short sale trades must have a borrow agreement in place. As things stand now abusive traders can literally create stock out of thin air and drive prices down artificially to the point where margin calls and other triggers are set in motion that further drive down prices artificially. I think the SEC should make preventing naked short selling one of it's top priorities. Furthermore I believe the penalties for breaking this law must have very real and significant outcomes. Monetary damages should be treble ill-gotten gains and jail time should run in 20 to 30 year range for a first offense. I am of the opinion that the lack of enforcement coupled with relatively light penalties that are currently in place encourage these unscrupulous individuals to adopt the attitude of "I'll never get caught and even if I do I'll make so much money that I will gladly spend 18 months in jail." Please please please put and end to this practice and the negative effects it has on the portfolios of those of us that abide by the rules.
Thanks for listening to my rant.
A. Mecoli