September 1, 2009
I suggest a complete ban on short selling. Why ?
1) Because short selling is illegal. If I do not own shares of stock A, how can I have a right to sell shares of stock A ? Of course, I should have no right to sell stock A. If I do not own House A, of course I have no right to sell House A. If I attempt to sell House A which I do not own and attempt to pocket the proceeds, I would be arrested for encroaching on another person's property right. That is the very simple legal common sense.
2) Short sellers may argue by saying: " we borrow shares to sell short. " May I ask back: " Who do you think that has the right mind would lend you the shares? " If you own shares of Stock B, of course you want stock B price to go up. That is common sense also. But would you want to lend your shares of stock B to short seller for them to knock the price down? Of course nobody would willingly do that.
3) Since no shareholders would want to willingly lend shares to short sellers for them to knock the price down, why cannot the SEC set a rule to ban all short selling ?
4)Some short sellers may say that they borrow shares from broker firms. Again, that is not fair to shareholders. Because broker firms , in order to increase trade volume so as to increase their profit, lend the shares to short sellers without permission from stock owners for the short seller to knock down the price.
5) Some broker firms as good as forced customers to sign paper that agree to lending shares to short sellers. That kind of agreement is not legal, strictly speaking. Because if customers do not sign that paper, they would not be allowed to open an account with the broker firm. That kind of agreement is actually depriving the free will of the customers.
6) If SEC bases its rule on such kind of illegal agreement mentioned in 5), that would put shareholders in a harm's way.
7) Besides, short selling , by bombarding the market with millions of short selling orders at the same time,will invariably manipulate and disrupt the normal order of the stock market. Short sellers can knock any stock down 100 points in a few minutes, no matter how good that stock is from the fundamental and technical points of view. Does SEC like to see that happen ? Of course not.
Short selling is actual the most serious manipulation of the market. And they do the manipulating from an illegal basis, because from the origin, short selling is illegal , because nobody has any right to sell something which he or she does not own. That is a very basic legal rule.
8) Why our rules go so far as to allow those illegal short selling in our market? Because some of the regulators are under heavy pressure of exchanges , broker firms and other persons directly or indirectly benefited from short sellings. Noboddy dare fight the illegal short selling. Exchanges and broker firms want short selling or whatever, because that would greatly increase the volume of trade and increase their profits.
9) I hope SEC will start to ban and stop all short selling, because all short sellings are illegal, as I stated above. Short sellings, by manipulating and disrupting the normal operation of stock market, actually disrupt our economy and shareholders legal and financial rights and benefits. Thanks.