April 15, 2009
The up-tick rule is a cosmetic change, and not fundamental enough to be of much benefit.
Much more aggressive changes need to be implemented:
1) To address the lack of transparency of short selling, all reporting of shorted shares should be made public, and made public in a timely manner.
During the trading day, it would be useful to instantly monitor what percentage of stock transactions are short sales.
2) Up-to-the-minute tallies of shorted sales, as a subset of total sales, should be required. Online brokerages have that information available. (Trade orders are categorized as short or long when the order is placed. )
At the end of the month, large shorted share positions should be reported in the same way that major holders must report long positions.
3) Naked shorting is prevented by transparency and accuracy.
SEC should require up-to-the-minute reporting of available shares to short. If the pool of available shares shrinks to zero during the day, then there can be no more shorting until shares become available.
Market makers can have some flexibility, but not outside established share counts. NO EXCEPTIONS
4) Every stockholder, whether an institutional or individual investor, should be able to make their shares unavailable to short sellers. Statistics should be public so the market can prevent excessive shorting i.e. beyond the permitted number of shares.
5) Fees should be set by individual shareholders for "lending" shares--just like options traders collects fees. Even public libraries demand their lent books back within three weeks, or they'll impose a fine.
More reporting and more transparency, would make the market more trustworthy. As it stands now, the market is a sham. The true value of a company is not reflected in a stock price. I support short selling, but only when it truly becomes a publicly viewed part of the market.