Oct. 08, 2022
I do find it absurd that there can be more shares shorted than a company has legally issued to begin with, through this infinite chain of securities lending. That said, the biggest problem seems to be naked short sales, which creates counterfeit shares in the market. This is not only harmful to the company, employees, retail/other investors on the long side, but also to pension funds/other institutions who are lending out their securities. Because these counterfeit shares do not reflect the real supply and demand, they lower the borrowing fee, according to Charles Gradante. These pension funds/other lenders get far less income than they should, and plenty of them get behind their objectives, harming the majority of the people once again. In other words, the entire economy gets harmed, except those that abuse the rules. It should be obvious that regulators should know exactly what goes on in the markets, at any time. The proof is in the pudding, again and again, that not all market participants will play by the rules. I do not see much difference between a bank robber, or someone who robs through the markets. In the case of naked short selling, it's an even bigger crime than robbing a bank, because it affects the vast majority of the people. So the punishments should be more severe as well. Otherwise breaking the rules/stealing becomes part of doing business. What (a big part) of Wall Street has become now was never the intention when it was created, and it can present a clear and present danger to the majority of the people, so the laissez-faire culture is the worst idea possible.