Re: <nettime> Naked short selling - in the Dutch Golden Age...

[Ed Phillips <ed@cronos.net>]

Thanks Patrice,

The so called ban on naked short selling is interesting for a number
of reasons, not the least of which that it was the formal
redeclaration of the illegality of something that was already illegal.
Yes, already illegal.

So why was the ban made? The companies for which naked short selling
was put under an explicit ban were none other than our good
financials. This ban has an effect even though it was already illegal.
The effect is estimated to be about 25 cents on a 4 dollar put option,
which is considerable.

It affects the way the short markets work, in that it makes it more
costly and cumbersome to have to "prove" in advance that one has
borrowed the shares before one shorts them. It makes it that much less
profitable and seemless to engage in shorting. No one was naked
before.

This wrench in the works is in place to buy some time for the
financials to make more aggressive write downs without going under, so
they and the market can find a bottom. So far it looks as if they have
not been agressive enough with their writedowns and their estimates
are sheer voodoo. You can lead the horse to water....

Look to see this crisis in the credit markets continue. Meanwhile
technologists are already at work setting up markets where owners of
stock can put their shares up to be directly "rented" by short
sellers, cutting out the need for those who make the short markets
work presently.  So in the future borrowing or renting will be more
open and explicit although surely new beasts will emerge in these new
niches.

And yes, of course the Dutch were there first.

On Thu, Jul 31, 2008 at 03:56:07PM +0200, Patrice Riemens wrote:

> For the amateurs of financial extravanganza taking a slightly more refined
> interest than George Doubleyew ....
 <...>



#  distributed via <nettime>: no commercial use without permission
#  <nettime>  is a moderated mailing list for net criticism,
#  collaborative text filtering and cultural politics of the nets
#  more info: http://mail.kein.org/mailman/listinfo/nettime-l
#  archive: http://www.nettime.org contact: nettime@kein.org