May 1, 2009
I have been trading for my own account since the 1990s and have made in excess of 20,000 trades since the beginning of April 2008.
The vast majority of these trades were short sales and buys to cover previous short sales.
Virtually 100 % of these trades added liquidity to the market. Thereby helping to stabilize the market and reducing volatility.
I have never made a short sale that was intended to or in fact drove down the price of any stock.
I am sure that the vast majority of short sellers like myself are contributing to making the markets fair and orderly.
Any rule that institutes a complete ban on short sales (i.e.: circuit breaker) will have the effect of raising volatility and is completely unfair as it punishes all short sellers. Most of these short sellers are doing nothing more than reacting to market forces.
Market news, either market wide or pertaining to a particular stock or market sector, creates the primary force that drives stock prices up or down. Any attempt to regulate the price of any stock by rule is foolhardy and will be more disruptive to the market as a whole than any short seller has ever been.
If you must because of political pressure institute a new short sale rule. Make it the proposed bid test rule as this is the least intrusive to a fair and orderly market, it would interfere the least with market forces working the way that is most desirable and as intended.
It amazes me that so many people that clearly have little or no understanding of short sales at all are willing to demand that you implement a new short sale rule.
Many major market participants want a rule that restricts smaller market participants, while they can easily side step the rule. For instance if you want to short 10,000 shares buying 100 shares to create an up tick is no big deal. The little guy that wants to short 100 shares has no such tool. By the way which of the two was the real problem?
Lastly the company executives that are blaming short sellers for driving the prices of their companies stock down need to line up and look in a mirror to see the real culprits.