SEC Cracks Down on CBOE For Naked Short Sales

[Parsad]

SEC fines CBOE for naked short sales:

 

http://www.cnbc.com/id/100806985

 

Cheers!

[JEast]

Of course we all know that there never was anything as 'naked shorting' as all the toadies told us, now don't we  :)

 

Noticed a brief update.

 

http://finance.yahoo.com/news/florida-state-professors-settle-naked-232818737.html

 

 

Cheers

JEast

[ItsAValueTrap]

There's:

 

1- Naked shorting so you can make easy money arbitraging the cost of borrowing stocks to short.  You essentially get to collect the borrow (10-100% interest???) without having to pay the borrow.

2- Bear raiding.  This has very little to do with naked shorting.

3- Driving the price of a stock down by selling the shares without mercy.  In at least one case, the SEC found that somebody engaged in naked shorting to do this.  The selling party benefited from a lower share price.

 

Largely the SEC has found people guilty of #1.  Some people would like you to believe that naked shorting always involves the evils of bear raiding.

[original mungerville]

Some people would like you to believe that it never involves bear raiding and that it may not even exist.

[ItsAValueTrap]

Yes naked short selling is a problem but it largely doesn't have much to do with bear raiding.

 

Suppose naked short selling was completely wiped out.  Would abusive bear raiding still be a problem?  Yep.  If you think that bear raiding is this massive evil, then you should address bear raiding.

 

2- I have a feeling those university professors caught doing naked short selling didn't care whether their stocks went up or down.  They were probably fully hedged and making easy arbitrage money.