Greg Newton, Naked Shorts, comments on the modification of the order prohibiting short-selling the 799 financial stocks. The modification provides an exemption for hedging activities by exchange and over-the-counter market makers in derivatives.
SEC retires ‘Moron du Jour’ title
The commission staff is recommending to the commission a modification to its order prohibiting short selling in securities of specified financial firms. This modification would extend, for the life of the order, the exemption for hedging activities by exchange and over-the-counter market makers in derivatives on the securities covered by the order.
My comment: I asked Greg how the exemption would "gut" the ban on short-selling the 799 financial stocks. He replied, "If MMs/derivatives hedgers can short stock, investors can express negative view by e.g. buying puts (if MMs could not short stock to hedge put exposure they would either not sell puts, or more likely, price them so richly as to make sure that nobody wanted to buy them)." – Ilene
