Well it seems the SEC is starting to realize that shorting has gotten out of hand and something must be done about it. Especially if they wish to maintain the general equities with there rediculous P/E ratios at anywhere near these lofty levels.

I doubt it is because they all of a sudden got an attack of conscience but more likely they realize that the system especially with many pension funds reporting huge shortfalls in revenue could not sustain a concerted short attack. It is easy to create fear but far far harder to gain confidence. The establishment never makes so much money faster than in a good short attack.

Most retail investors are passive investors who once they buy sit and hold as long as they are not scared out in a blitzkrieg short attack. This is what the system needs right now and thus the establishment who has gaming the system down to a science needs to be brought under control.

Thus I was pleased not only by talk of bringing back the uptick rule but also that it has been reported that the SEC has passed a rule that bans shorting if a stock has fallen more than 10% in a day and that ban stays in effect for 2 days.

Now most people probably do not understand the significants of 2 days so let me explain. There is myth that is called the 3 day rule which states to the effect that many stocks when they decline heavily you can expect it to last for 3 days before some sort of recovery or stabilization will occur. The establishment if it bothers to try and explain this statisical anomaly passes it of usually as investor psychology hahahahahahahahahahaha.

The simple fact is there is what is called a three day delivery or settlement period for shares and as long as you can deliver in those 3 days you will not be given a failure to deliver even if you did not identify a legitimate short when you shorted. Not identify a legitimate short in a stock when shorting is what is called naked shorting which is supposedly illegal.

It is easy to drive a stock down with naked shorting because you are creating counterfeit shares and creating selling pressure that is not really there from the legal owners of those shares. Shorting is all about creating fear, confusion, hitting stop losses and creating negative momentum which the shorters use then to buy back the shares they owe at a much lower price pocketing the difference.

However since those shares have to be settled by the end of the 3rd day this restricts the time frame that this activity can be carried on before the shorter has to deliver the shares or buy them back in the open market and thus hault the downward pressure. If he does not deliver then he is charged with a failure to deliver which is indicative that he has possibly been naked shorting. Thus by restricting the downside of a stock to 10% and taking away 2 of the days that a shorter can ply his trade you only leave him 1 day in which to buy back his borrowed shares unless he wants to run the risk of a failure to deliver and possibly be charged with naked shorting. This in effect takes away much of the negative momentum and feeding frenzy that can occure because of it hahahahahahahahahahahahaha.

With computer trading and most people holding there shares in street name this three day settlement period as far as I am concerned has always been suspect.

At least now it appears that the SEC is getting serious about regulating the shorters and naked shorters.

The stock markets should be an exchange whose primary function is the facilitating of raising capital for businesses ventures.

I applaud this dicision by the SEC and can only hope it is enforced very strictly.

This of course does not help us out here in Canada unless our regulators adopt simular rules.

All in my honest opinion of course as always.

F.F.