RE: Stock monetizationTo the best of my knowledge, naked shorting is illegal everywhere, although how well it’s enforced is another matter. In emerging markets, e.g. Iraq, even what we in the West call legitimate shorting is illegal in order to help build investor confidence and participation in what are relativley new stock exchanges. It’s to assist the birth of free-market capitalism in emerging economies. After all, buying low and selling high is the most intuitive (easily understood and grasped) form of investing.
In order to keep new money from timid newbie investors coming into the equity markets in these countries, prohibiting short selling makes perfect sense. For sophisticated short sellers, especially those with the power to move markets, to come in and basically take their money from them would ruin the equity market as a much-needed source of capital for companies trying to grow in such economies.
One can argue the merits/demerits of short selling in mature markets such as ours. Advocates of short selling trot out such “benefits” as “keeping the market honest”, “mitigating irrational exuberance”, etc. Most advocates represent the interest of hedge funds, which number well over 7,000 by now in North America alone. Such arguments have intuitive appeal coming after the crazy tech bubble towards the turn of this century and aren’t without merit. But what’s not mentioned is the darker side of stock manipulation and naked shorting.
I couldn’t find the post you mention describing naked shorting, but it’s accurate in its definition. We have no formal mechanism yet for exposing it in Canada, unlike Regulation SHO which went public in the US in January, 2005. We may have the means in place to detect it, but we need to follow suit to what they’ve done in the States in order to make this information visible to the investment community.
I’d like to know your source or link to the SEC ban of Oct 29, 2003. The “critics” by the way are lame in the extreme with such a self-serving argument. They’re probably the same people that participated in the “micro-cap” crime wave and now that that’s been exposed, are defending their new way of exploiting the market. The 90’s was the decade of the boiler room (see the movie if you haven’t already) during which they profited from hype and greed. Now we’re in the decade of fear and fast-moving markets and these same crooks are working the market in the other direction.
Diz