No uptick required for short selling! It’s total insanity…..

      Shorting with no uptick required…creating chaos and damaging markets

This first paragraph is a letter we received from a professional investor and money manager for many decades. As follows:

 The question is and always has been are the stock markets primarily for the investing public or for the banks’ and brokerage houses’ profits from their trading desks. The answer is obvious as people believe more than ever that the investing public is more than ever and by far the last in line when dealing with the banks and brokerages which function first and foremast for their own profits.

The bottom line is that several of the major American brokerages offering their unprofitable and inaccurate advice needed to be bailed out eleven years ago just to survive so they have created a special advantage for themselves. That advantage can be seen recently by the Securities Exchange Commission permitting traders and professionals the shorting of stocks without upticks.“ He wrote quite a bit more which I cannot include here since this site is family oriented.

For over ten years we have asked for the long held requirement of an uptick prior to short sales be reinstated. It fell on deaf ears as it obviously interfered with bank and brokerage profits. The shorting with no uptick requirement has led to harsh downsides and enabled the recent 1000 point down day. As expected, short sellers could and did “pile on” with heavy volumes of short sales. As the gentleman said in his letter, there is a widely held belief that the banks and brokerages’ first priority is for themselves.

The brokerage industry was originally created to allow companies access to capital and to offer the investing public a means to invest in companies and markets. Priorities have changed for the worse.

We are not referring to shareholders who buy and sell stocks and certainly have every right to sell their shares at any time. We are referring to professional traders who must first borrow the shares from the true shareholders to sell shares short with no upticks required hammering the stocks down to create further weakness in the stock(s).

Short selling is legal but the unfair selling pressure created by no upticks being required on any short sales is wrong. It is something the brokerages should address. It is about time that the investing public is treated fairly in this regard.

Do they? We also question whether many of the short sellers actually do borrow the shares properly according to the law in compliance with the rules. That has been in question in the past and it should be monitored closely to confirm that it is being done in compliance with the rules.

In case you did not know, any shares that are shorted must be borrowed from the legitimate shareholders who are unaware that their shares are being lent out to the short sellers. So in essence they are being used to weaken the true shareholders own shares. Yes, shareholders very own shares are being used to help weaken their stock prices.

We would also suggest that investors both institutional and private no longer permit their stocks to be loaned out by banks and brokerages stock loan departments.

The fact that no uptick is being required for short selling has done enormous damage to many small cap companies’ shares in the U.S and Canada particularly the “juniors” market in Canada. If one wants to destroy companies and industries, the brokerage industry is doing a great job.