Tuesday, July 22, 2008

Stock exchanges only benefit themselves

The harsh reality of the real world. Every "exchange" for itself. Just read an article by a formal securities and exchange chairman (SEC). This is a quote from a few sections:

"Short sellers borrow shares they think are poised to drop in price and then sell them, hoping the stock will fall and can be repurchased at a profit. A "naked" short occurs when an investor sells stock that has not yet been borrowed.
Short selling provides extra liquidity in the market," he said. "The goal isn't to prevent short selling. The goal is to make sure that people who sell short will have the means to settle their trades when they are supposed to be settled."

This is ridiculous! That means a "naked short" can bypass the usual process of borrowing the shares before selling it.

This is already violating the fundamentals of shares investing. It is based on the concept of a limited number of shares in a general market. With this stupid loophole, this is no longer the case. No wonder nowadays no one cares about PTB, DCF, DDM, etc. One can just sell away the shares even though one does not even own it, even for a while (borrowing).

There is going to come a time that all successful companies will only want to be private, and not publicly listed due to these kind of actions. The wave is already coming, all because of these loopholes. If I'm a boss, I would not even want to list in this kind of exchange!

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