Hunt for £100m rogue trader after attack on HBOS share price

[Cyberman]

Can any of the local capitalist schweines explain in simple words how exactly "shorting" is good for the market? I take it your only point is that "it's a free market so I do what I want".

To me it is theft from other shareholders, as it reduces the value of their shares by selling borrowed shares into the market, thus depressing the SP.
Theft is not allowed in the free market so 'shorting' should likewise be illegal.

[AtW]

To me it is theft from other shareholders, as it reduces the value of their shares by selling borrowed shares into the market, thus depressing the SP.

To me this is an illegal market manipulation - if it involves more than one person AND succeeds then it's a conspiracy to manipulate market that leads to real costs - these costs should be recoverable from people who manipulated the market.

The solution here is to investigate any big trade made just before big share fall (or raise) with a view of insider trading / market manipulation. If same people are in frame more than once then it should no longer be deemed a coincidence, and in fact this to me would look at a strong proof that those people are actively enganged in market manipulation.

Of course this would mean half the players on the stock market will have to find another job or go to jail, but that's something that will benefit market and real economy - I can certainly live with 50% less jobs in the City, sorry chaps it's the truth - nothing personal (not even when it comes to sasguru who I am sure would find another job easily - he will just have to work for the money).

[Moscow Mule]

Are you all mental?.

It would be trivial. Futures and options do not involve borrowing someone elses shares that don't belong to you

You still be able to create an effective "short" using these trades.

Aside from the impracticalities (which you've so cleverly brushed aside AtW) the banning of shorting in the UK would result in the migration of billions of pounds worth of business from London to somewhere else.

What good is that going to do?

[Moscow Mule]

To me it is theft from other shareholders, as it reduces the value of their shares by selling borrowed shares into the market, thus depressing the SP.
Theft is not allowed in the free market so 'shorting' should likewise be illegal.

You are confusing shorting with market manipulation.

There's nothing wrong with making a punt on shares being worth less in two weeks (or whatever) time.

There's a lot wrong with making a punt on shares being worth less in two weeks (or whatever) time then spreading rumours that said company is about to go bust/have to take a big loan/etc. to depress the value of the share.

[bored]

Can any of the local capitalist schweines explain in simple words how exactly "shorting" is good for the market? I take it your only point is that "it's a free market so I do what I want".

I will explain.

Any trade between consenting parties potentially increases wealth. Since both parties agree to the trade each party must be gaining value from the trade.

If you ban short-selling then the number of trades in the stock market will be reduced and wealth creation (economic growth) will slow down.

[AtW]

If you ban short-selling then the number of trades in the stock market will be reduced and wealth creation (economic growth) will slow down.

It's not wealth creation. Wealth is created when some new drug is invented (people live longer), or new BMW is made, or new airplane, or new book is written - all that creates wealth.

Stock market does not create wealth - it creates the illusion that the wealth has been created, with time this illusion grows into a huge bubble just like right now and this illusion infects real economy - people start thinking that their house is actually worth more than it is only because of temporary speculation.

[Moscow Mule]

It's not wealth creation. Wealth is created when some new drug is invented (people live longer), or new BMW is made, or new airplane, or new book is written - all that creates wealth.

Stock market does not create wealth - it creates the illusion that the wealth has been created, with time this illusion grows into a huge bubble just like right now and this illusion infects real economy - people start thinking that their house is actually worth more than it is only because of temporary speculation.

Tree hugging anti capitalist

[AtW]

There's a lot wrong with making a punt on shares being worth less in two weeks (or whatever) time then spreading rumours that said company is about to go bust/have to take a big loan/etc. to depress the value of the share.

Big hedge funds actually BORROW huge amount of shares and then dump them in hope they can buy them back cheaper, thus make money on nothing.

This activity has no positive effect on market - they don't even have bloody money to buy those shares first, and then sell - the whole basis for shorting is fundamentally flawed.

People who dump huge amounts of borrowed shares are not predicting market will fall, they don't "punt" on it - they are actually manipulating market.

[AtW]

Tree hugging anti capitalist

I am pro free market. But free market does not mean I am pro monopolies or pro market manipulation - it is very damaging and only gives short term gains to a handful of people - activity of these people leads to more problems than what usual criminals do, so these people should be dealt with very harshly indeed.

[HairyArsedBloke]

And how this behavior exactly benefits market? With advent of computers speculation in markets raised to a completely new level - level that threatens global economy now so such behavior needs to be curtailed one way or another.

What difference does it make if I hold a futures contract (or several) for six seconds, six hours, or six months? I provided liquidity, the broker got a fee, and I earned money. Index futures are there to enable fund managers to hedge their portfolios against loss. I was simply there to provide the liquidity for proper markets operations to occur.

The reason why I held so briefly is that I messed up entering the target price and it ended up 6 ticks above the entry price in a reasonably rapidly rising market. It was only for 5 contracts, but about 350 bucks in six seconds. It’s nearly as much as what you pay for sex and for a longer duration.