Short selling from Australia to America

Image via Wikipedia

The short interest data for the NYSE and NASDAQ was published last night for short positions as at the end of February.  Overall short interest was up by 3.1% on the NYSE, showing a short interest of 3.83% as compared to 3.61% at mid-February.  NASDAQ numbers showed a 2.1% increase in the two week period.

This tied in neatly with comments from Barney Frank who told reporters that the SEC was planning on reimposing the "uptick" rule in the US.  The uptick rule requires that a stock cannot be sold short unless the most recent trade was higher than the preceding one.  The idea is that the uptick stops a wave of continuously negative trades being executed, acting to slow down short sales being executed.  The fact that it is being looked at should hardly surprise investors or trades as Mary Schapiro, SEC Chairman made a commitment to re-examine the uptick at her confirmation hearings. 

Two things I don't understand follow.  I know, any of you will say there are a lot of things I don't understand, but stay focused please.  If the removal of the uptick has allowed shorts to trade unfettered and as a result exposed us to the turmoil we are in , then why aren't the short interest figures higher?  The entire US (and world) markets are down, so how can such a small percentage of shorts be the driver.  And if the uptick rule stopped half of all the shorts, would we have avoided the horrific markets we've seen?  The second item is that I don't recall Tech stocks being saved when that bubble burst even though the uptick rule was in place.  I obviously don't get it, so please explain.

Normally it's the short sellers that get the grief, but the latest comments from Australia questions the value of securities lending itself.  Alan Kohler, commenting in the Business Spectator raised the following:

"The question is whether artificially increasing the supply of listed securities through stock lending is necessary for the better functioning of the securities market and the economy.

Let’s have that debate."

I can never resist these things, so I added a comment.  Let's see if he really is interested in a debate.  As of writing this post, they still haven't published my words.  I will however, give them the benefit of the doubt due to the time difference.  I'll keep you posted. 

No posts for a couple of days as I am off to Paris, spreading the Stock Loan Love!