Goes211 -I agree with everything you said! How about that!
I made an assumption (perhaps unwarranted) that we were talking about futures contracts, and it was based on "naked shorts" in said market that many people complain about - JPM and silver, etc.
The whole phenomenon of naked shorting of stock is odd. I suppose its necessary for market makers in shares as well as options, but as you say, it can be abused pretty dreadfully.
[quote=davefairtex]Goes211 -
I agree with everything you said! How about that!
I made an assumption (perhaps unwarranted) that we were talking about futures contracts, and it was based on "naked shorts" in said market that many people complain about - JPM and silver, etc.
The whole phenomenon of naked shorting of stock is odd. I suppose its necessary for market makers in shares as well as options, but as you say, it can be abused pretty dreadfully.
[/quote]
Dave,
I really was talking about futures. I just was explaining how "Naked Shorting" of stocks work to show how different that is from Shorting Futures. Basically what I was getting at was "Naked Shorting" of stocks is an inherently manipulative practice that is illegal, however well that is enforced. However, so called "Naked Shorting" of futures is not inherently manipulative/evil/illegal, it is basically just speculation which can be done on both the long and short sides.
Where this practice can become abusive is with large position sizes that become manipulative. If you trusted that market regulators (CFTC in this case) were actually doing what people think they should be doing, they would limit this manipulation.
At least to me, shorting (or even being long) futures is not manipulative as long as you have the money to cover losses and if you are short, don't mind getting squeezed. The real problem is the same problem with TBTF. If a major player or exchange gets in trouble, the rules will be changed to screw everybody else. If you really believe that JPM is massively short, the only way to stop them is to take delivery and stop playing their game. One thing I certainly agree with is that when the game is up, the rules will be changed to help the big players (cash settlement, margin changes), at the expense of everyone else.
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