The fiasco in stocks has had significant impact on fx prices as we all know. This editorial in Investor’s Business Daily addresses a major flaw in the current regulation of trading and equity markets:
On July 6, 2007, the Securities and Exchange Commission voted to repeal the uptick rule for short sales. The Dow industrials then stood at 13,611, just three months away from an all-time high of 14,198. The SEC’s timing couldn’t have been worse.
Finally, much has been written and reported about the role of predatory shorting in the demise of Bear Stearns and Lehman Bros. Clearly, both of these venerable investment bankers were in serious trouble. Yet, if one carefully analyzes the price and volume action in the final five days of their dramatic declines (when most of the damage was done), the evidence is compelling.
Bear, with a float of 159,098,000 shares, traded down from $61.58 to $2.84 in just five trading days (March 14 to March 20) on stunning volume of 669,737,000 shares, or 4.2 times its total float.
Lehman had similar footprints, diving from $16.20 to 15 cents in five days on almost three times its floating supply. In the process of these startling declines, these firms’ ability to fund their businesses disappeared, and both failed.
