The capital markets were designed in order that companies could raise money in order to grow there business without the need to borrow from a lender and be charged interest. They are very efficient when price discovery is left to those market participants who actully own the shares they are trading.

Capital markets weren't "designed" They evolved from primitive forms, starting with the syndicates in 16th century Holland, progressing through financing of the great sea voyages and colonial expansion of the next 3 centuries, and undergoing a series of ad-hoc reforms following catastrophic failure due to manipulation and control by inside interests connected to mercantile banking and state finance, a situation that persists to this day. Ergo, there's no such thing as an "efficient" market, and you are simply dreaming if you believe there is.

Shorting is not the flip side of buying shares on margin( borrowing the money). Buying on margin entails putting up collateral to buy shares that have been legitimtely issued by a company with approval of shareholders.

When the collateral for margin is the shares themselves, you have an identical situation to the Mississippi Bubble where the value of those shares was used as collateral for the purchase of more shares. If I own 1000 shares in XYZ, which I pledge as collateral for a loan of 1000 more shares in XYZ, then that drives up the market price of XYZ, thus allowing more borrowing to occur. This is just Ponzi finance. The whole scheme collapses when XYZ collapses, which may be driven by XYZ specific events, or by an external market event. In either case the underlying collateral quickly vanishes, and forced selling ensues. If the pyramid of debt based on XYZ collapses fast enough, it can damage XYZ's ability to obtain financing and may even drive them out of business. So how is this efficient?

Shorting entails putting up collateral in order for the privilage to conterfeit shares issued by brockerages without the companies or their shareholders permission. In case readers missed it , to allow a brockerage to dilute at will the number of outstanding shares of a company by selling short without shareholder permission is conterfeiting and should be illegal.

Wrong. You gave them permission to lend out your shares when you signed the margin agreement. Read the fine print. You are confusing naked shorting with legitimate lending of your shares, which you yourself authorized by entering into a margin agreement with your broker.

In our almost non exhistant enforced regulatory environment, when individuals are allowed to indiscrimanefit dilute the number of outstanding shares of a company. This will lead to any companies share price collapsing, it is a simple matter of supply and demand. An infinite supply willl always overpower a limited demand.

This I will agree with, but again, you're talking about naked shorting. That is illegal and needs to be prosecuted, but it has nothing to do with margin lending which makes your shares available for legitimate shorting. You can't have your cake and eat it too. If you pledge your securities for a loan, those securities become available to lend. End of story.

To suggest that shorters provide the markets with some sort of stability is naive at best, or brought up by someone who's interest remains in keeping the manipulated markets exactly as they are for their own personal benefit.

To suggest that margin lending using the shares themselves as collateral doesn't lead to exactly the same outcome, ie. overvalued shares that eventually collapse, is also naive, and displays a basic lack of understanding of commercial lending. When the asset being purchased is offered as collateral (eg. a building or a car) that asset has some residual value external to the loan and can be seized in payment in the event of default. No such relationship exists with shares, whose collapse in value is the underlying cause of the default.

If you want to borrow money to invest, fine. Take a loan out against your home. OTOH, if you take out a loan against the (possibly inflated) value of shares, you not only risk your own capital, but that of people (like me) who paid full price.

Shorting was brought into effect by the MM, not to bring stability to the markets but instead to bring instabilty when they so chose to do so hahahahahah. This was for the reason, so that they could swing trade securities without having to first actually purchase it. Not much of a trade if the selling you do is offset by your previous buying.

Demonstrates a basic misunderstanding of the role of Market Makers. The market maker profits off the spread between bid and ask, not by trading long or short. Their central role in providing liquidity depends on a) maintaining inventory, which requires hedging, b) being able to short against long positions they are required to purchase based on their defined role in the market.

It is much easier to create fear in the markets than euphoria, especially when you can conterfeit shares. By slowly feeding shorts into the market and then when buying has dried up massively shorting you can collapse a share price creating fear and margin calls. Where you then replace those shares at a substantial profit.

This I agree with, but again, you are talking about naked shorting and again, margin calls don't happen out of the blue. They are caused by the collapse in underlying collateral.

This volatility would never happen if only those legitimate shareholders were allowed to unwind their positions themselves through legitimate price discovery. Shorting has the effect of collapsing a stock below its true value, such as in the case of ARU or many other junior explorers that stock are selling for below actual cash on hand.

You yourself borrowed against your Aurelian position to buy more shares, correct? I'm sure a lot of "feeling lucky" types did exactly the same. So, why all of a sudden are they complaining that "their" shares, purchased with borrowed money, were used to short the stock when external events (WFT and Mining Madate) made the play less of a "sure thing?" I didn't place that kind of bet, yet I got caught in the same downdraft which the lucky rabbit foot set allowed to happen. You can't blame legitimate short selling for that. You lent them the shares when you borrowed on margin. Sure, they lent you the shovel, but it was you that dug the hole.

To suggest giving a bunch of manipulators (to put it nicely) the power to regulate the supposedly free markets by allowing them to short(conterfeit) shares is one of the most laughable things I have ever heard hahahahaha. Might as well give the keys of a prison to the prisoners and entrust that they will self regulated themselves, releaseing themselves when their time is served hahahahahaha.

Why do I get the impression you're purposely confusing legitimate shorting (which you allow when you open a margin account) with naked shorting which is a crime? They are not the same thing.

But it's OK for you to run the price by borrowing long? Why? So you can sell the inflated shares to some naive retiree who understands nothing of how the market works? Isn't that manipulation too? Run the price with borrowed funds, then sell out to a greater fool? If you're going to allow that, then you have to expect to be the greater fool yourself once in a while.

Caveat emptor (buyer beware), if a person through inexperience buys a security that has raised to unrealistic expectations then that was his own doing. If he loses money or is whiped out, the share price, through price discover of those who actually own the legitimately issued shares comes down to reflect a more realist price then that is an efficient and fair market. This is because this person will have learned a valuable lesson or not be able to participate in the markets for a long time. This process is much more gradual without shorting involved and thus allows those investors who bought high to more orderly exit their positions if they so chose to.

Now you're starting to make sense, and this is exactly the point Otto was trying to get across which some people thought was condescending. Clearly it wasn't, or more people would have paid for their shares in full and not tried to blame manipulation for what was the inevitable outcome of buying a risky stock using that stock as collateral for the loan. That's just gambling. You bet on seven and you rolled fours.

There is no need for a bunch of manipulators, who in many cases are the same entities who drove the share price up to unrealistic prices, then suddenly collapsing the share price to doubly profit. This is the real reason shorting was introduced into the markets. Elliminating margin accounts will not stop markets from being overbought, all it would stop is the amount of money involved being smaller. This of course is not in the interest of the manipulators either.

You know, at some point you have to either fish or cut bait. I won't argue that markets aren't manipulated. They clearly are, especially thinly traded issues. So stop facilitating that. Stop buying on margin, stop chasing momentum, and stop whining when you guess wrong and lose money. Have some discipline and understanding of the basic elements of the game you're playing, or you will lose your shirt.

However to suggest not allowing margin is to suggest not allowing borrowing for any purpose, whether to buy a car, house or whatever. You do not need to take margin from a brokerage in order to borrow in order to buy stock. You can borrow from a bank but in either case cash has been paid for any security bought on margin.

I think I've already explained the basic difference. It's in the type of collateral offered. By all means, borrow from the bank or against your home to buy securities. You may go broke, but I guarantee you'll never get a margin call.

Margin or loans should only be given to those people through good lending pactices who actually have the collateral to repay the loan. If these practices are not followed than those institutions should suffer the consequences of their actions and not be bailed out, but prosecuted harshly.

Stocks are never good collateral for a loan. That's why banks won't accept them. Only brokers will lend against securities, and that is a call loan, which means it can be called at any time. You don't have to fall below the maintenance level to get called either. If the broker needs that money somewhere else, they will call it in, period. Most people don't even know that.

It seems shorting is being put on hold or contemplated in more places than just Britian now, just as I predicted.

Yeah, and you watch the effect of that. A massive runup in bank stocks which will suck in the unwary and allow insiders to cash out near the top, once again leaving joe sixpack holding the bag.

ebear