1. Abolish Short Selling in Financial Markets

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Author: Robert341

Started: July 11, 2009, 9:31:49 pm

Target: World Governments and Financial Regulators

Category: Economy & Business

Supporters:

Goal:

1,000,000

Goal Progress:

Status

Active

TO:
President Barack Obama
U.S. Congress, SEC,
Canada Prime Minister Stephen Harper,
Canada Finance Minister James Flaherty, OSC,
and their equivalents in other countries as indicated by signatories

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A little known but longstanding stock market practice called short selling, shorting or covered shorting has escalated out of control in recent years to such an extent as to amplify current financial and economic problems. Even people who do not own stocks or mutual funds are being affected by this little understood activity as jobs, pensions and businesses suffer from its debilitating effects. Details can be obtained by visiting http://www.stopshortingstocks.com but essentially the problem is that short selling undermines companies (even whole industries or sectors) by introducing a virtual / electronic duplicate or counterfeit share (or other asset) into stock and other markets that competes with, and therefore undermines the value of similar assets. This is not just an investors\' worry, it impairs the ability of businesses and employers to raise capital which can be crucial to their survival -- and by extension, to your own survival. Short selling is legal at present but an illegal kind of short selling called naked shorting is similar but more insidious. Regulators are unable (or unwilling) to stop naked shorting or to recognize the destructive effects of legal shorting. The expansion of this little known technique to major proportions is both cause and effect of the growth of hedge funds and the expansion of recent bubbles as duplicated shares proliferate throughout the market, undermining the entire economy. Therefore, we believe it is in the public interest to abolish all forms of short selling in all markets (stocks, futures, commodities, etc.)

Inasmuch as short selling is based on the surreptitious duplication of one asset into the hands of two different owners and notwithstanding legal fine print declaring that shares in margin accounts, funds, pensions etc may be 'borrowed' for the purpose of being sold short, it is a fact that most investors are not explicitly informed of this (or of its importance to them), they are not informed when their assets are actually borrowed, nor are investors informed if they are purchasing shares actually owned by someone else (or illegally counterfeited). That public markets legalize such blatant dishonesty is unacceptable.

Inasmuch as shorting has existed for a long period of time, apparently without harming markets or stopping economic growth, it is our contention that conditions have changed through the abolition of rules & restrictions, the growth of hedge funds, the creation of ETFs and short ETFs, double short ETFs, and the proliferation of online trading that have combined to increase shorting activity beyond what markets are able to absorb without becoming unstable. Increased short activity brings into sharper public focus the inherent dishonest nature of the transaction and the nature of the impact. In addition, the emergence of strong overseas competitors means that we should eliminate anything that systematically weakens our collective position.

Inasmuch as the dishonesty inherent in shorting combines with the ease and success of this self fulfilling strategy to reward those who destroy value and enterprise, short selling therefore breeds a moral hazard in participants and in the market so as to increase the popularity of short selling and the volume of their activity. We contend that markets were invented by humanity as an engine of growth and improvement and not as an engine of destruction and pillage and we are opposed to rewarding such parasitic activity.

Inasmuch as occurrences of naked shorting are only discovered through "fails to deliver" and such information is forwarded but slowly through the system after initial wait periods, and inasmuch as numerous occurrences of overly long delays have gone unexamined and unpunished, and inasmuch as regulators are drawn from the ranks of industry which itself benefits from vast commissions paid by shorters, we feel that governance is both lax and conflicted, and therefore, that abolishing all shorting activity is the only way to be sure naked shorting is not also occurring.

Inasmuch as the duplication of shares (or other assets) undermines the value of all similar assets, and inasmuch as popular market data pages do not reflect the impact of the extra shares on important investing metrics such as market capitalization, float etc., and inasmuch as it is difficult for ordinary people to access short and fails information in a timely way, it is therefore difficult, even impossible for the average investor to understand the true value of shares they own or may wish to invest in.

Inasmuch as the market playing field is not level but favors short sellers over businesses in certain technical ways, ie. trading limits being imposed on public companies but not shorters.

Inasmuch as shorting and its illegal twin have spawned unintended spin-offs and consequences such as increased volatility, manipulation, "bear raids", "death spiral financing", and the fattening of bubbles (peoples' savings sucked in), shorting has contributed to recent turmoils to such a degree it was briefly outlawed on a limited basis, lending weight to our case.

Inasmuch as the benefits of shorting claimed by many are illusory, overstated, biased, and do not justify the dishonesty, moral hazard and economic damage involved.

We, the undersigned members of the public, do hereby petition our governments to outlaw the practice known as short selling as it applies to stocks, futures, derivatives, structured instruments or any similar assets in any financial market.

Finally, we are signaling our legislators to FIX the problem or face the consequences of widespread public anger, loss of trust and consequent withdrawal from the market which would have dire economic repercussions.

This petition addresses itself to all jurisdictions allowing the practice, initially asking the United States and Canada to show moral leadership by banning the practice immediately.

Further information may be found at http://www.stopshortingstocks.com

Sincerely,

The Undersigned

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Note To the Public

PLEASE INFORM YOURSELVES AND SPREAD THE WORD! PLEASE URGE AS MANY AS POSSIBLE TO GIVE THIS ISSUE THEIR SERIOUS CONSIDERATION. MAKE IT A GOAL TO GET OTHERS TO SIGN. LET\'S ALL WORK TOGETHER FOR AN END TO MARKET DISHONESTY.
Please also consider assisting with this petition.

If you are not in agreement that legal shorting is a problem, and only feel that illegal/naked shorting is a problem, you may wish to sign the other petition at the "Market Reform Petition" page which basically tries to patch things up. http://www.petitiononline.com/mrktrfrm/petition.html We are of the opinion that just rejigging the shorting system is unlikely to make much difference, but there is no harm in signing both.