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Comment by Rufbdbskrufb473 | Hacker News Reader

You just listed a bunch scary sounding financial buzz words, but I doubt that a thorough analysis of them would support your conclusion.

In fact, many have the opposite effect and result in more efficient price discovery. Take naked shorting for example. Without shorting, it would be far more difficult for an equity research firm to be incentivized to look into fraudulent stocks, as was widespread with Chinese companies a few years ago. Without their efforts, stock prices would have remained inflated for longer.

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You don't understand what naked shorting is. Naked shorting is shorting without first borrowing from someone. Normal shorting is limited by the availability of stock to borrow (by the way, if stock holders wish, they can request from their broker that their stock won't be available for borrowing, potentially causing short squeeze), by the interest rates on borrowing the stock.

Naked shorting skips it all. Some market makers are privileged and can sell stock they don't own and didn't borrow. So they have a privilege of printing stocks in the short term, and that's quite broken, and many of them abused this position to manipulate markets. Normal participants in the market can't naked short.

Naked shorting means that the market maker who supposedly sold you a stock, can now fail to find the stock he sold you, leading to "fail to deliver".

The excuse given is that naked shorting allows for more liquidity, but given the other problems, I think it's bad.

> excuse given is that naked shorting allows for more liquidity, but given the other problems, I think it's bad

I assume you have a counterpoint to the decades of data the NYSE, SEC, Financial Crisis Inquiry Commission and others around the world have collected that show naked shorting improves liquidity without FTDs negatively impacting price discovery while tamping volatility, evidence made particularly robust by the fact that naked shorting is permanently banned, and has been temporarily banned, in many markets, such as Australia, Switzerland and, for some stocks post crisis, in the United States? (See Wikipedia for a summary.) The whole affair reminds me of the lead up to the Onion Futures Act [1].

[1] https://en.m.wikipedia.org/wiki/Onion_Futures_Act

Isn’t that argument somewhat strange or dishonest? To paraphrase you: I‘d rather have naked shorting and the associated manipulation and problems with it than better price discovery for stockholders. In your example, the stockholder isn’t protected either, only an equity firm derives profit from this information. In a more ideal world the stockholders themselves would do this due diligence, which is something that already happens. Also there’s differences between shorting and naked shorting. I could well imagine allowing fully hedged shorting and outlawing naked shorting. Especially considering the issue of fail to deliver, that’s just absurd with our technology.

> could well imagine allowing fully hedged shorting and outlawing naked shorting

Many markets (e.g. Australia and Switzerland) do this. We have the comparative data to show it doesn’t do anything good while increasing volatility.

You referenced due diligence as naked shorting but they are different.

You listed a bunch of financial buzz words and didn't disprove OP.

Please show how naked shorting incentivized good due diligence.

You could have just pointed to the massive new supply that was announced, it's the logical reason why the price dropped.

Geopolitics are the primary mover of markets currently.

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