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Uptick Rule and Mark-to-Market Reform Hints Boost Stocks

March 10, 2009 RSS Feed Print

The market obviously loves the idea of a return of the uptick rule as well as contuining rumors about an alteration of mark-to-market accounting. But look, M2M is not going to be suspended. The SEC and Treasury are both against that. But note that Fed Chairman Ben Bernanke said that there should be "improvements" made to the accounting standard, though not suspension

How about this improvement suggested by Citi's Vikram Pandit who has suggested that mark-to-market created losses could be 1) realized by the banks, but 2) not as an immediate hit to income statements. Instead the losses would be 3) realized on an amoritized basis over time. Simple as 1-2-3. Could this be what Bernanke has in mind?

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Good comments on eliminating, or at least suspending m2m.
And when in the world will the SEC enforce the regulations against undelivered and unreceived securities? This stock counterfeiting (aka: naked short selling) must end. The investigative website DeepCapture (2008 Best Business Blog winner)has exposed much behind the captured regulators, Congress and the NY financial media. Bloomberg ran its own Emmy nominated exposé of this catalyst of the financial meltdown we're in, called "Phantom Shares." FYI, see: www.deepcapture.com

Zulu of MD 10:24PM March 10, 2009

Last September the SEC stated they have zero tolerance for abusive naked short selling yet they have rarely if ever locate violators.
How does the SEC determine whether an institution is in compliance with rules?
They don’t. Presently the only way they determine compliance is through an SEC audit they do months after institution is flagged if at all like Mr. Madoff.
In the case of a bear raids does not work.
Here are some Bear Raid Common sense suggestions that would be more effective than an uptick rule.
1. Do what we pay you to do regulate the market! If you don’t be criminally held responsible. No more blanket immunity like you gave Mr. Paulson,.
2. Amend Regulation SHO effectively to require broker-dealers before they accept short sales orders / effectuate short sales from their own account. Require by law shares in hand that they are shorting. If they don’t take the brokers license away for life and fine the firm 100X what they failed to have on hand. No one would risk their license to help out a friend and no firm would look the other way or promote this loophole.
3. Eliminate the broker having “reasonable grounds to believe that the security can be borrowed.” Everyone has watched what it costs the world when we have no oversight system in place except for reasonable brokers. M2M is like asking a student to mark their own final exam only much more expensive.
4. Long positions are required to be disclosed yet substantial short positions are not. They should be treated equally and both should be reported.
5. The SEC should vigorous enforce action against violations such as the Regulation SHO and all other attempts at market manipulation. Start with FAZ and SKF since the governments are now such a large bank stock shareholders.
6. Fines and penalties should be so severe to curb illegal temptation and more importantly not encourage.
7. Hire hundreds of enforcers that know the game and are presently laid off by their institutions. Use the Wallstreet bonus system the more illegal money and corruption they locate the more money they earn.

sharron 8:52PM March 10, 2009

How did an accounting rule destroyed the world in less than 2 years?
Simple, Bonds are not the same as Stocks! Accountants who created M2M do not know that. Stocks are risk assets that should be M2M. Banks are the holders of bonds. Bonds are risk averse, but do not have 2 sided markets and MOST of the 4.5 Million bonds are fairly illiquid, compared to the 10,000 stocks in existance. Even the best Bonds in a bad market can have a spread so wide, you can drive a truck through it. This is the worlds biggest fire sale.
No! We must suspend M2M! Or just wait to till the 1st big insurance companies (who's models ALL rely on S&P average returns) decide to go bamkrupt and NOT pay policy holders. Then congress will have to listen, but it will be tool late.
If I am wrong, let your accountant manage your portfolio. According to them, paying interest and taking big losses is a great strategy. I think being out of debt and having big gains is the way to go. You disagree?

John Gagliardi of NJ 6:52PM March 10, 2009

Uptick Rule and Mark-to-Market Reform Hints Boost Stocks

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