SEC’s move towards transparency in Short Selling — a step in the right direction
Upstream’s blockchain-powered market goes a step further with no short selling allowed
By Vanessa Malone
Conventional financial markets do not offer safeguards against short selling. On Upstream, a MERJ Exchange Market powered by blockchain technology, short selling is inherently not allowed.
We believe the technology powering Upstream’s investing app signifies the next phase of capital markets, driven by several compelling factors. Notably, the elimination of prevalent market manipulations like short selling stands out as a prominent feature, contributing to the development of a more equitable and transparent trading environment.
Recent actions by U.S. regulators suggest we are on the right track.
The U.S. Securities and Exchange Commission’s (SEC) recently implemented new rules for increased transparency in short selling. This marks a significant milestone in the ongoing efforts to ensure market stability and fairness.¹
The move, first proposed in late 2021 and early 2022, aims to provide greater visibility into the intricate world of short selling, a practice that has long been a subject of debate and controversy.
The GameStop short squeeze that took place starting in January 2021 really brought the consequences of short selling into the spotlight. In true Main Street versus Wall Street fashion, the world witnessed Reddit community ‘wallstreetbets’ take a stand against Wall Street by pumping the stock prices of GameStop (GME) and various other stocks to counter Wall Street hedge funds that were “shorting” them. GME went from $17 in early January, 2021 to nearly $500 by late January, 2021.² This coordinated move driven by retail investors cost traditional Wall Street hedge funds billions of dollars.
The events surrounding the GME stock emphasized the importance of democratizing finance and leveling the playing field for investors of all levels.
The SEC’s recent rule adoption, under the leadership of Gary Gensler, is a proactive step to enhance transparency and market fairness. The new rules will mandate that investors report their short positions to the SEC, while companies lending out shares will need to report such activities to the Financial Industry Regulatory Authority (FINRA). This level of disclosure will not only shed light on the dynamics of short selling but also enable regulators and the public to better understand market trends, especially during times of volatility.
Short selling, despite its proponents arguing its role in uncovering fraud and corporate misconduct, has often faced criticism for its potential to harm companies and destabilize markets. With short interest in the U.S. market currently standing at a staggering $927 billion according to the analytics firm S3 Partners, the need for comprehensive oversight has become increasingly imperative.³
The SEC’s new rules signify a positive step toward a more transparent market, but our team sees this as a stepping stone towards markets that remove the opportunity for market manipulations to occur, like Upstream.
It’s essential to highlight the significance of blockchain-powered infrastructures like Upstream in preventing practices such as short selling. Upstream’s decentralized and transparent nature ensures that market activities are conducted with integrity and accountability, mitigating the risks associated with speculative maneuvers that can adversely impact businesses and investors alike.
Upstream is an investor-driven marketplace with best bids and offers displayed and secured using Ethereum blockchain technology. Investors of all levels can buy, sell, and settle securities directly from the userfriendly trading app. Pricing to buy or sell a stock is determined by the individuals and the free market. There is no short selling, no naked short selling, and the public orderbook is available for all to see.
By leveraging blockchain technology, Upstream creates an ecosystem where all transactions are securely recorded and accessible, eliminating the opacity often associated with traditional financial markets. Through smart contracts and immutable ledgers, Upstream fosters a level playing field for all participants, fostering trust and confidence in the market.
With the SEC’s latest move toward transparency in short selling, it becomes increasingly apparent that a platform like Upstream is not just an alternative but a necessity in today’s evolving financial landscape. By prioritizing integrity and accountability, Upstream paves the way for a more equitable and sustainable market environment, safeguarding the interests of all stakeholders involved.
As we embrace these progressive changes in the regulatory framework, it is imperative for market participants to recognize the value of a robust infrastructure enforced not just by rules and regulation, but by design. Upstream stands as a testament to the potential of blockchain technology in revolutionizing the financial landscape, ensuring that market activities are conducted with utmost transparency and integrity.
Conclusion
Upstream is actively accepting listing applications from global issuers that are seeking to offer their shares to a modern-day investor pool that accepts digital currency and traditional payments. Learn more at: https://upstream.exchange/GetListed.*
*Upstream is currently accepting non-US issuer applications only
Sources
1 Reuters | 2 thestreet | 3 SEC |
Disclaimers
This communication shall not constitute an offer to sell securities or the solicitation of an offer to buy securities in any jurisdiction where such offer or solicitation is not permitted.
NFTs have no royalties, equity ownership, or dividends. NFTs are for utility, collection, redemption, or display purposes only. Anyone may buy and sell NFTs on Upstream.
*U.S. or Canadian-based citizens or permanent residents may only deposit, buy, or sell securities on Upstream after being introduced by a licensed broker-dealer. Note that U.S. or Canadian-based investors include those U.S. or Canadian citizens who may be domiciled overseas. All orders for sale are non-solicited by Upstream and a user’s decision to trade securities must be based on their own investment judgement. Anyone may buy and sell NFTs on Upstream.
Upstream is a MERJ Exchange market. MERJ Exchange is a licensed Securities Exchange, an affiliate of the World Federation of Exchanges, a National Numbering Agency and member of ANNA. MERJ is regulated in the Seychelles by the Financial Services Authority Seychelles, https://fsaseychelles.sc/ an associate member of the International Association of Securities Commissions (IOSCO). MERJ supports global issuers of traditional and digital securities through the entire asset life cycle from issuance to trading, clearing, settlement, and registry. It operates a fair and transparent marketplace in line with international best practices and principles of operations of financial markets. Upstream does not endorse or recommend any public or private securities bought or sold on its app. Upstream does not offer investment advice or recommendations of any kind. All services offered by Upstream are intended for self-directed clients who make their own investment decisions without aid or assistance from Upstream. All customers are subject to the rules and regulations of their jurisdiction. By accessing the site or app, you agreed to be bound by its terms of use and privacy policy. Company and security listings on Upstream are only suitable for investors who are familiar with and willing to accept the high risk associated with speculative investments, often in early and development stage companies. There can be no assurance the valuation of any particular company’s securities is accurate or in agreement with the market or industry comparative valuations. Investors must be able to afford market volatility and afford the loss of their investment. Companies listed on Upstream are subject to significant ongoing corporate obligations including, but not limited to disclosure, filings, and notification requirements, as well as compliance with applicable quantitative and qualitative listing standards.
Forward-Looking Statements
This communication contains “forward-looking statements.” Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential,” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control, and cannot be predicted or quantified, and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) difficulties in obtaining financing on commercially reasonable terms; (ii) changes in the size and nature of our competition; (iii) loss of one or more key executives or brand ambassadors; and (iv) changes in legal or regulatory requirements in the markets in which we operate. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.
