By William K. Black
June 27, 2017 Bloomington, MN
The president of the New York Stock Exchange (NYSE) launched a coordinated attack on “shorts” that mirrored his rival’s (Nasdaq) attack. The NYSE assault, however, used bizarre rhetoric.
“It feels kind of icky and un-American, betting against a company,” NYSE Group President Tom Farley told lawmakers in Washington Tuesday.
The heads of the NYSE and Nasdaq have appropriated the word “transparency” to support the effort to reduce the shorts’ effectiveness. When the NYSE purports to champion “transparency” – the key to reducing fraud by the CEOs of the companies whose stocks they exchange – it is time for investors to grab their wallets and hold them tight. The stock exchanges are very far from being champions of transparency when the question is what the CEOs of the listing companies should be required to disclose. Sure enough, it turns out that the stock exchanges’ proposed anti-short “reform” is actually a means to try to reduce the reliability of the public disclosures made by the CEOs of firms on those stock exchanges. A sophisticated stock fraudster wants the public to believe the firm is “transparent” because of its disclosures, but it is those very disclosures (when false) that turn that ‘transparency’ into an illusion designed to deceive the investor. When shorts improve the reliability of the disclosures that the CEOs of firms listed on the stock exchanges make, they protect investors from fraud. That makes honest “shorts” highly “American.”