Kass: 11 Ways to Fix the Short Ban

This blog post originally appeared on RealMoney Silver on Sept. 23 at 8:09 a.m. EDT.

Last week's hastily crafted regulatory response to ban short selling must be immediately corrected or terminated.

While it is probably true that the recent fiscal RTC-like effort, which I call CRUD, or the central repository for underperforming debt, has its own set of problems but is probably a necessary jolt to a deeply challenged financial system, the series of poorly constructed and reactive regulations in a selected ban (and enforced disclosure) of short selling that the SEC has instituted will likely have unintended negative consequences.

My prediction is that the only naked short sellers that are caught and prosecuted in the SEC's hunt will be daytraders who have bypassed the current shorting regulations as they trade on their REDIs and other trading platforms -- that is, the same daytraders who took stocks up to ludicrous levels nine brief years ago in the Internet bubble and set the stage for the Nasdaq collapse. ...