Why does the regulator impose rules

LankanBusiness · 1 Why does the regulator impose rules Thu Oct 20, 2011 2:35 pm

LankanBusiness

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I have seen many posts blaming the regulator by most and also veterans of the stock market are now roasting the regulators.

The regulator has to ensure a level playing field for everyone concerned and also ensure that the integrity of the overall market is maintained

Integrity is a concept of consistency of actions, values, methods, measures, principles, expectations, and outcomes.

To ensure this the regulator has to impose many rules that are unpopular – maintaining integrity of a stock market is a very difficult task.

For example the regulator has to ensure that stockbrokers remain liquid to ensure that they can meet short term liabilities to the stock market as a whole.

What happens if a broker goes bankrupt? Does the central bank bail him out? No – it is the people who had transactions with that broker that suffer. What if you had sold shares and cannot recover sales proceeds you will then lose everything. In that situation we would rightly blame the regulator. It is for this reason that forced selling is in operation to ensure that brokers maintain adequate liquidity to meet liabilities especially during a market down turn – similar to what we are facing now.

Now aren’t you glad there’s forced selling and so many other rules to keep your money safe?

cseradar · 2 Re: Why does the regulator impose rules Thu Oct 20, 2011 2:52 pm

cseradar

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Yea... The money is safe now due to the regulators.... How good have they been...? It is a well regulated market... (But we are incurring losses)

Welcome to the world of regulations and Losses...!

Happy trading...!

Paypal · 3 Re: Why does the regulator impose rules Thu Oct 20, 2011 3:01 pm

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This is called over regulating...

hariesha · 4 Re: Why does the regulator impose rules Thu Oct 20, 2011 3:09 pm

hariesha

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RUBBISH!

In your topic you talk about two values.

1. Level playing field
2. Integrity ( You go further to describe what integrity is, “consistency of actions, values, methods, measures, principles, expectations, and outcomes”

The above are undoubtedly two of the many characteristics of a healthy market. No issue of that.
But before discussing further can you please explain whether the actions taken by our so called regulator, are for the above two or whether their action possess the above two characteristics.

Any how I would like to thank you for opening this topic.

Deva · 5 Re: Why does the regulator impose rules Thu Oct 20, 2011 3:39 pm

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hariesha wrote:RUBBISH!

In your topic you talk about two values.

1. Level playing field
2. Integrity ( You go further to describe what integrity is, “consistency of actions, values, methods, measures, principles, expectations, and outcomes”

The above are undoubtedly two of the many characteristics of a healthy market. No issue of that.
But before discussing further can you please explain whether the actions taken by our so called regulator, are for the above two or whether their action possess the above two characteristics.

Any how I would like to thank you for opening this topic.

hariesha, you are absolutely correct.
Have regulators performed their duties in a fair and consistent manner?
People should stop pointing fingers @ small investors. How can big investors exist without small investors?
The only thing regulators know is to squeeze everybody's neck.

hariesha · 6 Re: Why does the regulator impose rules Thu Oct 20, 2011 4:31 pm

hariesha

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Dear LankanBusiness,

This absurd level regulating started with the introduction of so called Price Bands in August 2010.

Will price bands create a level playing field?

Valuations of shares of companies can be changed drastically due to business situations. Let’s think all of sudden earnings potential or asset value got changed drastically.

IE:
If company X struck a deal, this will increase the earnings potential in several times and share price of that company needs a natural re-rating. But what will happen with price bands. Before the news broke out, share will get caught in the price band due to speculation. In the next day morning people who want to move the price (who had inside information and collected the share, in other words “white collar criminals”) will place huge buy orders at the maximum price which will discourage sellers. Next day there will be another huge buy order at maximum price. And so on, till achieving their target price. This acts will create a huge demand for the share, as intended investors who didn’t had information and couldn’t bought the share earlier but eager to buy the share will follow the manipulator buy placing buy orders at the maximum price. When the share reach the targeted price manipulator will start dumping his shares to this innocent unsuspecting investors. Why I say “Innocent”. Because they are not involved in the crime of insider dealing.
One can argue, why the innocent investors bought at the highest price. That’s how human beings behave. This is what is extracting in TECHNICAL ANALYSIS.

Has the price band created a level playing field? Or does it helped the manipulators?

wiki · 7 Re: Why does the regulator impose rules Thu Oct 20, 2011 10:04 pm

wiki

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hariesha wrote:Dear LankanBusiness,

This absurd level regulating started with the introduction of so called Price Bands in August 2010.

Will price bands create a level playing field?

Valuations of shares of companies can be changed drastically due to business situations. Let’s think all of sudden earnings potential or asset value got changed drastically.

IE:
If company X struck a deal, this will increase the earnings potential in several times and share price of that company needs a natural re-rating. But what will happen with price bands. Before the news broke out, share will get caught in the price band due to speculation. In the next day morning people who want to move the price (who had inside information and collected the share, in other words “white collar criminals”) will place huge buy orders at the maximum price which will discourage sellers. Next day there will be another huge buy order at maximum price. And so on, till achieving their target price. This acts will create a huge demand for the share, as intended investors who didn’t had information and couldn’t bought the share earlier but eager to buy the share will follow the manipulator buy placing buy orders at the maximum price. When the share reach the targeted price manipulator will start dumping his shares to this innocent unsuspecting investors. Why I say “Innocent”. Because they are not involved in the crime of insider dealing.
One can argue, why the innocent investors bought at the highest price. That’s how human beings behave. This is what is extracting in TECHNICAL ANALYSIS.

Has the price band created a level playing field? Or does it helped the manipulators?

well said... even their mysterious formula dose not take ill liquid share into account