Dropping the Shorts

The most politically charged aspects of the Open Source Real Time Exchange is the role of short sells.

Advocates of shorting claim that the device is needed to provide market efficiency. Personally, I can't imagine anything more efficient than a virtually instantaneous transaction in real time.

Naked Shorts

Since the system requires a seller to identify the shares being sold, the program would eliminate the ability of a seller to make a naked short.

Disciplined Shorts

A real time system would allow for traders to engage in disciplined shorting. In a disciplined shorting regime, the system would allow a short seller to take shares from an account that permits shorting. Replace the shares with an IOU, then sell the borrowed shares. The original share owner would not be able to sell the loaned shares until the short seller returns shares and removes the IOU.

A disciplined shorting regime would leave a full auditing trail of the short transaction. This is in contrast to the current regulatory regime where short sellers borrow shares from a brokerage without the knowledge of the actual share owners.

Experimentation with Shorts

Personally, I think short selling should be banned. I believe that short selling magnifies the depth of every stock market correction and is a prime contributor to the massive inequities in the distribution of wealth in the world.

Defenders of short selling tend to yell profanities, and threaten people opposed to short selling. The general consensus among traders is that people opposed to short selling are naïve and should be ridiculed and ignored.

I agree that is entirely possible that I am completely off my rocker in my distaste for the short sale.

Rather than playing the game where I make moral arguments against short selling while short sellers heave contempt at my very existence, I believe that the best way to resolve a dispute would be to have a system with multiple exchanges that operate by different rules.

The whole point of a free market is that is allows people to experiment with different ideas. Having multiple exchanges on the market would produce empirical data as to the costs and benefits of different takes on the shorting issue.