Amazing scenes as Mr Cox announces "new" rules aimed at naughty short sellers. These bear remarkable similarity to "old" rules announced in June last year.

Naked shorting should not be allowed - that is clear. If the SEC are so sure of their audit showing larger floats than issued stock then there are grounds, it would seem, to take action. There are also bear squeeze opportunities going a begging - albeit difficult ones to take advantage of.

On the other hand, if market participants just think, for some odd reason, that financials do not look a great place to be, the regulator is on a political justify-our-existence romp just as the proverbial is being blown off the fan. And a decent portion of shorting (legitimate or otherwise) will probably shift into the options and CFD markets simply on the back of the bureaucratic and administrative confusion Mr Cox's intervention is generating.

There is the greater question of Fannie and Freddie - and by implication systemic dangers - which Mr Cox referred to directly in his testimony. But highlighting his agency's inability to enforce its regime or targeting "rumour mongers" (brilliant) is not any solution to the spawn of excessive leverage.

Related articles:
In defense of short sellers
SEC calls top bankers in hunt for 'manipulators'
SEC's new red herring
SEC moves to curb stock manipulation

Feds fight the fear factor

SEC Chairman Answers Critics

Christopher Cox's Shorts
(Fox video interview with Mr Cox - recommended)

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