The Noble Motivations Behind Regulations (Or, "We'll Take You to the Cleaners")

No surprise. When the Ministry of Price Control (the SEC) first banned shorting in September, it also banned the Market Makers and Options Market Makers from shorting (effectively). Options market makers have very strict quoting requirements, so some firms refused to make markets at all and they were all up in arms about the stupidity of these restrictions – until the SEC returned their exemptions. The return of their exemptions meant that they could almost exclusively take advantage of wide bid/ask spreads and additional volatility in the markets caused by the ban. These are the conditions that market makers dream of because they make more money and customers have to pay more to transact. When their restrictions (but not anyone else's) were lifted, they all began waxing philosophical: "I'm the biggest free market guy you'll ever meet, but these restrictions are necessary to prevent short sellers from driving down financial stocks". Short interest was only 6% on average for all the stocks on the original short ban list.

They want the uptick rule back for the same reason – they have some exemptions and it widens the market and reduces liquidity. Reduced liquidity means less price competition and wider spreads for market makers & specialists. Of course, they're all very "free market" and claim the rule is there to protect the market from going down too fast and grandma's portfolio from tanking. It's all for the greater good, you see. The reality is that the SEC did a pretty thorough study and found that, while the uptick rule reduced liquidity and increased spreads marginally, it did nothing to keep stocks from declining rapidly (assuming that's even a desirable goal). Of course, the crash of '87 and the rapid market decline after 2001 both happened while the uptick rule was in force. Somehow, they always forget to mention that.

Basically, what I've noticed in my highly regulated industry is that regulation is generally meant to insulate the professionals from competition. Sometimes it's intended, like the NYSE's Duncan Niederauers's blatant lobbying of the SEC for circuit breakers and an uptick rule where a "tick" is more than a penny – widening spreads for market makers. Other times an unintended consequence. Most of the time, it's intentional. I'm sure this is no surprise. But you'll only ever hear that from those of us who, like me, are arrogant enough to believe that we can compete without the field being tilted in our favour.

Vidyohs,

A little clarification on Colorado water law:

It's not accurate that no individual owns water. Rights to water are purchased and are weighted according to seniority, which means senior rights take delivery priority, and delivery to junior rights occur only as long as water is still available in the stream. If you own an 1869 right to 100 acre-feet of Arkansas River basin water, you are entitled to all of your 100 acre-feet before an owner of 1870 right can make his call. In normal or wet years, this generally isn't a problem, but it was a real problem during the drought five years ago. It is correct that owning the land doesn't necessarily include a right to any of the stream flow, but it can.

The realtor was absolutely correct about the use-once law, but I'm not sure that it applies to people who get their water from a private well and who are on a private septic system.

Brotio,

I was guilty of lazy and careless phrasing. you are correct, individuals do own water rights.

I should have correctly stated that just owning the land does not necessarily mean you have the rights to the water on it or that falls upon it, someone else may have prior right to that water under Colorado law. IOW, individuals may not assume any ownership of water.

If I take the realtor's word for it, I would have no rights to the water in the stream that flowed through the property, no junior and no senior rights. Zip, nada.

I was told by the realtor that if I bought the property he showed us, I could get a permit to drill a well; but, that I could only use the water for household functions and would not be able to use it to water a garden or to water livestock. That realtor said I could use gray water to garden, but the Reason article said no I couldn't. Who is correct, considering one man (realtor) was selling and the other man (Reason) was informing, until I see the actual law I'll go with the one who was informing. He has no dog in the hunt.

Anyway, ain't no way in hell I would ever move to Colorado knowning that.