Toronto, Ontario--(Newsfile Corp. - July 13, 2020) - Save Canadian Mining (SCM) today responded to the 47 policy proposals contained within the consultation report released by Ontario's Capital Markets Modernization taskforce last week. The advocacy group, which includes many junior mining companies as well as mining associations and TSX Venture Exchange, was pleased with the attention paid to predatory short selling, which they claim has disproportionately impacted the junior mining sector for years. "We commend the work of the taskforce and are encouraged that our message on the need for more regulatory oversight of predatory short selling has been heard. We remain hopeful that the final recommendations will include an endorsement of the "tick test" and that the government decides to reinstate this critical safeguard," said Terry Lynch, Executive Director of SCM.
If I understand it correctly, the "tick test" requires short-selling to be at the current offer price (Sell price) or higher. So, while short-sellers can still benefit from a falling share price, they cannot by the short-selling itself, drive down the share price.
There would still be some issues, but this could go quite a long way towards solving the problem (yes, there really is a problem!). Two examples: It would prevent short-sellers from triggering others' stop-losses, and it would prevent short-sellers from destroying rights issues by driving the share price below the offer price.
SXY has I think been plagued with short-sellers for a very long time, and it has had the effect as described by SCM. I would like to see Australian regulators get serious about it, as appears might happen in Ontario. Yes, recent good news has given a nice jump in SXY's share price, but I'm pretty confident that it still won't get anywhere near fair value (which has itself gone up of course) and that the short-sellers will get their icy grip restored very quickly.
SXY Price at posting:
28.5¢ Sentiment: Buy Disclosure: Held
