Noone should benefit from sabotaging a company. It's way too easy to drive the price of a stock down...the slightest rumor sends them into free fall.
Granted it wouldn't solve much. Wall Street could just as well drive the price of a stock down with a false rumor, then buy up the stock at a discount before it rebounded.
But at the very least, they wouldn't make twice as much on each transaction.
Actually I disagree. Shorts one of the few cures for bubbles that we have and they are weakened greatly by institutional rules that favor promotion over rationality. But, and this is a big one, we would have to reveal trading positions daily to banish all speculation.
Large short ratio is the first sign something is amiss. In an environment with imperfect information, someone knows more than the news on the company press releases page.
I think you're equating short selling with fraudulent market manipulation. Short selling has no soul - flipping the buy-then-sell to sell-then-buy ( that is, shorting ) merely allows the pessimists to place their bets along side the optimists, and the markets are better off for it. A great read on the subject:
Noone should benefit from sabotaging a company. It's way too easy to drive the price of a stock down...the slightest rumor sends them into free fall.
Granted it wouldn't solve much. Wall Street could just as well drive the price of a stock down with a false rumor, then buy up the stock at a discount before it rebounded.
But at the very least, they wouldn't make twice as much on each transaction.