SEC exempts Market Makers

This big news in the market these days has been the new SEC naked short sale regulations. According to this article, market makers in equities and options have been exempted from the short sale regulations.

In my view there are three main criticisms of the original regulations. The first is resolved by this adjustment. The options market, in particular, was effected by these regulations since it can disrupt hedging operations. Since activity in the options market feeds into the equity markets, if you create regulations that make it less likely someone will make markets in some options, there will be some big effects. The second criticism is the one pointed out by Mish several times that the firms exempted from the shorts has been chosen rather arbitrarily. Finally, is the whole this prevents these companies from going quickly to a fair value and serves as a form of relief for privileged, politically well-connected banks. People lost their life savings on internet companies and rules like this weren't put in place. And I'll leave it at that.