Jim Cramer for SEC Chairman / Leveraged ETF and Volatility

On today's show, Cramer nominated himself for the next SEC Chairman pounding on Christopher Cox.  He used to be a hedge fund manager, and a Goldman alumni, he knows all the tricks....he knows how to kill bad bears...  His explanation of the impact of double/triple leveraged ETFs on such volatility made perfect sense.  

He has repeatedly criticized Cox for a long time especially on his short friendly policies (removal of the uptick rule, ignoring naked short selling, etc).  He has also openly talked about option expiry week manipulation.  But he failed to admit that the oil price last summer was due to speculation.  

He made good points...here's what he will do:

Investigate the bear raiders. Subpoena the tapes, the e-mails, the instant messages. Follow the evidence to the wrongdoers. Hold people accountable for the damage done to Lehman Brothers, et al.

Bring back the uptick rule. Remember this little regulation? It prevented traders from selling a stock short until it first ticked up in price. Cox repealed the rule, allowing company after company to be virtually obliterated. This is why the Dow can drop 9% in a single day, like it did Monday.

Get rid of overleveraged exchange-traded funds. Double- or triple-short ETFs allow investors to sidestep important margin rules. A dollar turns into two or three, increasing the size of a bear raid. In fact, these ETFs have had a direct effect on the market recently in ways you probably recognize: ETF orders are placed at 3 PM ET, and executed at 3:40. Does this kind of terrible last-minute action sound familiar to you? Again, just look at what happened Monday if you need proof.

Watch for market manipulation. Why does Exxon Mobil [XOM  77.61    3.30  (+4.44%)   ], the largest stock by market cap, trade like a penny stock in the final minutes of the session? Because of the aforementioned ETFs. Of course, Chris Cox believes that the market’s too big to be manipulated, and that’s one of the reasons why we keep getting hurt. Cramer vowed to stop this.

Demand transparency. Cramer’s amazed that Citigroup’s [C  7.22    0.77  (+11.94%)   ] balance sheet – and that of AIG [AIG  1.87    0.22  (+13.27%)   ] – showed none of the problems that eventually warranted a government rescue. How is that possible? Cramer wants transparent financials. Companies that don’t pony up will be held responsible.

I have had love/hate sentiment about Cramer.  When he recommends AAPL, it seems that shorts start selling aggressively.  And when he says "sell AAPL", his explanation is not good enough.

  

Video Link: Video - CNBC.com

These are the prominent short sellers: The Wizards of Short-Selling - BusinessWeek