By Tyler Durden

It’s not HFTs; It’s not global orchestrated central bank intervention in “markets”; it is not even confirmed

manipulation of virtually every asset class by the Too Big To Prosecute banks, who instead of doing research spent time colluding in anonymous chat rooms how to manipulate everything from FX, to Treasurys, to gold.

No: according to the SEC what is truly broken with the markets, and why two-thirds of Millennials have lost faith in stocks, are short sellers “manipulating” stock prices on Twitter Inc (NYSE:TWTR).

In an interview with Bloomberg, SEC chair Mary Jo White (who had to recuse herself from some of the SEC’s biggest enforcement cases as a result of her prior work) said that instead of dealing with far more pressing issues for why retail investors have practically deserted the entire market due to its wholesale manipulation by embedded interests, U.S. regulators are “reviewing whether to make short sellers step out of the shadows, as negative comments by research firms increasingly batter share prices.

That’s odd: if it wasn’t for “negative comments” by research firms nobody would have uncovered Philidor, and Valeant’s questionable and now defunct specialty pharma relationship. But why bother with uncovering alleged criminality when keeping this quiet would have meant lack of billions in losses for those who the SEC is sworn to protect: billionaires who manage other people’s money, based on some clearly terrible investment decisions.

Just as surprising: the SEC is not planning a crackdown on “positive comments by research firms” that send prices surging – because when it comes to “price discovery”, the SEC is all about cracking down on manipulation but mostly when it is manipulation leading to lower prices.

Bloomberg continues:

“It’s a complex sort of landscape, but it is an issue that has our intense attention,” Securities and Exchange Commission Chair Mary Jo White said during an interview on Bloomberg Television on Tuesday in response to a question about whether the agency would consider rules requiring short-selling disclosures by investors. She declined to discuss specific companies.

“Short selling has a legitimate, positive purpose in the marketplace,” White said. “That’s very different, though, than if you manipulate by short selling.”

It’s not just short-sellers though: it is short sellers on Twitter of all places. “White said Twitter is an information source that must be policed actively, and a 140-character Twitter posting and a four-hour presentation are essentially the same.”

“Policed actively” when it leads to drop in any one price but when momentum-chasing momos (or better yet, Virtu algos) push up Div/0 PE companies to beyond infinity, well… jus go to town.

So this is the SEC’s stance: a crackdown on evil, Twitter-based short-sellers is imminent. But when you manipulate by going long, or leaking details of your stake to the press sending the price surging so you can sell into the jump, or when Ackman colludes with the CEO of Valeant on a hostile bid for Allergan… that’s when the SEC turns a blind eye to its other favorite activity – watching taxpayer-funded porn.

Another irony: more disclosure wouldn’t necessarily affect short sellers like Citron’s Left, who makes his bearish views of companies public. Mallinckrodt has “significantly more downside” than Valeant, Citron said in a Twitter posting on Monday. The firm had previously accused Valeant of inflating sales using specialty pharmacies such as Philidor RX Services. From 2010, Valeant shares rose more than 10-fold to peak in August. Since then, they have lost 67 percent of their value as of Monday’s close.

What the SEC apparently fails to grasp is that just like sell-side research companies, which incidentally are merely a gateway to extracting profitable investment banking fees from the research target and providing interview opportunities to the banks’ best sellside clients, shorter are a far more valuable source of incremental information as they have a true motivation of looking at both sides of the story, not just the bullish one.

Which, incidentally, is the problem with the Fed, the IMF, the World Bank, and virtually every other economic organization whose forecasts are now so tainted with rose-colored glasses even Reuters is making fun of them. Confused? Perhaps the answer is that the SEC will crack down on those who anonymously have a pessimistic, as in realistic, bias in their forecasts.

But don’t despair at the SEC’s stupidity: it could get worse – all it takes is for White to look at how China deals with “malicious sellers” and suddenly America’s prisons would be full overnight.