SEC to temporarily ban short-selling: report
The U.S. Securities and Exchange Commission intends to temporarily ban short-selling
, The Wall Street Journal reported Thursday night. It’s unclear if the commission has approved the move, the Journal reported. SEC Chairman Christopher Cox, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson were briefing congressional leaders Thursday night. The U.S. move would follow a similar action by U.K. regulators on Thursday.
Wow, that would be very surprising to me (especially if you asked more than a month ago the chances of this happening). But given these crazy times I can believe it. I wish they just properly regulated short selling the last 10 years (the failure to do so has been very disappointing). And I would be against banning short selling unless there were a very extreme situation. I don’t see that are necessary now, but I have far from all the details so maybe it is warranted now (though I am skeptical).
Update: SEC Halts Short Selling of Financial Stocks
Under normal market conditions, short selling contributes to price efficiency and adds liquidity to the markets. At present, it appears that unbridled short selling is contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation. Financial institutions are particularly vulnerable to this crisis of confidence and panic selling because they depend on the confidence of their trading counterparties in the conduct of their core business.
Given the importance of confidence in financial markets, the SEC’s action halts short selling in 799 financial institutions.
Related: Naked Short Selling – Shorting Using Inverse Funds – Investor Protection Needed