Thursday, August 11, 2011

NYT: Europe to Institute Complete Short Selling Ban

The New York Times is reporting that Europe is preparing to institute a complete short selling ban in an attempt to stem the market collapse caused by fears of sovereign debt defaults, and now mega-banks as well.
We'll see whether or not it has the exact opposite effect, and causes holders to dump stocks prior to the ban going into effect.
Either way, things are starting to resemble 2008 more every minute...

Fron the NYT:

A European market regulator is considering recommending a temporary ban on negative bets against stocks across the continent, in an effort to stop the tailspin in the markets, according to two people with knowledge of government discussions. 

The European Securities and Markets Authority, a body that coordinates the European Union’s market policies, has been requesting information from member states about such bets against stocks, known as short-sales. 

“We are discussing with national authorities and together we will decide whether we need coordinated action,” said Victoria Powell, a spokesperson for the E.S.M.A. She declined to comment on the timing of any decision or its possible scope.

The two people knowledgeable about the discussions said the authority might propose a ban on betting against all stocks or just financial stocks. It also may propose a ban on a certain type of short selling in which the party making the negative bet does not borrow the share it is shorting first. The bans would likely be temporary, just to calm the markets.

Such a policy would add to the list of parallels commentators are making between the current market panic and the financial crisis of 2008.