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Regarding ban on short selling


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#1 NAV

NAV

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Posted 19 September 2008 - 01:38 AM

I think you guys are panicking too much. Firstly, i highly doubt it's gonna be implemented across the board on all stocks. If they do that, that would eliminate the entire universe of delta hedging and all the options market makers will leave the floor. Secondly, since this is a SEC mandate, futures market do not come under purview of SEC. And like geosing already said, in derivatives market for every long, there should be a short (a seller). So it cannot be implemented in the derivatives market. Many countries like India has a complete ban on short selling in cash market (stocks). But of course you can short sell always in the derivatives market. If in the unlikely remote event, that this short selling ban gets enacted across the board, my guess is Single Stock Futures will popular like crazy. Money will leave the cash market and enter the Single Stock Futures (SSF) market big time. That's how shorting is done in places like India, where the SSF are higly popular and liquid. While the third world is finding ways to eliminate ban on short selling, it's both a pity and a shame that U.S going the way of the third world.

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