SEC has now banned short-selling in stocks of 799 financial companies. List of banned stocks is here. SEC statement says that it has taken these steps in coordination with FSA. FSA has banned 29 stocks from short-selling. List of stocks is here
SEC’s ban ends on 2 Oct 2008 but FSA’s is a longer ban till 16 Jan 2009. FSA statement says:
“While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector.”
This is a classic case of repugnance good and short-selling being limited to only text-books. When prices rise and are seen to be away from fundamentals, all say it is very difficult to say what is the fundamental price. Hence bubbles are ignored and preference is being given to markets to correct the excesses. However, when they fall, we see such reactions.
Why not some ban on long buy when prices are rising like they are falling now? Then most financial players will cry foul, socialism etc. However, now players will say this is needed as markets are irrational etc.
I hope now the experts in India don’t say such things don’t happen in developed financial systems. Or cry foul when such decisions are taken in India……when developed economies can’t afford short-selling in times of distress, it is too much to ask emerging markets to fact the music.