Short Selling Ban Spreads Around the World
Earlier today, we looked at an October 18, 1930, NYT editorial on on Short Selling. As we now see via Google News, bad ideas are contagious:
• Germany restricts short selling of financials
• Netherlands bans short-selling
• Australian Regulator Extends Ban to 'Covered' Short Selling
• Dutch ban 'naked' short selling for 3 months
And in related news:
• Short-selling set to debut in Egypt as the West moves to curb it
See Jum Chanos's WSJ OpEd:
Short Sellers Keep the Market Honest
JAMES S. CHANOS
WSJ, SEPTEMBER 22, 2008
http://online.wsj.com/article/SB122204250955761325.html
Sunday, September 21, 2008 | 09:30 PM | Permalink
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First. Barry where are we going next in this mumbo jumbo world of linance???
Posted by: Aunit | Sep 21, 2008 9:41:42 PM
Barry:
I see that Etrade allows trading on various foreign exchanges. I'm sure there are others. Are there any "honest" securities markets out there that you would recommend?
Posted by: Mike in NOLa | Sep 21, 2008 9:45:58 PM
Thoughts on the late Sunday night Goldman/Morgan Stanley news?
Posted by: Brian | Sep 21, 2008 9:49:03 PM
Looks like well orchestrated collusion which clearly indicates the severity of the global financial crisis.
Posted by: km4 | Sep 21, 2008 9:49:20 PM
HEADS UP
The PLUNGE of GS and MS by short selling was done by the GS/MS BONDS holders, after seeing there BONDS spread widen and losses explode. So they covered there bond losses by shorting the common stock and buying puts. Do you blame them ? So why the bond spreads widen so much, Paulson allowed the LEH to go bust thats why ! Also GS/MS made plenty on the shorting LEH/FNM/FRE/MBI/ABK/AIG/BEAR - get the picture. Then the STUPID SEC concurs with the CEOS of GS/MS that short selling was treating them unfairly. COX is dumb as hell !
Posted by: icm63 | Sep 21, 2008 9:52:34 PM
Being reported by the WSJ that the Fed has granted a change by GS and MS from investment to a traditional bank holding companies.
As someone who has been involved in OCC and Fed audits, there better be a Safety and Soundness started tomorrow.
Posted by: Hangtime79 | Sep 21, 2008 9:56:44 PM
So, short selling no longer allowed. No problem - if I'm short a position in one of the 799 (just hypothetically, of course), I just won't cover into this bear rally - I'll simply go long the same amount in the same name and then when I DO want to go short, I'll sell the long position in Morgan Stanley (oops) again.
(And until the short bans kick in globally, I could box in trades long/short in markets while they're still allowed.)
Posted by: HT | Sep 21, 2008 9:58:16 PM
Fed Reserve:
http://federalreserve.gov/newsevents/press/bcreg/20080921a.htm
Posted by: wally | Sep 21, 2008 10:00:34 PM
"Free Markets My Arse", this nonsense seems to be becoming universal. Banning shorts will bite them in the butt, Humpty Dumpty just has a bigger wall to fall off now.
I see the bailout will now perhaps be extended to toxic ABS based on credit cards, commercial real estate and hedge fund Lamborghinis.
No bailouts for the fiscally conservative, of course. Joe Public seems to be sleeping, most of them think this is 'a good thing' because 'it helps the housing market'.
Keep yelling Barry, at least MSM are starting to wake up, even Krugman seems to be finally growing some intestinal fortitude.
Posted by: leftback | Sep 21, 2008 10:01:06 PM
Here is the NYT article on GS and MS:
http://dealbook.blogs.nytimes.com/2008/09/21/goldman-morgan-to-become-bank-holding-companies/?hp
That is amazing news - the end of the bulge bracket white shoe investment banks, after decades of thumbing their noses at their commercial banking brethren. What will happen if the Democrats win and Glass-Steagall returns?
Posted by: CNBC Sucks | Sep 21, 2008 10:06:30 PM
My weekly card game has temporarily banning check-raising.
Posted by: Ramstone | Sep 21, 2008 10:09:18 PM
Shorting financials prohibited????
Strategy 1: Short S&P 500 and go long all non-financial stocks
Strategy 2: Sell a call , buy a put.
Strategy 3: SKF
Strategy 4: ????
There must be more things these morons must think off than make a mokery of a natural market. As someone said, Hank is taking a bazooka to a a-bomb party.
Posted by: Aunit | Sep 21, 2008 10:09:33 PM
HT, you might want to double check that before you do it. Used to be that if someone was short v the box they need to borrow all over again in order to lift the long leg.
The idea being that short v the box is not short. To establish a new short you must borrow shares.
I may have it wrong but you should ask whoever you trade with.
Posted by: Roger Nusbaum | Sep 21, 2008 10:17:44 PM
are we going to skip the Amero phase, of worldwide currency consolidation, and go straight to World Bank /credits/ ?
I'd rather have S&H Greenstamps..maybe, even Gold Bond..Trading Stamps
http://www.aw-wrdsmth.com/offers/greenstamps.html
anybody forget that these were commodity currencies that traded along side our beloved FRNs?
If we were living in a free-market, companies like GE, T, HES, & CHK (as ex.) would be welcomed as commodity-based fiduciary media issuers..
maybe now we can understand what 'Legal Tender Laws' are all about..
Posted by: Mark E Hoffer | Sep 21, 2008 10:21:09 PM
Isn't there a SIGNIFICANT amount of shorting that goes on via puts to hedge positions and limit risk? Won't this pretty much petrify all hedging and lock markets up tighter than a drum?
If puts are not affected, I suppose this means that no put can be exercised? And if that is the case, where's the value in puts? How do they obtain their value?
Isn't the Law of Unintended Consequences getting cued for the next scene?
All this spontaneous production of fixes to a very complex, dynamic and chaotic system leads me to think that many of the ongoing series of calamities are being exaggerated by the fixes to the previous calamity.
Future economic history books -- assuming that there are books and schools in the future, and we are not waging war with rocks in a stage of primitive savagery -- will have trouble deciding whether to portray this era as tragedy or comedy.
Posted by: constantnormal | Sep 21, 2008 10:22:41 PM
why not ban selling, like no selling of financial stocks ??
That way the share price will really go up.
Posted by: rickrude | Sep 21, 2008 10:24:41 PM
Digging through the SEC's no-shorting "799" order...
Page 13:
'GIW'... 'GLBZ'... 'GLRE'... huh ?!?!GLRE as in Greenlight Capital ? As in David Einhorn-who-supposedly-shorted-LEH-to-death's Greenlight Capital ?
Yes, one in the same.
Whatever else we accuse the SEC of, at least they have a sense of irony !
Posted by: Murph | Sep 21, 2008 10:45:21 PM
(GLRE is actually Greenlight Capital Reinsurance, which is a reinsurer affiliated with Greenlight Capital, and Chaired by David Einhorn). Same difference but I figured I'd post this minor correction before someone else does...
Posted by: Murph | Sep 21, 2008 10:47:30 PM
John Hussman's Open Letter to the U.S. Congress Regarding the Current Financial Crisis.
Posted by: APB | Sep 21, 2008 10:51:28 PM
what.like if i was buying i state the price i am willing to pay and see if anyone fronts up.
and
if i am selling, wait to see if some one offers a price i am willing to accept?
no stated prices from sellers?
Posted by: may | Sep 21, 2008 10:52:17 PM
no shorting is the new black....get with it man.
Posted by: the man from nantucket | Sep 21, 2008 10:56:23 PM
So, the Dutch do it a bit differently to the Netherlandians?
rc
Posted by: rootless cosmopolitan | Sep 21, 2008 11:31:45 PM
aren't they just going to short their debt and CDS instead?
Posted by: m3 | Sep 21, 2008 11:41:17 PM
Clothing the naked shorts wasn't enough. Stopping shorting wasn't enough. I think authorities should simply ban selling altogether.
Then the market HAS to go up ...
Posted by: jock gunter | Sep 21, 2008 11:48:32 PM
I've thought about this a bit, and while of course short-selling provides liquidity for the markets, there is something to be said for not allowing naked short selling. Requiring pre-borrow ensures they can borrow before they short makes sure there is not artificial downward pressure on the market. In essence, one should not allow more short than there is long. Just as one would not lend infinite credit to someone to go long and keep constant upward pressure on a stock's price, one should not lend infinite long stock to someone so that they can go short. Requiring pre-borrow before shorting is a natural mechanism to restrict this artificial pressure.
Posted by: Frank Tobin | Sep 21, 2008 11:49:19 PM
