Corporate Governance

The Ban on Short Selling Spreads

By J. Robert Brown

The SEC's ban on short selling was supported by a similar measure enacted by the FSA in Great Britain.  Other countries have followed suit, although not always in the same heavy handed way.  According to the Journal, Australia and Taiwan have banned short selling, with Taiwan limiting the practice to the 150 largest companies.  Dutch regulators, in comparison, only banned naked short selling, with the article indicating that Belgim and France would do the same.  The article made no mention of the practices in other large markets including Tokyo and Frankfurt. 

In addition to questions about the SEC's authority to implement the ban, the existence of global trading raises issues with the effectiveness of any ban.  At least for companies traded on overseas markets, it would seem that short sales were still possible if executed in foreign markets.

Full post as published by The Race to the Bottom on September 22, 2008 (boomark / email).