Adventures in market reporting, short-selling edition

By Felix Salmon
May 20, 2010
what happens to stocks when you try to ban short sales, right?

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Everybody knows what happens to stocks when you try to ban short sales, right?

LONDON, May 20 (Reuters) – European shares were sharply lower at midday on Thursday, extending the previous session’s steep fall, on persistent concern other euro zone countries will follow Germany in banning short selling in certain instruments.

Except that’s not exactly what happened in September 2008:

LONDON, Sept 19 (Reuters) – European shares soared in afternoon trade on Friday, driven by a temporary ban on short sales of financial stocks in the United States and Britain.

So, if you ban short-selling, then stocks go down. Or else they might go up. Glad that’s cleared up.

One comment

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Well, in fairness, this isn’t an apples-to-apples comparison; the 2008 ban was on ALL shorts, and this 2010 ban is on just NAKED-shorts. The all-shorts ban of course led to a surge as everyone needed to cover their bets, leading to a supply crunch; the naked short ban is more like a non-confidence vote that warns people to stay away from the market or get out while you can. I think that might account for it, but who knows… maybe it was just someone pissed off their trip to Thailand is likely off :p

Also wanted to say what the hell kind of keyboards are over in UK that ANYONE could come up with this fat finger nonsense and believe it! My bottom row looks like this: Z-X-C-V-B-N-M… that’s one hell of a fat finger to miss by 2 keys or not at least get an N in there to boot. I suggest a big head-smack is due to the next person who says anything so idiotic

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