Thursday, September 18, 2008

SEC bans short selling of financials

In a 2am press release, the SEC has banned short selling on almost 800 financial stocks.

Interestingly Moody's is not on the list.  Vindictive, much?

How does it affect existing short positions?  How does this affect options?  Can people hedge options?  Can market makers still short?  How does it affect the short ETFs?   How does it affect credit default swaps?   I'm sure the SEC has carefully considered all of this.  

For your guide, you can create a short position using options.  So if option trading is not curtailed, this does nothing.

this is the mother of all desperation moves and is going to massively distort the market.

The government is doing everything it can to
  1. prevent price discovery
  2. prevent transparency
  3. prevent you from protecting yourself

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