Short selling ban - Is it legal?

[jersey10]

How can it be perfectly legal for asic to ban short selling? Will there be any legal ramifications for asic over this?

It doesn't seem right to me that it can be legal to artificially manipulate the market like they are doing.

If they can do this, doesn't that mean that in a manic bull market they could ban long positions to bring the market back into check?

 

[prawn_86]

I think it is legal Jersey, wether it is 'right' or not is up for debate, and you are totally correct about the precedent this sets.

There can be no doubt that we no longer operate in a free market

Buying pushing prices up, hence people buy. Selling pushes prices down, hence you short. Shorters are ony cashing in on downward pressure, nothing more or less.

Chasing ghosts if you ask me. Want to be seen to be doing something, when nothing needed to be done.

 

[Awesomandy]

Buying pushing prices up, hence people buy. Selling pushes prices down, hence you short. Shorters are ony cashing in on downward pressure, nothing more or less.

Chasing ghosts if you ask me. Want to be seen to be doing something, when nothing needed to be done.

In the end, buyers will have to sell, shorters will have to cover. Either way, prices will go up when there are more people wanting to buy, and fall when there are more people wanting to sell. There is still a large derivatives market as well, so in the end, those who wants to profit from falling prices will still do so anyway.

 

[M34N]

There can be no doubt that we no longer operate in a free market

Agree totally. This kind of regulation is not part of a normal free market, but then again, we're not in a normal market now, are we?

I think we may see some very heavy selling pressure when the shorting ban comes off, and it may cause some ridiculous drop in prices again. Delaying the inevitable perhaps?

I can understand they are trying to settle and calm the markets, but if this was Russia, people would be saying 'typical Communists', but when a 'free market' does it, no-one questions it!

What a crazy world we live in. I'm worried now that it has reached a point where we have to ban shorting, I think it's time to cash in some stocks and wait a while. If this is as high as we go and shorting is banned, who is left to blame? Communists?

 

[GreatPig]

I think it is legal Jersey

And if it's not, it will still give the regulators time to get out of their own long positions before they fix the faux pas.

GP

 

[nioka]

In the end, buyers will have to sell, shorters will have to cover. Either way, prices will go up when there are more people wanting to buy, and fall when there are more people wanting to sell. There is still a large derivatives market as well, so in the end, those who wants to profit from falling prices will still do so anyway.

Yes. Isn't that exactly what we need to happen. That should be done without the opportunity for some organisation or individual to manipulate the market as has been done in the past few weeks using selling short in a manner designed to crash the SP of some companies.

The new rules are no different in intent than the ASF rules regarding ramping, a rule that gives ASF it's integrity. Now the stock exchange has more integrity than it had last week.

 

[nunthewiser]

A group of the world's biggest hedge funds are planning to sue the U.K.'s Financial Services Authority for millions of British pounds in losses from the regulator's ban on short-selling, the Sunday Telegraph reported late Saturday, citing unnamed fund managers and lawyers. The report quoted hedge-fund representatives as saying the British financial watchdog illegitimately extended its powers and caused wide-spread capital destruction. The FSA announced a ban on the short selling of financial stock Thursday. See full story. The action was followed Friday by a similar move from the U.S. Securities and Exchange Commission. See full story. The Telegraph said hedge funds felt the move unfairly impacted on their trading business. "It's too easy to blame hedge funds," the newspaper quoted a fund manager as saying. "The real culprits are the banks which were cavalier in their lending, and the investment banks which were irresponsible in the way they packaged the loans and pumped them round the world. It's also the regulator's fault for not picking it up, not ours." Reuters reported, however, that the FSA had not been told of any pending action. "We're not aware of any legal challenge. We're clear that the new code provisions are both valid and necessary," it quoted an FSA spokesperson as saying. Still, the Telegraph cited an attorney for one of the hedge funds as saying the suit would go ahead, as the move could otherwise put many funds out of business. "With one swoop, the regulators have wiped out perfectly legitimate businesses and have cost some funds millions. They have gone for the big political hit without a thought for the damage they are wreaking. There may be unintended consequences but it's outrageous and illegal," the lawyer was quoted as saying.

 

[jersey10]

There may be unintended consequences but it's outrageous and illegal," the lawyer was quoted as saying.

So, it seems there could be some legal implications of what they have done

 

[Greg71]

How can it be perfectly legal for asic to ban short selling? Will there be any legal ramifications for asic over this?

It doesn't seem right to me that it can be legal to artificially manipulate the market like they are doing.

If they can do this, doesn't that mean that in a manic bull market they could ban long positions to bring the market back into check?

Exactly what I was thinking today. If we take the principle to the extreme, maybe we should ring them up and ask them which stock they would like us to buy as well. Or, they could freeze the entire market, except for one stock, and only allow long buying and no selling.

 

[kengaikl]

When Malaysia Pegged its Ringgit to stop speculation it was condemned by the free world now the free world has banned short selling on its own share markets to stop speculation. Would this be a good example of hypocrisy?

 

[Trembling Hand]

Would this be a good example of hypocrisy?

:

 

[overlap]

Interesting article

Bear squeeze blues: How to destroy a bank
http://www.theregister.co.uk/2008/09/29/destroying_banks/

One of the comments:

"The problem I see is that money in the market is not 'real' money, it is more like play money or at best potential money. Might as well be WoW golds. It's only when you cash it in and convert it to currency that it gets any real value. There is a boundary between the real world and the market world. Somebody mines iron ore, somebody buys a car. In between lots of people make money. some of it through the market. BUT the money originates from the iron ore, or the oil or the cotton or the oranges or whatever.
Shares are (supposedly) based on a fraction of a real world enterprise. If you gamble in Futures you are betting on events in the real world and how they effect the world of the market. Short selling however never crosses into the real world. Pension fund manager A could short sell to B, B may later sell, A could buy from B and cover the original sale. If he's done it right A has made money.
A trading circle has been completed but nothing has happened in the real world. Except, and this is the important bit, Market 'Play' money has been converted into real money. Money has been taken out of the market without a link to real world events. If it were not a nett money making scheme nobody would bother so the generally the money is removed from the market by short selling. That money has to come back into the market somehow, sometime. I think that this is the money GW is trying to get congress to pay. This is the $700 billion that has come out of the market in the past few years and been spent on city bonus parties, cars, penthouses and huge estates in Palm Beach.
They say that if two antique dealers were marooned on a desert island with one Sheraton writing desk between them they would both make a good living. It's clearly absurd. What we now have is that two traders can be marooned on a desert island with nothing but a stack of B&B shares and both make an excellent living. somebody is going to pay sometime and it's us, now."

 

[Prospector]

Is it legal to sell something you don't own?

 

[Trembling Hand]

Interesting article.

Ya reckon

I think that this is the money GW is trying to get congress to pay. This is the $700 billion that has come out of the market in the past few years and been spent on city bonus parties, cars, penthouses and huge estates in Palm Beach.

So now the breaks(shorters) on the excesses are responsible FOR the excess (Out of control debt binge)

For F........... Sake. This is why people are so bent up because they read crap like this.

 

[Trembling Hand]

Is it legal to sell something you don't own?

Yeah its call capitalism. And every business in the world does it. (except for two bit cash strapped ones that can't get credit)

 

[jersey10]

since the ban was implemented, I have had about 5 long set ups that i have taken and 5 short set ups that i would have taken if i could. all 5 longs stopped me out. 4 out of the 5 shorts would have had me a moderate profit. so instead of being in profit i have lost over $1000.

I still struggle with the concept that the powers that be can just change the rules that have a big impact on some people's income. People who trade for their income and can't short are being treated unfairly in my view. Many people's trading system would require them to trade short as well as long. Banning shorting has a huge impact on their profitability and therefore their income.

 

[erichmj]

I'm new to the share trading but to me I think it's not legal.
why people invest their money in share market? to make more money
or to lose their money?
when the market is in the upward trend do they ban short selling, no.
because not may people can make profit from short sell.
In current market (downward), people can make more profit by short sell than just buy the share. So ban it is like disallow people to make profit?
am I thinking correctly or??

 

[deadset]

I was selling one stock the other day at a good price, then I ran out of stock to sell, then I though, "ahh, it'd be good to short at this price".

It's only a temporary ban for sure.

There is a review on the Short Selling ban late Oct. So it all depends on wether things have stopped sliding or not til then I suppose.

 

[nikemi]

since the ban was implemented, I have had about 5 long set ups that i have taken and 5 short set ups that i would have taken if i could. all 5 longs stopped me out. 4 out of the 5 shorts would have had me a moderate profit. so instead of being in profit i have lost over $1000.

I still struggle with the concept that the powers that be can just change the rules that have a big impact on some people's income. People who trade for their income and can't short are being treated unfairly in my view. Many people's trading system would require them to trade short as well as long. Banning shorting has a huge impact on their profitability and therefore their income.

Same here, seeing that one cannot short right now sometimes i get in on a not so great looking long hoping it will turn out to be ok with time, only to see my account balance disappear and after patiently waiting for a few days be too happy to get out at the first opprortunity of close to break even.

All they've done with this ban is stop the people from making money from the anyway falling stock prices!

 

[Trembling Hand]

Guys you can still short the index or use put options.