Short Sellers Returning to Wall Street
The NYT reports: At the stroke of midnight on Wednesday, the short-sellers will return to Wall Street.
The question is, what will they do when they get there?
Nearly three weeks ago, regulators abruptly banned short sales of financial stocks to protect companies that had come under siege in the stock market. Short-sellers, critics said, had contributed to the declines by betting against the companies’ shares.
But once the ban expires Wednesday night, shorters — viewed as villains by some and heroes to others — will be free to ply their trade again.
Few expect their return, on its own, to spark another precipitous plunge in the stock market. Financial shares have plunged 23 percent since the ban was imposed on Sept. 22, suggesting that the short-sellers might not have played such a big role in the declines.
The Securities and Exchange Commission took additional steps, which will remain in place, to hem in short-sellers, who typically borrow shares and sell them, hoping to buy them back later at lower prices and pocket the difference. The S.E.C. has shortened the length of time allowed to locate borrowed shares for short-sellers and will require investors to begin disclosing the stocks they short. That may discourage some investors from the practice.
Since the S.E.C. ban went into effect, borrowing shares has become more expensive, in part because some big pension funds and endowments have stopping lending stock altogether.
Full Story: nytimes.com
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In this very fragile financial environment, how can the SEC do this?
God Bless America!
Cheers, |
