As is usual in global stock markets, when prices fall it is always someone/something else’s fault – algos, short-sellers, Russian disinformers, Fed and Elites new world order plans – but it is never, ever a rationalization that prices at haughty levels may have been overdone and the asset-gatherers and commission-rakers were doing what they always do – buying every dip… for the long-term… because stocks go up… over the long-term… right?
Wrong! Ask Japan…
However, as Bloomberg’s Lisa Pham notes, when stock prices plummet in a market rout, short sellers often become a target.
Regulators can attempt to curtail the plunge by restricting equity short selling, or betting with borrowed shares. Shorts, as these bettors are known, say their trading helps keep markets functioning smoothly. Critics say their actions can blur into market manipulation. During periods of acute market distress, such as now in the face of the coronavirus pandemic, some of the hardest-hit countries are again imposing bans.
And sure enough, short-selling is being restricted around the world:
France’s AMF regulator halted such trades in 92 stocks for a day on March 17,
Italy’s Consob blocked the transactions in shares of 20 companies
Belgium’s FSMA imposed a similar restriction.
Spain went further, telling market participants they couldn’t bet on share declines for a month. Madrid, as well as Italy, had already ordered a one-day ban on short selling in the March 13 sessions.
South Korea has banned short-selling of shares in the benchmark Kospi index, tech-heavy Kosdaq index and small-cap Konex from March 16 to Sept. 15.
China’s securities regulator in February suspended securities lending, one of the few short selling tools available in China, until further notice, according to people familiar with the situation.
Additionally, the European Union’s market regulator has ordered hedge funds and other traders to disclose more information when they bet that stocks will decline and signaled that more restrictions could come.
And now, The Bank of England’s new boss has threatened “shorts”…
“Anybody who says, ‘I can make a load of money by shorting’ which might not be frankly in the interest of the economy, the interest of the people, just stop doing what you’re doing.”
And NYPost reports that The White House is fielding calls from Wall Street to rein in short sellers as the stock market continues to tumble.
Specifically, several prominent investors and executives have asked the Trump administration to bring back a legacy securities regulation called the “uptick rule,” according to a White House adviser.
“There’s a crowd that wants to reinstitute the uptick rule,” the source said. “It’s out there for discussion.”
However, there’s just one thing wrong with all this.
As most non-biased-long market participants know – over the past week, it is has not been short sellers that have been dragging down stocks. As NYPost reports, according to Ihor Dusaniwsky, managing partner and head of predictive analytics at S3 Partners,
“When you see moves like these, these are long sellers.”
“When you look at the total amount of trading, it’s minimal,” he said of short sellers.
But that will fall on deaf ears as “we have to do something” and someone must be blamed for this disaster!
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