Will the US ban short sales to protect markets?

US, WASHINGTON (ORDO NEWS) — Amid the plummeting markets around the world, Malaysia, Belgium, France, Italy and Spain have banned the short sale of a number of shares in order to stop the market from falling.

Such bold steps led some to think about whether the regulatory authorities in the United States and Canada would introduce similar restrictions to ensure market stability.

Dutch regulators also monitor financial markets to determine if restrictions are possible if necessary.

The EU encourages hedge funds to share additional information if they bet on falling stocks. The European Securities Market Authority notes that traders should inform regulators if their net short positions are 0.1% of the company’s net share capital. According to previous requirements, they should have been notified when short positions reached 0.2%.

The United States may well introduce a ban or tighten restrictions on short sales. In September 2008, the US SEC banned the short sale of nearly 1,000 shares of financial companies “to protect the quality of the securities market and strengthen investor confidence.”

However, this time the situation with the shares of oil-related companies forces traders to bet against them. Earlier this month, Malaysia introduced a one-day ban on short selling of shares in oil and gas companies, as oil prices plummeted.

Since the beginning of the year, oil sales have tripled, according to Bloomberg. Since then, oil prices have fallen even more.

The ban on short selling of shares in oil companies will nullify market manipulation and restore equilibrium in the market. Those who support the prohibition of short selling argue that unlimited short selling contributes to falling stock prices. Opponents of prohibitions, on the contrary, argue that this is a necessary market tool that can expand the infusion of liquidity into the market.

Given that oil prices fell more than 17% on Wednesday, regulators in the US and Canada will consider this step.


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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.