The SEC in the US has the ability to revive and modify the
up-tick rule. This power should be exercised in order to set an
example. A global up-tick rule is a far better way to
contribute to financial stability than a ban. In the US there
has been call for the reintroduction of the rule and in the UK
there has been the suggestion that it be adopted. The current
ban on shorting will only have the effect of forcing short
sellers to search for similar exposure in non-financial
markets, to gain short exposure through the credit-default swap
(CDS) market and to create synthetic short positions via spread
betting through the use of contracts for difference (CFDs)
where physical stock does not have to be delivered. As mutual
funds and pension funds cut their stock lending programmes,
naked short selling may increasingly be engaged in.
Short selling and market...