Aggressive forms of short selling have recently been blamed
as one of the principal reasons for the collapse of Lehman
Brothers and with it the subsequent convulsion and extreme
volatility of the financial markets. Spain has suffered little
from this problem, in part because of a particular approach to
Shorting v naked shorting
Short selling is generally seen in Spain as a type of
speculative transaction whereby a seller is permitted to bet on
the downward movement of the share price of a company and
therefore adopt a negative position on it. Otherwise, in a
non-speculative environment, in Spain shorting trades are seen
as defensive transactions in order to hedge long positions
(which are expected to rise) and thus ensure partial coverage
if there is an undesired drop in the share price.
In Spain, short selling is permitted to the extent that
before entering into a trade the seller...