Skip navigation
Short Selling Video Gallery
Mad Money host Jim Cramer shares his final thoughts on the $25B mortgage settlement between the government and five big ...
Apple is set to unveil the iPad3 in March. Michael Walkley, Canaccord Genuity, weighs in.
Greek political leaders agree on austerity measures and warn there will be a "social uprising" over the agreement. As a ...
Over the last six months, shares of the spirits company are up more than 20 percent. A breakdown of the company's earnin...
Groupon's first earnings report Mark May, Barclays Capital Equity Research internet analyst.


Current DateTime: 03:28:55 10 Feb 2012
LinksList Documentid: 33482595

Current DateTime: 03:28:55 10 Feb 2012
LinksList Documentid: 23279666
Expiration DateTime: 2/10/2012 3:30:26 PM

Current DateTime: 03:28:55 10 Feb 2012
LinksList Documentid: 31255208
Expiration DateTime: 2/10/2012 3:30:08 PM

Current DateTime: 03:28:55 10 Feb 2012
LinksList Documentid: 23452764
Expiration DateTime: 2/10/2012 3:30:24 PM

Current DateTime: 03:28:57 10 Feb 2012
LinksList Documentid: 24355697
  • The World's Best Beers

      Craft brewers account for only about five percent of the US market, but that may be changing.

  • Fashion Stocks Traders Love

      Over the past couple of months, the “Fast Money” traders weighed in on companies that stood out.

  • Best in Show

      Who is the top dog at the Westminster Kennel Club Dog Show

MOST SHARED


Current DateTime: 03:28:57 10 Feb 2012
LinksList Documentid: 31330905
Expiration DateTime: 2/10/2012 3:30:45 PM

MOST POPULAR


Current DateTime: 03:28:58 10 Feb 2012
LinksList Documentid: 35819650
    • Road Warriors

        All the gadgets and gear a savvy frequent traveler needs to navigate the global economy.

HOT ON FACEBOOK

Short-Sale Ban Is Likely to Be Extended Beyond Thursday

By: Charlie Gasparino, On-Air Editor | 01 Oct 2008 | 02:26 PM ET
Text Size

The Securities and Exchange Commission is likely to extend a ban on short sales of hundreds of stocks beyond Thursday, when the temporary ban is set to expire, SEC staffers have told Wall Street executives.

It's unclear how long the ban would be extended. The SEC's emergency powers are set to expire on Oct 17.

An extension is expected to an include an exemption for convertible preferred shares. The SEC believes that the exemption would ensure that companies have the maximum flexibility in raising capital, the staffers said.

The short sale ban, which was imposed on Sept. 19 for two weeks, involves more than 950 stocks, most of them financial. The ban is viewed in many quarters as an artificial stimulus likely to wear off once normal trading resumes.

Short sales involve an investor selling borrowed stock in the hopes of replacing it later at a lower price. Short-sellers have been blamed for driving down the price of financial stocks, which led to a temporary ban over the summer and a second ban during September.

Some worry that the short-sell ban gives an artificial boost to bank stock prices that could come back to haunt investors later.
Wall Street in CrisisWALL STREET IN CRISIS - A CNBC SPECIAL REPORT

In turn, those holding sizeable portions of the stocks, such as employees of larger institutions like Goldman Sachs [GS  Loading...      ()   ] and Morgan Stanley [MS  Loading...      ()   ] can benefit the most from the ban on shorts, while the rest of the market could be set up for trouble.

"They're totally inflating it," says Dave Rovelli, director of US equity trading for Boston-based Canaccord Adams. "Once this ban gets lifted the (bank) stocks are going to get annihilated. Nothing's really changed."

Rovelli is among many traders who believe the short-selling rules were unnecessary. Instead, he thinks that if the uptick rule, which forces shorts to wait for a buyer willing to pay more than the last trade, was put back in place, that would have put a lid on short selling.

The rules also could inspire a false confidence in the overall market, another factor that could bite investors who are taking money off the sidelines to get back into stocks.

Still, other countries around the globe are following the US lead and instituting sharp restrictions or outright bans on shorting. Moreover, there is speculation swirling that the US deadline could be extended until the end of the year, or at least past the presidential election.

But some advisers are telling their clients to wait until the short rules expire before taking aggressive action, on belief that the market will drop after that and set up nicely for bargain hunters.

Options traders fear that the short selling rules are taking equity out of the market and causing even greater risk to options traders who can't short to cover their positions.

"I just see it as kind of putting the brakes on the inevitable," says options trader John Carter, who is president of Trade the Markets. "It can't stop a process. If a company is losing money and it's going to go bankrupt, the short-selling rules aren't going to help it."

© 2012 CNBC.com
Tools:
Add This share icon


Current DateTime: 09:37:12 10 Feb 2012
LinksList Documentid: 29778428

Current DateTime: 02:33:41 10 Feb 2012
LinksList Documentid: 29779196

Current DateTime: 11:35:13 10 Feb 2012
LinksList Documentid: 29779197

Current DateTime: 02:56:30 10 Feb 2012
LinksList Documentid: 29779199
CNBCCNBC
About CNBC  |  Site Map  |  Video Reprints   |  Advertise  |  Help  |  Contact
Privacy Policy  |     |  Terms of Service  |  Independent Programming Report
  Data is a real-time snapshot  *Data is delayed at least 15 minutes
Global Business and Financial News, Stock Quotes, and Market Data and Analysis

© 2012 CNBC LLC.  All Rights Reserved.
A Division of NBCUniversal
Thomson ReutersThomson Reuters