U.S., British market regulators ban short-selling
A man walks past the London Stock Exchange on Friday. The main British stock index was up more than nine per cent Friday after a ban on short-selling of financial stocks and news of U.S. plans to combat the financial crisis.(Kirsty Wigglesworth/Associated Press)
The main U.S. equities market regulator, the Securities and Exchange Commission, announced a temporary ban early Friday on the market practice known as "short-selling."
The ban applies to the stocks of 799 financial companies.
In effect a way of betting against company stocks, short-selling is blamed by some analysts and experts for adding to the volatility of markets.
The move, announced early Friday on the SEC's website, follows a similar ban by financial regulators in Britain.
In the announcement, the commission said it was acting in concert with the U.K. Financial Services Authority in taking temporary emergency action to "prohibit short-selling in financial companies" to protect the integrity of the securities market and boost investor confidence.
"The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," SEC chairman Christopher Cox said in a statement. "The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets."
The move, he said, would not be necessary in a well-functioning market and is only a temporary step that is part of the actions being taken by the Federal Reserve, the Treasury and Congress.
A recent wave of the market manoeuvres — where traders seek to profit by selling unowned shares of companies in the anticipation their prices will drop — has been blamed in part for the demise of venerable investment firm Lehman Brothers and other big companies.
With files from the Associated Press
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