Spain bans short-selling of shares as markets fall

[dipsydoodle]

Source: BBC News

Spain has banned short-selling of shares to try to limit price moves after markets fell sharply on fears the country may need a full bailout.

Spain's market regulator blocked the practice for three months to try to restore order after sharp falls in bonds and shares.

"Short-selling" is a way that traders can make money by betting on falling share prices.

Italy has also banned short-selling of financial stocks for one week.

Read more: http://www.bbc.co.uk/news/business-18950896

[Lars77]

1. Why is this legal anywhere in the first place?

[dixiegrrrrl]

2. Short selling or banning it?

[Lars77]

6. See my answer to ag dude :)

[ag_dude]

3. Why wouldn't it be?

[Lars77]

5. Because you are creating an incentive for people to make the market drop,

Which is partly what got us into this mess in the first place. Bad behavior should not be rewarded. When the market drops, real people and real money suffers and so it should not be encouraged.

Also, i am generally against profit making practices which create wealth out of nothing. Wealth should ideally be created from the production of goods and services, or at least be somehow related to those activities.

Short selling produces nothing of value except cash for the people doing it, it has no positive effects for society what so ever. And when you're encouraging that kind of wealth generation you are far, far away from the kind of capitalism that Adam Smith envisioned.

[A HERETIC I AM]

7. Actually, that's not entirely true.

Short selling produces nothing of value except cash for the people doing it, it has no positive effects for society what so ever.

Not entirely true.

While I agree that certain types of selling short are predatory and/or unethical (Naked shorting, for instance) what it DOES do is ensure a buyer for a falling share price. One who sells short must at some point, buy the shares. Also, short sellers can act as sort of a flashlight in the dark, if you will, by finding companies that have faults or problems and then by their actions, force the shares to trade at a more realistic level.

Again, I am not defending naked shorting nor do I think this type of trade is without issues, but it does serve a purpose.

Limits should be placed on the practice at appropriate times, but they should be done carefully.

[ag_dude]

8. Shorts are repsonsible for finding problems with numerous companies.

Problems that those in a long position would actually have an incentive to hide.

[snot]

4. Good for them! Wish we could do the same.