Hedging Europe's Short-Selling Ban (Again)

Tyler Durden's picture

While repeating the same thing and expecting a different result is the definition of insanity, the Italian and now Spanish regulators, in their wisdom, have banned short-selling once again (supposedly not just on stocks but OTC derivatives also) - because, of course, this is all speculation and not just real money exiting the increasingly encumbered 'bail-in-able' worst banks in the world. When will the long-selling ban begin and what does this S-S ban mean? Very little in reality - within a few days of the last ban, following a very short-term squeeze - European banks were back below the pre-short-sale-ban level as we noted here and here. The trouble with the ban is that managers will look to hedge the implicit stress that this means those banks are under (that may otherwise be manipulated out of the price). How to do this? Well, last time, it was Morgan Stanley that was the most correlated on the way down and was the worst performer immediately after the ban began - and this time seems like it should be no different. Already in the pre-market, MS is -4%, notably underperforming its peers.


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GetZeeGold's picture





idea_hamster's picture

Who wants to bet we rip in the last 0:30 to close at Friday's VWAP?

Vince Clortho's picture

This is a given.  That dildo that runs the PPT is one of the few entities left in the "market".

MillionDollarBoner_'s picture


The PPT is the market :O)

DoChenRollingBearing's picture

This is as good a time as any to push the AMF button...

Get out now!

StychoKiller's picture

Guys, NEVER press the ATM (automatic tampon remover) button!:>D

Stock Tips Investment's picture

Governments in desperate times, desperate measures apply, however absurd that these measures are. Vedar short sales operations did not improve the difficulties of Spain (or Italy). Conversely, this may make things worse by trying to prevent the market do its job. It is a sign over the European crisis.

timbo_em's picture

When will France follow the short selling ban madness?

MillionDollarBoner_'s picture

C'est n'pas "madness"

C'est "magnifique" !;o)

Mercury's picture

Evidently long selling is still functioning properly...D'oh!

What the hell happens to open interest options in these situations?

eclectic syncretist's picture

I may be incorrect on this, but I believe you can still buy puts, so the ban is really just the big boys getting the little guys out of the playground so they can have more of the pie all to themselves.

I'd wait until the inevitable short squeeze runs it's course and buy puts.

buzzsaw99's picture

MS is Banco Santander in draghi?

Duke of Con Dao's picture

here's something to watch while you ponder Spain's decision: 

YouTube - "Howard Roark, You Didn't Build That!" says President Obama

Obama v Roark    (70 secs) A Classic I'm Tellin' Ya!   (unless you like Obummer)


Cue another EU summit, another three letter acronym, another tie wire and duct tape fix, another "all better" market rally, another four hour half life before markets realize said tie wire and duct tape fix won't work................................something tells me we've been here before...and before...and before...and before...and before.......

Vince Clortho's picture

There is a looming shortage of 3 letter acronyms.

MillionDollarBoner_'s picture

Did anyone try putting some Manuka honey on it?

P'raps that'll work?

firstdivision's picture

Shorting Morgan Stanley feels like beating up a quadriplegic.

Jake88's picture

No it's beating up the guy who beats up quadraplegics and takes their lunch money.


That 00:30 rip is a given

XtraBullish's picture

Fear not! The PPT is warming up the juice machine. Trap all the mutts short in the first 30 minutes then they engage the turbines. The U.S. Treasury can buy every stock in the board times ten and never get a margin call. BTFP...

Bubble's picture

here we go boys, strap yourselves in. the ride to reality is finally kicking in

MillionDollarBoner_'s picture

Its been a fucking long wait... where are we, Disneyland?

AgK9's picture

Spain has also apparently banned having their futures market being listed anymore on forexpros.com/indices/indices-futures  Will Italy be next?


john_connor's picture

Ok. So the way to hedge this is to short or buy puts on MS based on this correlation? The above could have been coincidental, no?

GMadScientist's picture

Correlation, causation...whatever. Do you want the compression trade or not? ;)

orangedrinkandchips's picture

Short Selling is like a Wildfire.....publicly bad, bad, bad....do not allow to happen...


but both are crucial to a free market/free enviorment....





GMadScientist's picture

We categorically deny the existence of anything called a "bottom".

Negro Primero's picture

'...there's always someone else for you to blame'

European shares hit by Spain short-selling ban

falak pema's picture

when the euro hits 1.10 the FED will tremble, as USD will become too strong to resist WS from plunging. Profit margins will disappear in corporates given low utilistaion rates and slo growth.

Hype Alert's picture

Short selling ban is just more proof the market is not what it's advertised to be. 

asteroids's picture

(1) The shorts make money. (2) Change the rules on them and rip their faces off. (3) Confidently spout victory. (4) Shorts come back for blood. (5) Panic. (6) Print. This is 2008 all over again. We are at step 2.

hedgehog9999's picture

Once again, short selling bans did not prevent the SPX from going down 333 points from 1000 in 08/09......


noses's picture

Keep in mind that the short selling ban has been heavily supported by the betting industry lobbyists (also called the Mob) who obviously try stifling the competition in a legal way. Why bet on immaterial nonsense if you can waste your money on doped horses and crooked football games?

Grand Supercycle's picture

SPX bearish weekly chart strengthens: an important development.

As mentioned on Friday, SPX downleg continues.

Useful SPX weekly chart at my blog.


MillionDollarBoner_'s picture

I love it!!!

Someone still believes in voodoo !:O)