Proving once again the nobody ever learns from the past, and is guaranteed to repeat the worst mistakes thereof, the NYT has reported what Zero Hedge noted less than a day ago when we said that a "Eurowide short selling ban now appears imminent" with a report that "Europe Considers Ban on Short Selling." What this means is that transatlantic panic is really about to spike, and the next imminent step is a total collapse of European capital markets. European regulators should be bound and quartered for even considering this stupidity which will destroy price discovery and lead everyone to dump their holdings ahead of a resumption of the Lehman bankruptcy PTSD flashbacks. Also making short covering impossible will remove the only natural downside market buffer. Oh well, if they want to blow themselves up, so be it.
A European market regulator is considering recommending a temporary ban on negative bets against stocks across the continent, in an effort to stop the tailspin in the markets, according to two people with knowledge of government discussions.
The European Securities and Markets Authority, a body that coordinates the European Union’s market policies, has been requesting information from member states about such bets against stocks, known as short-sales.
“We are discussing with national authorities and together we will decide whether we need coordinated action,” said Victoria Powell, a spokesperson for the E.S.M.A. She declined to comment on the timing of any decision or its possible scope.
The two people knowledgeable about the discussions said the authority might propose a ban on betting against all stocks or just financial stocks. It also may propose a ban on a certain type of short selling in which the party making the negative bet does not borrow the share it is shorting first. The bans would likely be temporary, just to calm the markets.
Such a policy would add to the list of parallels commentators are making between the current market panic and the financial crisis of 2008.
Sure enough keep an eye on BAC (not to mention Fairholme) should this be enacted: it will be mean the start of the tumbling dominoes for the global financial system.
And we sure hope readers have been hoarding gold at cheaper prices courtsy of the CME's margin hike gift from yesterday.