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South Korea Joins Greece In Banning Short Selling

Tyler Durden's picture





 

Yesterday Greece, today Korea, tomorrow the world. The traditionally last ditch attempt by a regulator losing control of events: making short selling illegal, is starting to appear in random places, first showing up in Greece, and now in South Korea, where the capital markets commissioner just said no most shorting for 3 months. South Korea’s Financial Services Commission will also temporarily ease daily limit on amount of shares companies can buy back. This latest short selling ban has put many on edge, and following Italy's move to ban naked short selling several weeks ago it is now expected that at least several more European countries will follow in these footsteps, further eliminating price discovery and destabilizing market confidence and more.

 


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Tue, 08/09/2011 - 06:47 | Link to Comment slaughterer
slaughterer's picture

I do not know why Italy did not ban short selling last week already.  

Tue, 08/09/2011 - 06:53 | Link to Comment Ghordius
Ghordius's picture

perhaps little experience with the short-selling crowd

they do have muni decrees against topless sunbathing if you are ugly...

Tue, 08/09/2011 - 06:47 | Link to Comment malikai
malikai's picture

Party Hard.

Tue, 08/09/2011 - 06:51 | Link to Comment kaiten
kaiten's picture

WTF?

Market talk that Fed is selling gold reserves
Tue, 08/09/2011 - 07:17 | Link to Comment Azannoth
Azannoth's picture

That is pretty much their last bullet before out-right Marschal Law

Tue, 08/09/2011 - 09:00 | Link to Comment malikai
malikai's picture

That would be fuckin awesome. Get ready to back the truck up.

Tue, 08/09/2011 - 06:52 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Yay for free markets. Why not ban all selling too?

Tue, 08/09/2011 - 06:54 | Link to Comment Ghordius
Ghordius's picture

shhht! don't give the govs ideas

Tue, 08/09/2011 - 06:57 | Link to Comment slaughterer
slaughterer's picture

Love these blurbs:

German 5-year CDS above UK 5-year CDS.  (Interpretation: can you see the Bundestag actually approving the ESFS in one month?  The debate in Germany is likely to put the US debt ceiling debate to shame...)

BAC may have lost the chance to raise equity (WSJ)   (Interpretation: BAC is never coming BAC-K).  (Investment strategy: short the BAC-L preferred for a good 50%)

and, then, Kaiten: market talk the Fed is selling gold reserves (sell now, be sorry later).   

 

Tue, 08/09/2011 - 07:09 | Link to Comment Ghordius
Ghordius's picture

"German 5-year CDS above UK 5-year CDS"

in this market situation it has to be explained like this: "expect more news from Germany than from the UK". It's "sell whatever makes news".

Tue, 08/09/2011 - 07:29 | Link to Comment Smiddywesson
Smiddywesson's picture

It's just talk, nobody is selling real gold reserves.  All the central banks of the world are buying gold.  That is an integral part of their game plan, not just a coincidence, or a short term ploy.  They may be selling paper gold, but they aren't letting go of physical.

Tue, 08/09/2011 - 08:23 | Link to Comment YHC-FTSE
YHC-FTSE's picture

One of the oldest tricks in the book to try to lower gold prices. Italy tried that trick at least twice during the last decade. Only UK's Gordon Brown actually did what he said he would, the idiot.

Tue, 08/09/2011 - 08:13 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

U.N. Ban Ki Moon and now shorts too? This must make littol Elvis Kim Jon Il http://www.youtube.com/watch?v=xh_9QhRzJEs

Tue, 08/09/2011 - 07:07 | Link to Comment oobrien
oobrien's picture

Today, their market plunged damn near 10 percent before paring the losses.

They had to do something.

Will it work?  Probably not.

http://geraldcelente.proboards.com

Tue, 08/09/2011 - 07:20 | Link to Comment Drag Racer
Drag Racer's picture

I think all markets should ban shorts, if you don't actually own it you shouldn't be able to sell it. I see it as a negative to true price discovery and it is used too much to manipulate.

same goes for paper wannabies like GLD and SLV. all purchases and sales should involve actual transfer of a product or it's bogus.

Tue, 08/09/2011 - 07:24 | Link to Comment Bartanist
Bartanist's picture

Agreed! Getting rid of the paper B/S and only using the markets for capital formation and not a Ponzi gambling mechanism would be both a great step forward and backward. All of these casino games misallocate resources (so that can support and entire generation of banking thieves).

Tue, 08/09/2011 - 07:21 | Link to Comment Bartanist
Bartanist's picture

It is total B/S that short selling creates price discovery. Short selling (naked or legal) creates a DIFFERENT!!!! supply and demand point by bringing more shares to market. Even with borrowed shares there are TWO or MORE people who think they own the same shares because they have been sold two or more times. Each person thinks they own legitimate voting shares even though they have been borrowed. Most owners of shares have no clue their broker lent out their shares and pocketed money for it (and maybe there is the real problem).

Of course, the stock markets are anything but free markets anyway since trades are made through a third party (human or computer) who sets the price. The price is not negotiated between buyer and seller.

Tue, 08/09/2011 - 07:21 | Link to Comment IMA5U
IMA5U's picture

no more short selling... that would do wonders for the long/short and convertible arbitrage strategies

 

 

Tue, 08/09/2011 - 07:26 | Link to Comment carlnpa
carlnpa's picture

Naked short selling is not price discovery, it is price manipulation.  It should not only be banned but prosecuted,

Tue, 08/09/2011 - 07:35 | Link to Comment boooyaaaah
boooyaaaah's picture

Can I sell you the Brooklyn Bridge

And old joke but exactly what naked short selling is

Selling something you do not own

Which is easier than stealing something you do not own

but you will never hear Tyler say a peep about naked short selling

I wonder why

 

Tue, 08/09/2011 - 07:56 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

Deep Capture ...Bitchez. Guy has been overstocking on nakedness for a while now. Guy has made that case but still the corruption rules the game. http://www.deepcapture.com/

http://www.youtube.com/watch?v=YUxZRJxNrMI&feature=relmfu Jim and Max get naked

Tue, 08/09/2011 - 07:29 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

Short selling was "banned" in the Netherlands in 1610. What followed was the great tulip bubble.

Tue, 08/09/2011 - 07:32 | Link to Comment dollartheque@ya...
dollartheque@yahoo.com's picture

does that mean we cannot buy/sell inverse or short etfs too?

Tue, 08/09/2011 - 07:33 | Link to Comment Smiddywesson
Smiddywesson's picture

At least tulips are worth something when the bubble bursts.  You can eat the bulbs with your breakfast herring or plant them for the flowers.  Not so with government paper.

Tue, 08/09/2011 - 07:34 | Link to Comment Gmpx
Gmpx's picture

Short selling is FRAUD. It can only be allowed to sell shares you have. It should not be allowed to borrow shares which do not exist.

Tue, 08/09/2011 - 08:05 | Link to Comment nonclaim
nonclaim's picture

Fraud is to make new rules and void others as you go.

Even the game Monopoly had rules and the supply of money was limited. If someone cheated you could kick the bastard in the head and/or quit.

So, what do you propose in real life? Accept all the crap quietly? A child won't do that!

Tue, 08/09/2011 - 08:16 | Link to Comment Gmpx
Gmpx's picture

Short selling was a fraud from its creation.
It was the new rule you are talking about
(when it appeared).
You only need to return back to old good
rules which existed before short selling was invented with the purpose to defraud other market players.

Tue, 08/09/2011 - 09:45 | Link to Comment nonclaim
nonclaim's picture

"Short" derives from the concept of lend/borrow. Once you lent it to me I can do as I please as long as I return it (or an equivalent) to you someday as promised, be it a share or a hammer.

The ridiculousness of a decree that for the next three months or so you cannot sell property under your control is beyond description.

Tue, 08/09/2011 - 09:04 | Link to Comment malikai
malikai's picture

You're describing naked short selling, which should be illegal. However, market makers sometimes need to naked short, so it's not easy to control.

Real shorting, where borrowing occurs requires a lender of the security. This is a normal market function and should not be controlled.

Tue, 08/09/2011 - 09:31 | Link to Comment Iam_Silverman
Iam_Silverman's picture

"It should not be allowed to borrow shares which do not exist."

That is NAKED short selling, and it is illegal.  In "traditional" short sales, real shares are borrowed, sold on the open market, and then replaced at an agreed-upon later date.  There are risks to the borrower, and  it can go horribly wrong for them.  I only disagree with short selling if the share price drop is created by the short seller (i.e. rumors or inside knowledge).

Tue, 08/09/2011 - 10:01 | Link to Comment Gmpx
Gmpx's picture

"In "traditional" short sales, real shares are borrowed".
Borrowed from who? The problem is that they are borrowed not from an equal market player but from a special entity.

Tue, 08/09/2011 - 10:42 | Link to Comment nonclaim
nonclaim's picture

Borrowed from a market player, like yourself.

If you have your account with a broker you most likely agreed to have your long positions available for lending for free and without any risk to you. You can opt-out, of course, and they will offer to hold your shares for a daily fee or else you take delivery as paper certificates.

No "special entity" unless you feel special...

Tue, 08/09/2011 - 12:53 | Link to Comment Iam_Silverman
Iam_Silverman's picture

I wonder how many of these novices are wide-eyed when they realize that they have unwittingly become enablers in the game?

Tue, 08/09/2011 - 07:47 | Link to Comment disabledvet
disabledvet's picture

drying up liquidity=increased volatility. right after buying tons of gold no less. how's that for profoundly unoriginal. time to see just how important having access to an American market is. Let's see: race to the bottom in currencies...CHECK, plunging oil prices...CHECK, soaring precious metal prices...CHECK, debt downgrades...CHECK! If it looks like a trade war, smells like a trade war and acts like a trade war....IT'S A TRADE WAR.

Tue, 08/09/2011 - 08:36 | Link to Comment g speed
g speed's picture

wow--you've spied the trees--err seen the forest?

Tue, 08/09/2011 - 08:01 | Link to Comment Peter Pan
Peter Pan's picture

Greece bans short selling but is about to legalise the use of illegal drugs. The former will not allow price discovery and the latter is probably to allow self discovery.

Tue, 08/09/2011 - 08:25 | Link to Comment caerus
caerus's picture

"evil speculators"

Tue, 08/09/2011 - 08:39 | Link to Comment PulauHantu29
PulauHantu29's picture

So when do they remove JPM's exempt status and prevent them from short selling PMs? Very uneven playing field.

 

Tue, 08/09/2011 - 08:45 | Link to Comment g speed
g speed's picture

ahh let me get this straight--If you borrow shares and sell then the price (should) drops--I(sharp operator that I am) buy them low. shares rise--lender says gimme shares back-- shorter must buy high to give back.   So the shorter is a con-artist?  noo doesn't sound right--Theyr'e all stupid?  -nope   I't a scam? Its just the market I think. So what it really is is me having something (property) and you telling me I can't do this or that with it. type aa gov't asshole.

Tue, 08/09/2011 - 09:35 | Link to Comment Iam_Silverman
Iam_Silverman's picture

Google "Investopedia" and "Short Sale".

Your confusion of how a short sale works will hopefully be cleared up.

Tue, 08/09/2011 - 11:05 | Link to Comment MarcusAurelius
MarcusAurelius's picture

Stopping the contraction of 750 trillion of derivitives. I wish them luck. Even the Fed has little to no control over this kind of derivitive leverage. World credit is contracting again and welcome back to the Bear that never left. Now is when people will lose faith in the central banks who supposedly had control over the situation.

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