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 NY Times reports. 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.
In such deals, a trader sells borrowed shares in hopes that they will decline in value before he has to buy them back to close out his loan. The difference in price is his profit, or loss. Critics say short-selling encourages speculation and pushes stock prices down, sometimes feeding on itself in a panicked market, while advocates say it keeps the market honest and maintains liquidity.
“We are discussing with national authorities and together we will decide whether we need coordinated action,” Victoria Powell, a spokeswoman for the authority, said Thursday. She declined to comment on the timing of any decision or its possible scope.
http://www.nytimes.com/2011/08/12/business/global/europe-considers-ban-on-short-selling.html?_r=1&smid=tw-nytimesglobal&seid=auto
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