September 28, 2008

Ban on Short-Selling Results in Less Liquidity

The SEC's ban on short-selling on 799 financial stocks has resulted in further drying up liquidity. Go figure.

The short-selling ban is taking the 'hedge' out of hedge funds. ...With their hands tied on those stocks and the algorithms that do much that do much of their trading running into technical hitches, many quantitative and other 'market neutral' hedge funds are drastically reducing trading activity.
 
Another way of saying reduced trading activity is less liquidity in the market. Way to go Team Technocrat. Way to go.


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