The end of the SEC's no-short selling rule, which had prevented short-sellers from taking positions on hundreds of stocks, ended on Wednesday at midnight. But just as the imposition of the rule, on Sept. 19, did little to halt the decline in these stocks, the end of the rule appears to be having little downside impact.
Bloomberg's No-Short index of 969 stocks was down 3.3 per cent in the early afternoon. Yes, that is down, but keep in mind that the index has declined during 10 of the past 15 trading sessions, including an 8.3 per cent drop on Tuesday and an 11.8 per cent drop two Mondays ago. In fact, over the life of the ban, the index fell 19.8 per cent, slightly worse than the 18.8 per cent decline of the S&P 500.
“If the ban did any good, it was this: executives at the protected firms could no longer blame short sellers or ‘bear raids' when their stock dropped,” said John Carney, writing on ClusterStock.
Wells Fargo & Co. fell 10.4 per cent on Thursday, Morgan Stanley fell 13.5 per cent and American International Group Inc. fell 18.2 per cent. On the upside, JPMorgan Chase & Co. rose 3.9 per cent.
“If there had been no ban, would they have gone down even more?” said Mozaffar Khan, a professor at the Sloan School of Management at the Massachusetts Institute of Technology, in an interview with The New York Times . “Normally the studies that we do are in normal times, and we just don't know in a state of panic what the outcome would have been.”
