On 19 September 2008, before the opening of stock market, short selling is offically banned by the Securities and Exchange Commission, SEC of U.S. This very agressive and some called it a timely move will almost absolutely prevent market from deliberate selling of the 799 financial stocks listed on New York Stock Exchange, NYSE. This ban order is on a temporary basis till 2 October 2008 and could be extended for another 10 days if SEC deems that it is necessary.
Short selling in the stock market context is a process of selling shares that the trader do not own. Short selling or ‘shorting’ usually adds pressure to the already battered market and SEC deems that such selling is the key reason that caused the market to collapse for the past months. In time of panic like the collapse of Lehman Brothers Inc will cause selling and short selling will cause market to drop deeper.
According to news, SEC said that it was acting in concert with U.K. Financial Services Authority in taking emergency step to "prohibit short selling in financial companies" which will ultmately protect the integrity of the securities market and boost investor confidence with a four month short selling ban order on Thursday.
Shorting selling in normal market contribute to the stock market effeciency and adding liquidity to the market. However, with this ban, I can forsee that the only way for the market to go is ‘up’ from now on. Recovery at sight as this will be considered as a very good call to bring U.S economy to the road of recovery.