Notes On The Global Financial Crisis

1431 Words Oct 12th, 2016 6 Pages

The recent turmoil in the global financial market has given rise to an argument on what policy measure or controls should be imposed to curb excess stock price volatility. One such restrictions were placed on short selling to reduce speculative trading.The aim of the present paper is to consider the impact of the measures placed on short selling following the 2008 global financial crisis. This report assesses the success of the interim measures in achieving these objectives, and also considers the impact the interim measures had on the market, participants in the market and other stakeholders

What is short selling?

The short sale of a security that is not owned by the seller of the stock, or the seller has borrowed. Short selling is the belief that the price of a security will decline, at a lower price to make a profit, you can buy it back at a reduced cost in future.

There are two general types of short sale transactions:
(A) short sales covered: a person sells a financial product they can trust agreement existing loan to have a "right exercisable and unconditional to confer 'the product the buyer at the time of sale; and
(B) short sales Uncovered: the seller has no arrangement in place to borrow the financial product at the time of sale and therefore does not have a "right exercisable and unconditional to confer 'the product.
1 These measures included, in summary:
(a) the temporary banning, with some exemptions, of the covered short…
Open Document