WASHINGTON — Effective immediately, the Securities and Exchange Commission and the U.K. Financial Services Authority banned short selling at financial institutions in an effort to protect the integrity and quality of the securities market and strengthen investor confidence.
Under normal market conditions, short selling contributes to price efficiency and adds liquidity to the markets, according to SEC. However, the current market conditions have led to "unbridled" short selling contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation.
The ban, which is currently in place, halts short selling at 799 financial institutions. The ban is scheduled to end on Oct. 2.
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"Financial institutions are particularly vulnerable to this crisis of confidence and panic selling because they depend on the confidence of their trading counterparties in the conduct of their core business," the commission said.
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