news.manifold.markets/p/isaac-kings-whales-vs-minnows-and
2 corrections found
There are usually enough market-enhancing positive effects to it that the government never actually gets around to banning it.
This overstates things: governments and regulators have in fact imposed short-selling bans, including the SEC’s 2008 emergency ban on many financial stocks and France’s 2020 ban on creating or increasing short net positions.
Full reasoning
The sentence says governments never actually ban short selling, but that is not correct.
Authoritative regulators have repeatedly imposed short-selling bans or prohibitions in at least some circumstances:
- In the United States, the SEC announced on September 19, 2008 that it had taken emergency action to "prohibit short selling in financial companies", applying to 799 financial companies.
- In France, the AMF announced on March 17, 2020 that it had decided to "ban the creation or increase of short net positions" for an initial period that was extended to 30 days.
So while short selling is often allowed under normal conditions, it is false to say the government "never actually gets around to banning it." A narrower claim like "governments rarely impose broad permanent bans" would be much closer to the record.
2 sources
- SEC Halts Short Selling of Financial Stocks to Protect Investors and Markets (Press Release No. 2008-211)
On Sept. 19, 2008, the SEC took temporary emergency action to prohibit short selling in financial companies. The action applied to the securities of 799 financial companies.
- The AMF announces a short selling ban for one month | AMF
On March 17, 2020, France’s AMF announced it had decided to ban the creation or increase of short net positions with immediate effect, with the ban applicable from 18 March 2020 until 16 April 2020.
you set a neutral win/lose level when you buy the stock and hope it stays under the bar.
This reverses how short selling works. In a short sale, you borrow and sell first, and only later buy the shares back; your gain or loss is anchored to the initial sale price, not set when you buy.
Full reasoning
This sentence describes the mechanics of a short sale incorrectly.
In a standard short sale, the trader borrows shares and sells them first. The position is then closed later by buying equivalent shares back and returning them to the lender. That means the economically important reference point is the initial sale price (ignoring fees and borrowing costs), not a "neutral win/lose level" set when you later buy the stock.
The SEC's own explanations describe a short sale this way: the seller does not own the security, borrows it to deliver to the purchaser, and later closes the position by purchasing equivalent securities on the open market and returning them. So this passage gets the transaction order backwards.
2 sources
- SEC.gov | Division of Market Regulation: Responses to Frequently Asked Questions Concerning Regulation SHO
A short sale is the sale of a security that the seller does not own. In order to deliver the security to the purchaser, the short seller will borrow the security. Typically, the short seller later closes out the position by purchasing equivalent securities on the open market and returning the borrowed security to the lender.
- SEC.gov | Short Sales
The SEC explains that a short sale is the sale of a security that the seller does not own or does not deliver. The short seller borrows the security and later closes out the position, typically by purchasing equivalent securities on the open market.