Shorting the ban
Commentary: SEC's short-selling ban isn't giving investors a brake
10/01 10:45 AM
NEW YORK (MarketWatch) -- So, how are those 799 stocks originally part of the Securities and Exchange Commission's ban on short selling doing anyway?
Well, through the close of trading Tuesday, those stocks -- less 57 small issues that didn't trade on either Sept. 18 or Tuesday -- were down 5.5%, compared to a 7.7% average decline for the S&P 500 , according to a study of the stocks by TFS Capital, an asset manager that runs hedge funds and is based in Richmond, Va.
Stocks covered by the ban appear to be faring better. But take a closer look. The big winners were Fannie Mae (FNM:$1.5800,$0.0500,3.27%) , up 218%, and Freddie Mac (FRE:$1.7701,$0.0601,3.51%) , up 445%. Those shares were part of a government intervention. The mortgage giants' stocks went from less than 50 cents a share to around $1.50.
Then there were the community banks. Names like Fairfax Financial Holdings Ltd. (FFH:$334.0000,$5.5000,1.67%) , up 31%, and Harrington West Financial Group (HWFG:$4.25,00$0.00,000.00%) , up 68%, also rank among the big winners. Outside of their region, they're hardly household names.
So, how about the names investors have identified as being at risk? Wachovia Corp. (WB:$3.2000,$-0.3000,-8.57%) shares fell 87%. Sovereign Bancorp Inc. (SOV:$4.23,00$0.28,007.09%) shares were off 73%. National City Corp. (NCC:$2.10,00$0.35,0020.00%) fell 69%. Ambac Financial Group Inc. (ABK:$2.38,00$0.05,002.15%) fell 67%.
You get the picture. If the ban was intended to ease pressure on financial institution stocks, it didn't have any meaningful effect. Remember, short interest as a percentage of all shares was about 4% without the ban. So, again, little if any effect.
Unless it's having an amazing effect and without it everything would go to zero. These days, you can't rule it out.
- David Weidner
