Short-Selling Ban: The List

Friday, September 26, 2008
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Today, the Wall Street Journal reports that the ban on short selling is “casting a very wide net.” I just downloaded, into a spreadsheet, the list of companies on the short-sale ban list. There are about 1,000 listings. Is anyone surprised that GM and Ford were added to the list this week? Since the SEC has turned over the job of determining who gets on the list to NYSE and Nasdaq, listed companies are pounding on the doors of NYSE and Nasdaq to be put on the list of “protected companies.”

The original concept supporting the placement of the ban has already been blown to bits. Without setting any formal rules (read: arbitrary rules), the ban was supposed to “protect” banks, savings associations, broker-dealers, investment advisers, and insurance companies. One out of seven of all companies listed on US exchanges are now on The List. Libertarians always know that creeping interventionist tactics, rationalized by authorities, central planners, and the recipients of the intervention as being necessary to quell immediate crises, are always a precursor to long-term (and often permanent) takeovers, by government, of market processes. But occasionally, there is a bright light in this swelling tide of statism:

American Physicians Capital Inc., a provider of medical-malpractice insurance, opted off the list, too. CEO Kevin Clinton said in a statement: “We also believe in free and fair markets.”

Also opting out: Greenlight Capital Re Ltd., a Cayman Islands-based reinsurance company. Vocal short seller David Einhorn is chairman of Greenlight.

“We believe it is in the long-term interest of our company to have the market set an appropriate price for our shares,” the firm said in a statement. “We also do not want investors to feel our stock is the beneficiary of any artificial price support.”

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