A New Way To Short?

An old friend of ours used to say that every new regulation creates new business opportunities, especially as investors and firms scramble to avoid the costs or restrictions of the regulation. That’s exactly what’s happening with the short selling ban, according to a report from CNBC’s Charlie Gasparino.

“Hedge funds executives have told CNBC that several Wall Street firms are marketing a new hedging product that would allow them to “short” stocks—even those on the banned short sale list,” Gasparino writes on CNBC’s website

“Citigroup officials have been among those pitching the new shorting technique—which involves the use of derivatives. An official there who spoke on condition on anonymity said the technique is still in the discussion stages, adding that if it is rolled out, it will be used purely for hedging purposes. Hedge funds will not be able to use the technique to create a “net short” position. Rather, the technique will be used to hedge against potential losses from going long on a financial stock on the banned list.”


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