The Securities and Exchange Commission’s ban on short selling expired at midnight last night. Launched in a panic by SEC chair Chris Cox in an effort to “stabilise” markets, the ban seemed to have the opposite effect. It added confusion into the markets, made pricing less trustworthy and didn’t halt the drop in financial stocks.
“The ban applied to nearly 1,000 stocks, most of them financial institutions. Between the ban’s introduction on Sept. 19 and Wednesday, the Dow Jones Industrial Average fell nearly 19%. An exchange-traded fund tracking financial companies, the Financial Select Sector SPDR Fund, was down nearly 26%,” the Wall Street Journal reports.
If the ban did any good, it was this: executives at the protected firms could no longer blame short sellers or “bear raids” when their stock dropped.
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