France, Italy, Spain and Belgium temporarily banned short-selling of Financial Stocks.
The main reason for this is after speculators forced European bank stocks to their lowest level since the credit crisis began.
This decision made by the government are facing criticism from various parts of the economic zone.
The 15-day ban in each country begin on Friday, and follows a failed attempt at a wider regional ban. Britain has confirmed it is not considering such a measure.
Market analysts said that the move could have negative impact in the economy. "I haven't seen such a preposterous decision in my life", says Mr. David Buik of BGC partners in London, who argues it does nothing but introduce uncertainty into the market.
"If investors conclude governments are trying to fix the market, they will still sell bank stocks. You can ban short-selling but not Selling." -tweeted Mr.Hugo Dixon of Reuters Breaking views.
Short selling occur in 2 steps. This can be represented like this.
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| Steps in Short selling |
First the short seller borrows shares and immediately sells them.
After that he waits for the stock price to decrease.
When the stock price decreases then the short seller can make profit by purchasing the shares return to lender without ever owning any shares.
Regards Hari " लोका समस्ता सुखिनो भवन्तु "
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