Regulation And The Credit Crisis?
BY CHRISTINE BIRKNER
Published 10/15/2008
The collapse on Wall Street set off a regulatory firestorm in Washington, and the futures and options industries were shaken by the SEC?s temporary ban on short selling for 799 financial companies on Sept. 19. The SEC?s rule followed in the footsteps of the UK Financial Services Authority?s rule that prohibited short positions in UK financial sector companies until January 2009 with an exemption for market makers.
The initial SEC short-selling order threw options market makers into a frenzy. ?There was a complete absence of liquidity in the marketplace on the open on Friday [Sept. 19]. Option bid-ask spreads were extremely wide, people were scrambling to find out what the interpretation of the rule was,? says Peter Bottini, executive vice president of trading at optionsXpress.
By instituting the initial rule, ?the SEC once again proved its ignorance of, and indifference to, the options market,? says Mark Longo, president of TheOptionsInsider.com.