FSC drops ban on short sale of stocks

Starting today, both institutional and individual investors will be allowed to borrow stocks for advanced sales, as long as the price of any particular share to be borrowed rallies or remains unchanged.

But short sales of ETF (exchange-traded fund) certificates won’t be subject to the price limitation, FSC officials said.

FSC officials said that over the past two months since the ban was imposed on short sales Oct. 1, Taiwan and other major nations have take drastic measures to stabilize financial markets, stimulate private spending and investment, and grant enterprises bailouts, effectively boosting the stability of the entire financial market.

Meanwhile, the FSC’s ban on short sales has worked well in bolstering the local bourse, and some major countries such as the U.S. and Canada have gradually dropped bans on short sales of stocks.

Accordingly, the FSC decided to resume short sales mechanism to allow normal operations of the local bourse.

On Oct. 1, the FSC also banned investors from offsetting trading by buying back their sold stocks or selling their bought stocks in the same day, the so-called intraday trading.

In response to the measures taken Oct. 1, market analysts said the the policy would only have symbolic, rather than substantive, effect, since the current market plunge stemmed mainly from panic sale among investors, rather than the speculation of bearish investors.

Statistics of the Securities and Futures Bureau, FSC, showed that the outstanding amount of borrowed shares for short sale stood at only NT$12 billion in value in early October, only a portion of the market’s daily trading volume averaging NT$70-100 billion.

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