The idea is relatively simple. You take a position when you think a share will rise. And you take a position if you think the same share has peaked and will start falling. As an investor,you make money whether a share falls or rises. Long-term investors will also benefit because they can lend their shares to short-sellers for a fee.

Unlike now when investors are only ever interested in the NSE when its rising,short-selling will mean that investors stay in the bourse during a bull-run. And during a bear-run.

Who won't go for this?



www.mjengakenya.blogspot.com

Who ensures the rules are followed?

Crocodile tears: If you can't assist me when I'm alive en you attend my funeral.

Selling short is being outlawed in other countries. This is after the chaos in the financial markets. Why bring it now?

Baada ya dhiki,faaraja

...last yr or thereabouts VW became the largest co on earth courtesy of entrapped short sellers...yet I doubt it's even among top 50,000 companies...I'd say risky biz...

Playing the stock market without insider info...is like buying a cow in the moonlight.

First of all they should introduce a fully automated trading platform which allows investors direct access to the ATS then we can begin thinking about short-selling.My two cents

Short selling isnt gambling. The downward pressure on prices that shorts exert ensure that shares are closer to their real value at all times.

1000%

I trade global markets and the aspect of short selling presents equal opportunities as buying long. Those who say short selling is gambling then know nothing about investements,those saying it is being banned are misinformed and those saying it wouldn't work in our country have static minds.

If investors/speculators like something they should buy it,if they dont they should sell it,this way the tru values of our equities would be reflected,in Kenya we have so many equities that are not worth there value,and if short selling was introduced you would not see shares and the NSE index moviing in snail speed,volume would be heavily increased and opportunity to make $$ would go up as well


When written in Chinese,the word crisis is composed of two
characters. One represents danger and the other represents
opportunity.

May be you should first make sure we thoroughly understand the concept and more so the regulation bit. As per now I'm thinking of those who buy shares and just sleep! with them for years. They don't trade. Is short selling similar to getting someone's shares and trading with them and returning them later! Forgive my simplicity!

Crocodile tears: If you can't assist me when I'm alive en you attend my funeral.

Example to illustrate:

Lets say I hold 100k of Equity which I intend to sell in 2011. In the meantime,Kizee has worked out that the price will go to Ksh12 between now and end of November and so decides he wants to go short on Equity. He decides that he wants to go short using 50,000 Equity shares. Luckily,we both use AA as our broker.

Kizee will go to AA and put in his order of going short of Equity for 50,000 shares. AA can then (with my permission and offcourse paying me say Ksh0.40 per share lending fee) sell 50,000 shares at current share price and in effect credit Kizee's CDs account with cash (please note Kizee can't access this cash until he decides to close the position).

At the end of November or whenever Equity gets to Ksh12,Kizee will buy back the Ksh50,000 which AA will credit back into my CDs account.

Result:

Kizee makes 50,000 * (13.45-0.40-12)=Ksh52,500 before broker charges

MainaT makes 50,000* 0.40 =20,000 before broker charges


www.mjengakenya.blogspot.com

Mr Green is right on.short selling would definately bring better price discovery in the nse and more liquidity which means more volume/activity.NSE activity is too sluggish and as i said here another day even zimbabwe on some days has twice the volume of trading in their stock market.short selling is a great trading strategy and it has its purpose in financial markets.However,before this can be allowed in kenya i believe we would have to reconstitute the whole CMA because of serious corruption and their inability to formulate and regulate market policy.