SEC issues temporary ban on short sales | Reuters
I am all for government intervention to stop this financial meltdown but banning short salling can prove to have unintended consequences.
Short selling provide liquidity and price discovery to the market. Without these two elements prices are distorted significantly and skewed. Moreover the move can shake investor confidence in market integrity and operations. I do not sell short but now I have less confidence in the market transparency and rules that I base my investment decisions on.
Enforce the rules on naked short selling that already exist. no one should be able to sell a stock that he/she does not own, that makes sense. Banning short selling altogether is a hasty move that can backfire.