Financial Times FT.com

Lehman Brothers

Shorting ban raises liquidity fears

By James Mackintosh in London

Published: September 23 2008 21:36 | Last updated: September 23 2008 21:36

Trading volumes in financial stocks could dry up after the computer-driven hedge funds – the biggest traders in stock markets – have been hit by bans on short selling.

Several statistical arbitrage hedge funds, which use computers for rapid-fire trading, said they have already stopped dealing in financials because their models only worked by offsetting the risk of long positions by taking short positions, too.

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