JP Morgan Claims US may Ban Short Selling
An analyst at JP Morgan has claimed that the regulators in the USA may be looking to bring a ban on short-selling trading activities. This step can be a temporary exodus to contain the brewing banking crisis in the region.
At present, several Mid-tier banks in the USA have collapsed. Under these conditions, financial experts are looking at short-sellers and bear traders who can extenuate the issue.
To this end, JP Morgan analysts believe that the US government has the option of imposing a ban on short-selling to contain the problem.
It is worth noting that short-selling is a type of margin trading option that makes money by the declining trends in the price of an asset class rather than depending on its traction. American Banking Association or ABA addressed a letter to SEC sharing its concern about short-sellers.
American Banking Association Sees Short Selling as a Possible Threat to Financial Stability
Naomi Camper is the Chief Policy Officer at ABA, who addressed SEC officials in the latest letter about the possible threats of short-selling positions in the current environment.
She claimed that short-sellers can have a strong impact on the stock market performance, and some of the positions may even defy underlying fundamentals. To the same effect, JP Morgan analysts have also addressed the same issue in their notes.
The banking giant has highlighted that under normal circumstances, healthy banks do not fall into the hands of FDIC or Federal Deposit Insurance Corporation after a short duration of turbulence.
The analyst has maintained that the current financial banks can spread to other banks as many American citizens have started to worry about the security of their reserves in their local banking enterprises.
In the past, incidents of stock price fluctuations in regional banks have been linked to short-selling activities. During the last two months, First Horizon and Pacific Western Bank shares have experienced a visible decline.
At one end, the regional banks are undergoing a sharp decline. On the other hand, short sellers have been able to make a pretty penny from their trading positions. Data analytics firm Ortex has reported that short-sellers generated around $1.2 billion in profits connected to now-defunct three regional banking that lost an accumulated $532 billion in deposits.
Meanwhile, data projections also reveal that short-position holders generated $370 million by trading with stocks of First Horizon, Western Alliance, and PacWest.
On the other side of the spectrum, a public survey conducted by Ipsos has revealed that a majority of American citizens still have faith in their banks. The report also reveals that most citizens retain a considerable amount of confidence in the stability of their banks and deposit safety.
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