The Financial Express, 27 Oct 2008, Ajay Shah
"To ban short selling in India, you would need to ban stock options and stock futures. Two things would then follow. First, there would be a steep and dramatic drop in stock market liquidity, for the bulk of the depth of the stock market today is found on the derivatives. When a stock is more liquid, investors pay a liquidity premium for it. Conversely, when a stock becomes less liquid, investors would pay less for it. Thus, stock prices in India would drop sharply when a ban on stock derivatives yields a sharp reduction in stock market liquidity.
The second event would take place in Singapore. The Singapore Exchange (SGX) would bless their good fortune, and launch stock futures trading on Indian stocks. The optimists and pessimists would then take their business to Singapore."
Read More
