Greece: Gambling allowed again
Everything back to square one. Starting tomorrow, short selling on Athens stock exchanges is possible again.
Speculators will be pleased. Tonight the ban on so-called blank runs expires, it will not be extended. As of tomorrow, investors will once again be allowed to sell shares they do not actually own.
For almost 4 weeks, the stock exchanges in Athens are open again. These were on 29. June, at the time of the greatest turbulence, when it was a question of Greece remaining in the euro, were temporarily closed. Stocks have been allowed to be traded again for just under a month now. Normal stock market business is an inevitable part of a normal economy.
However, it remains unclear why it is now necessary to open Pandora’s box again in the form of short selling. In short selling, which will be allowed again in Athens from tomorrow, investors borrow shares at a certain price and sell these shares, which they do not actually own, on a cut-off date in the future. The deal only works out if they sell the shares at the end of the lending period, d.h. if they have to deliver them to their buyer, can buy them back cheaper on the market. They pocket the difference as profit.
However, if the price of the share has risen in the meantime, investors make losses. Since such trades are usually also leveraged, profits or losses are very easily multiplied. If prices on a stock exchange fluctuate strongly, the leverage effect is further increased. As a result, excessive uncovered short selling can quickly become an avalanche that can shake up entire financial systems.
At the beginning of the financial crisis in 2007, short selling was banned in many European countries. These included Germany, Great Britain, France, Portugal and Ireland. This type of financial transaction also came to the index in the United States, Australia, Canada and Taiwan.
In Germany, the ban on uncovered short sales was lifted by BaFin in January 2010, only to be reintroduced in May. The European Securities and Markets Authority (ESMA) may officially prohibit short selling since 2012. Following a ruling by the European Court of Justice, the EU may also prohibit short selling.
Why one must permit now of all things in Greece again such short sales, does not open itself with common sense. These financial products are truly devilish and have caused some damage in the past. Allowing such forward transactions again on the highly volatile Athens Stock Exchange, of all places, where prices are currently fluctuating wildly under the impact of the financial and debt crisis, is playing with fire. But in Greece’s recent history, there is little to be surprised about. Apparently the gamblers and speculators have great influence within the troika that they were able to push through this permission of short sales. The Greeks themselves have not been allowed to decide such things for a long time.