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Marketplace
BBC World Service

Who’s making money off market turmoil?

Marketplace Staff Aug 12, 2011
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STEVE CHIOTAKIS: France, Italy, Spain and Belgium all have prohibited traders from the practice of short selling — which allows people to make money by betting on falling stocks. The BBC’s business reporter Russell Padmore is with us from London now with the latest. Hi Russell.

RUSSELL PADMORE: Morning to you, Steve.

CHIOTAKIS: How are short sellers making money with all this volatility?

PADMORE: Well, volatility is manna from heaven for those who love to bet on a falling market — shorting of shares is effectively making a bet that the market is going to go lower and you benefit from that.

CHIOTAKIS: Besides, short sellers, Russell, who is making money on the market volatility right now?

PADMORE: I’ve been talking to a lot of traders and stock brokers here in London today, and I put that question to them, actually, kind of trying to reenforce what I was thinking — we’re in an open market today. The straight answer to that, Steve, is nearly everybody. Whether it’s hedge fund traders or ordinary stock brokers, investment banks themselves, anywhere in the world of course. Because you can be in let’s say Singapore, Sydney, Australia, New York — you could be electronically trading here in London making money on this falling market. So it’s literally anybody — it includes the private investor, too.

CHIOTAKIS: This short selling ban is limited, I know, to a handful of European countries — but could it spread to the other countries, and the United States?

PADMORE: Yes, many people have wondered if it could spread. Although I can tell you today that the financial regulator here in London has said it will not follow suit — what’s going on with France, Spain, Italy, Belgium, the ban on short-selling of shares that’s happening there will not be implemented in London. Remember of course, London, the biggest financial center in Europe. Any plan that the French have to protect their troubled banking sector — we’ve seen Societe Generale, the big French bank, it’s shares down by about a third in two weeks. The markets are very much in a time of uncertainty. The regulators here in London have said they’re not going to follow suit, and I think maybe the U.S. financial regulators, too, have learned a lesson. It’s a wait and see for the moment, I think.

CHIOTAKIS: The BBC’s business reporter Russell Padmore in London. Russell, thank you.

PADMORE: Steve, thank you.

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