SPK investigates short selling in Turkish capital markets

The board said in a written statement on Thursday that those who had inappropriately participated in short selling would “be heavily punished.”

SPK investigates short selling in Turkish capital markets

Turkey's Capital Markets Board (SPK) has launched an investigation against short selling after the country's capital markets were badly hit following fears of a worsening world economic outlook and a possible second wave of a global financial crisis just around the corner.

The board said in a written statement on Thursday that those who had inappropriately participated in short selling would "be heavily punished." In short selling, investors borrow equities that they forecast will lose value from a broker and sell them on the stock market, expecting to repurchase them at a lower price. Those investors make a profit if their expectations prove true -- that is, if the value of the shares they borrowed declines -- when they return the same amount of shares to the lender.

However, they risk facing an unlimited amount of losses if the shares they borrowed, contrary to their expectations, gain in value. This type of trading has the potential to magnify losses on the stock market or cause major troubles for publicly listed companies, particularly when this occurs in large sums at a time when a general share sell-off is observed in a stock market.

Also on Thursday, the board raised the minimum cash or equity an investor should hold in an investment account to start short-selling from 50 percent to 70 percent of the amount to be sold. It said, however, that a minimum of 35 percent of the amount should be maintained to continue short-selling. Companies may also buy back as much as 10 percent of their share capital to allow a "reduction in the volatility of their share prices," the board said in the statement.

Cihan news agency

Last Mod: 12 Ağustos 2011, 13:34
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