Question

Should the practice of 'shorting' stock be prohibited as harmful to society? Should Credit Rating be a Government function to remove the conflict of interest risk?

Answer 1

Note: We’ll answer the first question since the exact one wasn’t specified.

Answer 1):

The concept of Short selling is used as a strategy of stock trading, an investor thinks about fall of price of stock. Investors sell the stock at higher price in expectation of price fall in near future. It is not a new practice, the strategy existed since the initial times of stock trading. Many countries had put a ban on the short trading for short time period in different stress situation , like UK banned naked short position in 18th Century, during French Revolution in France, during the Great Depression, and financial crisis of 2008 the U.S.

From the above discussion , it is clear short selling may not very good for investment as well as society . So, security regulatory agencies should impose some restriction at least for naked short position in market.