IDX halts short selling to weather pressure

The Jakarta Post | Tue, 09/30/2008 6:40 PM | Business

The Indonesian Stock Exchange (IDX) has halted the practice of betting down stock prices through short selling for the month of October to curb pressure to the stock index average.

The new regulation is effective as of Tuesday, the IDX said in a statement.

Short selling is a legitimate method of trading, but has been blamed for widening the scope of the recent global financial crisis led by a liquidity crisis in the U.S.

The turmoil has swallowed some of the most storied names on Wall Street. Three of its five major investment banks - Bear Stearns, Lehman Brothers and Merrill Lynch - have either gone out of business or been driven into the arms of another bank.

Short selling involves betting against company stocks by borrowing its shares, selling them, and pocketing the difference when they fall.

A statement issued by the IDX says that the global financial market condition in the region will remain volatile to negative sentiment contagion from the liquidity crisis in the U.S.

The move by IDX follows a similar decision on Sept. 19 the U.S. Federal securities authorities and several others authorities in U.K. and Europe. (and)

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