Back to the Futures: When Short Selling is Banned

70 Pages Posted: 17 Jul 2019 Last revised: 8 Oct 2021

See all articles by George J. Jiang

George J. Jiang

Washington State University

Yoshiki Shimizu

University of Minnesota - Duluth

Cuyler Strong

U.S. Securities and Exchange Commission

Date Written: November 2, 2021

Abstract

We examine the effect of single-stock futures (SSFs) trading on the price discovery and market quality of underlying stocks during the 2008 short-selling ban. We find a significant increase in SSFs trading volume for banned stocks during the ban period. We show that the contribution of SSFs trading to underlying stock price discovery also increased significantly. Moreover, we find that SSFs trading helped mitigate the negative effect of the short-selling ban on market quality. Given that SSFs trading in US still lags behind other countries, our findings project an increasingly important role of SSFs in the US financial market.

Keywords: Short-Selling Ban, Financial Crisis, Single-Stock Futures, Price Discovery, Market Quality

JEL Classification: G01, G14

Suggested Citation

Jiang, George and Shimizu, Yoshiki and Strong, Cuyler, Back to the Futures: When Short Selling is Banned (November 2, 2021). Available at SSRN: https://ssrn.com/abstract=3420275 or http://dx.doi.org/10.2139/ssrn.3420275

George Jiang (Contact Author)

Washington State University ( email )

Department of Finance and Management Science
Carson College of Business
Pullman, WA 99-4746164
United States
509-3354474 (Phone)

HOME PAGE: http://directory.business.wsu.edu/bio.html?username=george.jiang

Yoshiki Shimizu

University of Minnesota - Duluth ( email )

1049 University Drive
Duluth, MN 55812
United States

Cuyler Strong

U.S. Securities and Exchange Commission ( email )

Washington, DC

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