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While overall short selling declined in nearly every robust affected by the decide, many of the 19 stocks still suffered declines in their share prices, the studies showed.

The U.S. Securities and Exchange Commission issued an emergency order last month requiring short sellers to pre-borrow stock in mortgage finance giants Freddie Mac (FRE.N) and Fannie Mae (FNM.N) and 17 other Wall Street firms, such as Goldman Sachs Group Inc (GS.N) and Citigroup Inc (C.N). While the prevail expired at 11:59 p.m. on Tuesday, the SEC had billed it viewed like an attempt to crack below the horizon on illegal "naked" crisp selling, that could allow reckless sharp selling of the public funds.

"While the SEC's intentions may have been good, their attempt to protect compensation with rule-making was quite flawed and without intended effect," said John Standerfer, Vice President of Financial Services for market premises firm S3 Matching Technologies. "The market has its hold mind."

An S3 study of market data showed short sells for the 19 stocks dropped by about 63 percent season the advise was in effect, but-end the firm concluded the have control was "inefficacious.," saying short selling "did not seem to be a significant factor" in the market's tendency of price for the stocks.

Shares of Fannie Mae and Freddie Mac are opposite to more than 20 percent since the defensive rule was first announced, despite an well-nigh 5 percent rise in the benchmark Standard & Poor's 500 index (.SPX) in the same period.

Even with the protection, S3 found the number of short sells in shares of Bank of America Corp (BAC.N) were often higher season the rule was in effect than they were the day before the rule was announced. But despite the higher levels of short selling, Bank of America's stock worth is up added than 40 percent in the past month.

A separate reflection from Arturo Bris, a finance professor at IMD business school in Lausanne, Switzerland, found that, even controlling for short selling, market efficiency had deteriorated additional for the 19 stocks affected by the rule than for other comparable U.S. financial stocks.

Bris build that shares affected through the give an order to lost here and there 3.8 percent of their value, compared to their peers — a figure that translates to about a $60 billion defeat for the firms' shareholders.

"Our belief is that naked short selling was never a problem with these stocks," uttered Eric Newman, portfolio manager at long/short fund TFS Capital in West Chester, Pennsylvania.

Indeed, prior to the SEC's rule only one of the 19 stocks, the U.S.-listed shares of Deutsche Bank (DBKGn.DE) (DB.N), had been listed on the New York Stock Exchange's list that tracks stocks with "fails to delivers" — one indication of uncovered short selling.

"We think the SEC are going to comprehend into this data that a lot of imperfect sellers exited positions," Newman added. "But we be persuaded a careful look will show was that unclothed short selling was not ferreted out, but that it was regular legitimate short sellers who were closing their positions."

(Additional Reporting by Kristina Cooke)


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