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It's become customary for regulators and governments to impose bans on short selling. It might be argued that imposing, or proposing, such a ban is a politically-motivated easy option for administrations to be seen to be challenging hedge funds and investment banks. Standing out from the crowd is the fast-growing Polish market, which is introducing regulations governing the taking of short positions. On 18 June, Deutsche Bank hosted a seminar in London at which the speakers included Jaroslaw Ziebiec of the Warsaw Stock Exchange (WSE). He walked through key elements of the new regulations, which are to take effect on 1 July 2010. The regulations permit short sale transactions in the most liquid Polish securities - including, but not limited to, those blue-chip stocks in the WIG20 exchange index and listed Treasury bonds. The WSE will maintain and publish a list of qualifying securities. All short sale order must be flagged on the WSE trading system using a designated field. The regulations provide for the WSE to suspend short sale orders in certain cases. This includes a circuit breaker which comes into effect on all securities if the value of the WIG index drops significantly (a fall of three percent or more) or affects a single security if it suffers a material fall in value (ten percent or more). In each case, suspension comes into effect only if the value of short sale transactions exceeds 20 percent of all sale transactions in the given securities. The WSE will publish information on short sale transactions in real time and, after the close of each trading session, will release details of the cumulative volume and value.
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