VGSF - WU Vienna - LC

Matthias Molnar, Vienna University of Economics and Business (WU Wien)

Campus WU D3.0.233 15:00 - 16:00

Organizer WU Vienna

The Fin­ance Brown Bag Sem­inar is held by the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance (WU Vi­enna) and the Vi­enna Gradu­ate School of Fin­ance (VGSF). It serves as a present­a­tion plat­form for PhD stu­dents, fac­ulty mem­bers, and vis­it­ors. An over­view of BBS on the web­site of the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance.

----------------

Mat­thias Mol­nar, Vi­enna Uni­versity of Eco­nom­ics and Busi­ness (WU Wien)

Are shorts restric­ted when op­tions are an op­tion? – Evid­ence from SEC Rule 201

(with Rainer Brand and An­gel Ten­gu­lov)

This pa­per in­vestig­ates the ef­fect of the cur­rent short-­sale reg­u­la­tion, SEC Rule 201, on cross-­mar­ket trad­ing and its im­pact on mar­ket qual­ity. The evid­ence sug­gests that after Rule 201 is triggered, short­ing activ­ity de­creases and put op­tion activ­ity in­creases. Call op­tion activ­ity, op­tion bid-ask spreads, and pres­sure on put op­tion prices in­crease as well. This evid­ence is con­sist­ent with in­formed short sellers migrat­ing from the equity mar­ket to the op­tions mar­ket after short-­sale restric­tions be­come bind­ing and con­trib­utes to a long-stand­ing de­bate on the topic. Fur­ther, we doc­u­ment an in­crease in equity bid-ask spreads and equity price dis­per­sion, in­dic­at­ive of de­teri­or­a­tion in the mar­ket qual­ity of the un­derly­ing stocks. The evid­ence high­lights the need of ad­di­tional dis­clos­ure re­quire­ments re­lated to large syn­thetic short-­sale pos­i­tions through op­tions.



Back to overview