Suppose this actually did happen... Given the recent fear and panic, our pseudo-socialist government might do just about anything in attempt to solve this credit crisis, no matter how uniformed and ignorant such an action may be. What will happen to vola? What will price behave like? I've never traded such a market and would curious to your thoughts on what exactly a no short selling allowed market would function like.
it doesn't change anything besides take away liquidity and makes finding the "proper" price longer, markets will still go where they have to go take a look at the pakistan stock exchange i believe it is called karachi they banned shorting of EVERYTHING in the summer the market rallied hard then sold off even more up to the point where the government put a price "floor" on stocks saying prices cannot go any lower.