Our speaker will be Matthias Molnar (Vienna University of Economics and Business).

He will give a talk on “Are shorts restricted when options are an option? – Evidence from SEC Rule 201” (joint with Rainer Brand and Angel Tengulov).

Abstract: 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.

The talk will take place on September 26, 2022 hybrid in room D3.0.233 at 3:00 pm.

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