The Relevance of Short Sales to the Maltese Stock Market

Abstract

The paper discusses the possible effects of short sales on the operation of a very small stock market such as the Maltese one. After studying the basic mechanics of short selling procedures, the paper reviews the salient literature with particular reference to how short sales may enhance informational efficiency and their relationship with liquidity. The paper proceeds by examining these relationships in the context of the Maltese securities market. The study reveals that short sales may be desirable on the Maltese stock market for enhancing price efficiency and liquidity, yet a more formal framework for conducting such transactions is required. In addition, short positions may be particularly risky in the context of the Maltese stock market, due to low liquidity levels.

Strategic Priorities or Stock Exchanges in New EU Member States

“…Once the market developed, an electronic trading system was introduced in 1995, and fixed commissions were abolished. As outlined by Azzopardi and Camilleri (2003), no significant market making, short sale and derivatives activities are conducted on MSE. An Alternative Companies Listing facility was introduced in 1999, which is intended for companies without a trading record.…”