(C) Short and Margin trade

With regard to the non-functioning margin & short trade any reduction in the requirements for margin trade would certainly pump more liquidity on the capital market. Thence, ceteris paribus, the higher liquidity would become a catalyst for higher prices and price multiples.

Any regulatory decision in this field should initially measure the influence of the REPO-contracts and the extent to which they have already satisfied the liquidity needs and whether it is actually the REPOs that have already augmented the current price levels undeservedly. On the other hand one should think of the same requirements regarding the short sales, (e.g. as in the current regulation 16 of the FSC), in order to balance the excess liquidity, caused by the lower margin criteria.

Additionally, any decline in those requirements will foster the performance of the more advanced intermediaries with more sophisticated software and risk solutions, such as the banks. Bearing in mind the widely spread, archaic trading systems on the market, any decrease in the short & margin requirements would definitely result in a liquidity flush and most probably cause significant price volatility.