The ban on short selling is like telling people that the New York Times is the only paper they can read.  But even banning half of the opinions in the stock market is not the only problem with this approach.  Remember that in falling markets the shorts represent a big block of buyers as they close out previously initiated short positions.  This is the same cockeyed logic that lawmakers were trying to use with crude oil trading, claiming that the long speculators needed to be shut down.

What a ban on short selling does, is to force the natural longs to be the only buyers in down markets.  In a sense, by eliminating short selling, you may in essence  be biasing the market to move down as there are always reasons for longs to sell: raise some cash,  pay for college tuition costs, etc….however, they don’t have similar  reasons to always buy, which short sellers do always maintain.  I think in very short order, this ban on short-selling will be scrapped, but the Dow might have to drop another 1000 points for this to happen.