Guide · Markets
Short-Selling Curbs Explained: Bans, Uptick Rules, Margins
Short-selling curbs are rules that limit bets on falling prices during a sell-off, from outright bans to price tests and higher margins. Taiwan tightened its rules on November 9, 2026.
On Monday, November 9, 2026, after seven straight days of losses had pushed Taiwan's stock market into a bear market, the Financial Supervisory Commission changed two numbers. The cap on intraday short-sale orders using borrowed shares fell to 3% of a stock's 30-day average daily volume, from 30%, and the minimum margin a short seller must post rose to 130% of the position, from 90%. At the same time the government activated a NT$500 billion stabilisation fund, and the Taiex rose more than 5% that day.
A short sale is a bet that a price will fall: the trader borrows shares, sells them, and hopes to buy them back cheaper later. Regulators rarely object to that in normal times, because short sellers add liquidity and help push overpriced stocks back down. In a panic, though, short selling can add to the pressure on falling prices, and that is when authorities reach for one of three tools.
The bluntest is a ban. On September 19, 2008, the SEC temporarily banned short sales in about 800 financial stocks, a list that later grew to roughly 1,000, until October 8. Several European countries, including France, Italy and Spain, banned new short positions for about two months in March 2020. South Korea went further: it banned short selling across its whole market in November 2023 and only fully lifted the ban on March 31, 2025.
The second tool is a price test. In the US, Rule 201, adopted in 2010 and known as the alternative uptick rule, applies when a stock falls 10% or more from the previous close: for the rest of that day and the next, short sales are allowed only at a price above the best bid, so short sellers cannot hit buyers who are already lowering their offers. The third tool is the one Taiwan used on November 9: leave short selling legal but make it smaller or more expensive, with volume caps and higher margins.
Do the curbs work? Research on the 2008 bans, such as a widely cited study by Alessandro Beber and Marco Pagano covering 30 countries, found that they widened bid-ask spreads and slowed price discovery and did little to support prices, with the US financial stocks a possible exception. Bans can also trigger short squeezes at the start, as short sellers buy back shares in a hurry, which makes the first day's rally look more convincing than it is.
For traders, three points follow. A rally on the day curbs are announced is partly mechanical, from short covering and fewer sellers, so wait for later sessions to judge demand. Stocks with heavy short interest tend to move the most when rules change. And look at what is announced alongside the curbs: in Taiwan, the stabilisation fund's buying matters at least as much as the short-sale rules, and the market's real test comes when that support is no longer needed.