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ARTICLE · 15 APRIL 2021

Short Selling Under Turkish Law

Short selling is a trading technique used by investors who believe that the prices of securities will fall.

TurkeyCorporate/Commercial Law

SHORT SELLING UNDER TURKISH LAW

A. Definition and Legal Basis for Regulation of Short Selling

Short selling is a trading technique used by investors who believe that the prices of securities will fall. While selling a long position is the most obvious means of avoiding losses in what is perceived to be an overpriced asset, short selling, on the other hand, offers a means not just to avoid losses but also to profit from the knowledge of overpricing.1 Although short selling had been practiced dated back to early 17th century, when first uncovered on stocks of the Dutch East India Company2, it was not until the Lehman Brothers crisis that it took the attention of the regulators from various jurisdictions.3 The panic generated by the bankruptcy of Lehman Brothers and the collapse in market prices of listed financial company securities pushed market regulators to introduce a ban on short selling as an emergency measure.4

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