Is short selling finally coming to Jamaica?  The Jamaica Stock Exchange has given us another timeline, but will they stick to it this time?

So if you don’t know what short-selling is, here’s a quick lesson.  

Short selling, also known as shorting, is an investment strategy that you would use if you expect a stock price to go down.  Most of the time, you buy a stock with the hopes that the price will go up, right?  You usually want to buy low and sell high.  But with short selling, you’re doing the reverse.  You’re betting AGAINST the stock.  That way you can make money when stocks go up AND when they go down.

So with this strategy, you’ll actually borrow the stock from someone else and sell it.  Let’s say you sell it for $100.  Then later, let’s say the price falls to $50.  Now you can buy it back for $100 and give it back to the person you borrowed it from, AND keep the extra $50 that you sold it for in the first place.  Sounds crafty right?  Well, it’s also very risky because what if the price doesn’t fall?  What if it goes up and you don’t have the money to buy back the stock?  Then you’re in trouble.

So it’s a very high-risk high-reward type of strategy because you can make really big gains, but on the other hand, losses can pile up quickly and you can even end up owing.  Shorting is quite common in countries like the US, which have larger markets and where trading is more robust.  There’s even an entire movie about it called The Big Short, based on the most famous use of this strategy during the financial crisis of 2007 to 2008.  Must watch for serious investors!

So for years, the JSE has been promising that shorting is coming to Jamaica.  In their latest update, they’re saying it will be available on the local stock exchange by the end of this year.  

Hmmmm?  When have I heard this before?

Let’s see if they stick to the timeline this time.

In its latest update, the JSE said it’s finalising the rules that will be used to govern shorting.  Obviously, because our market is so small, we’re gonna need some rules.  

Last year, we interviewed the JSE’s Group Business Development Manager, Andre Gooden.  He explained that you will not be able to use this strategy with every stock.  It will only be allowed with those that are very liquid – think TJH, NCB, for example.  These are stocks that trade a lot of volumes.  By the way, check out that full interview on my YouTube channel.

Remember shorting is a risky game and the JSE wants to make sure that they’re protecting investors and the exchange, especially now because the market is still fragile after SSL.

So are you looking forward to short-selling in Jamaica?  Or is this strategy too risky for you?  Let me know in the comments.