Mr. Lack doesn't say that short selling is the major source of hedge-fund risk.

WSJ: Book Review: The Hedge Fund Mirage

So the prohibition won't in theory prevent hedge funds and other investors short-selling French and Italian banks, for example, through offshore exchanges.

BBC: Can a ban on speculation strengthen Europe's banks?

Now the SEC said it might repropose amendments to the so-called options market-maker exemptions, which allow options firms to hold open short positions in stocks to hedge their options positions in ways that aren't allowed for other traders.

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