The emergency ban recently imposed by the Securities and Exchange Commission on short selling for all financial stocks has done more harm than good, and should be lifted, writes Arturo Bris, professor of finance at the business school in Lausanne, Switzerland, and a research associate at the Yale International Center for Finance.

The ban, says Bris in a Wall Street Journal opinion essay, has "disrupted the functioning of fair, orderly equity markets."

A plan by the SEC to extend the ban, could further disrupt markets when markets now desperately need reliable liquidity in "tremendous amounts ... robust price discovery, and regulatory certainty."

Bris argues that obstructing or interfering with market dynamics "could cause the U.S. and the world to slide into more difficult times ahead."

Prior to the SEC's ban, says Bris, short-selling of the 799 equities on the SEC "no shorting" list was not "excessively high from January this year until the ban."

Short sales of equities, according to a study by Bris, usually came the day after they dropped substantially in price, not before.

In an efficient market, Bris contends, stock prices should react primarily to "company-specific news rather than overall market activity."

"Short-selling in financial markets is critical to aligning equity prices with fundamental values. For every short sale there is a commitment to buy," says Bris. This creates liquidity and provides a hedge against risk.