No More Naked Shorting of Stocks - Bearish with Stock Options | PowerOptions Web Log
In September 2008, the Securities and Exchange Commission (SEC) instituted emergency rules to penalize short sellers who failed to deliver borrowed shares at settlement (naked short selling). These rules were set to expire on July 31, 2009, but on July 27, the SEC made them permanent. Why is this important? Short selling a stock is essentially betting against a stock. Short-sellers borrow shares of a stock, sell them and then hope to buy them back at a lower price when it is time to return them to the lender. The difference in price is the short-sellers profit – or loss, if he bets wrong. Short selling, while not considered an abusive tactic, can cause sudden plunges in a stock’s price. The SEC used to have strict rules regulating short sales to prevent abuse. One of the most important of these was the uptick rule. This rule allowed short sales only...
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