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SEC issues emergency rule to curb short sales

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  • SEC issues emergency rule to curb short sales

    Over the weekend, the SEC announced plans to crack down on false rumors and said it is examining whether broker dealers and investment advisers have controls in place to prevent market manipulation.

    The agency's rule change would prevent investors from making "naked" short sales of the biggest financial stocks. A "naked" short sale occurs when an investor sells stock that has not yet been borrowed.

    Broker-dealers will sometimes accidentally fail to deliver stocks to investors who have arranged to borrow a stock. If it is done intentionally, it is illegal.

    "Today's commission action aims to stop unlawful manipulation through naked short selling that threatens the stability of financial institutions," SEC Chairman Christopher Cox said in a statement.

    The emergency rule would require a short seller to borrow the securities before executing the sale. It would also require the investor to deliver the securities on the settlement date.

    "The new rule will benefit the investment community and help bring more stability to the market," said Dylan Wetherill, president and founder of short interest tracking service ShortSqueeze.com.

    "This rule would help relieve the extreme downward pressure on stocks that has helped fuel the market down to these levels," he said.

    As of June 30, short sellers held about 14 percent of Fannie's outstanding stock, up from around 3 percent last August. For the same period, shorts held almost 12 percent of Freddie's outstanding stock, up from about 2.7 percent. They also held about 10 percent of Lehman's stock, up from 4.5 percent.

    Short sellers say they prevent stocks from becoming overvalued and are an essential feature of the market.

    http://www.reuters.com/article/newsO...BrandChannel=0

  • #2
    What a crock of shit

    Comment


    • #3
      SEC extends limits on short sales
      The temporary order banning 'naked' short selling of 19 financial firms will be in effect until August 12.

      http://money.cnn.com/2008/07/30/mark...g.ap/index.htm

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      • #4
        In defense of short sellers
        Investors who bet that stocks will fall are getting blamed by some for the current market mess. But it would be a huge mistake to crack down on the shorts.

        By Paul R. La Monica, CNNMoney.com editor at large
        Last Updated: July 16, 2008: 10:56 AM EDT


        http://money.cnn.com/2008/07/16/mark...ion=2008071610

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