SEC Rule On 'Naked' Short-Selling Now Permanent

By: Associated Press Email
By: Associated Press Email

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July 27, 2009

Federal regulators are making permanent an emergency rule aimed at reducing abusive short-selling, put in at the height of last fall's market turmoil.

The Securities and Exchange Commission announced Monday that it took the action on the rule targeting so-called "naked" short-selling, which was due to expire Friday.

Short-sellers bet against a stock. They generally borrow a company's shares, sell them, and then buy them when the stock falls and return them to the lender -- pocketing the difference in price.

"Naked" short-selling occurs when sellers don't even borrow the shares before selling them, and then look to cover positions sometime after the sale.

The SEC rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.


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