Wednesday, September 17, 2008 4:02:19 PM
The Securities & Exchange Commission announced new trading rules Wednesday to curb the use of what's known as "naked" short selling.
This was first reported by FOX Business's Liz Claman.
Naked short selling is a Wall Street maneuver where a trader “shorts” a stock, or bets that a stock will go down in price, without borrowing the shares immediately first. Traditional short selling requires borrowing the shares before selling them. Naked shorts can usually push a stock's price lower than a traditional short can.
According to the rules instituted by the SEC, short sellers now must deliver the securities to the borrower by the end of business within three business days or face penalties that might included banning from further short sales of that same security.
The SEC issued a temporary ban on naked short selling on specific stocks that included Fannie Mae (FNM: 0.46, -0.02, -4.16%) and Freddie Mac(FRE: 0.28, +0.02, +7.69%) along with 17 investment banks. These rules now apply to all stocks and industries as of 12:01 a.m. ET on Thursday.
"These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling," said SEC Chairman Christopher Cox in a statement.
Naked short selling became much more common after the SEC eliminated a regulation known as the “uptick” rule on July 6 of last year.
Many companies, notably companies in the financial industry, have complained that without the “uptick” rule, their companies’ stocks can fall dramatically--commonly called a “bear run.”
VAYK Exited Caribbean Investments for $320,000 Profit • VAYK • Jun 27, 2024 9:00 AM
North Bay Resources Announces Successful Flotation Cell Test at Bishop Gold Mill, Inyo County, California • NBRI • Jun 27, 2024 9:00 AM
Branded Legacy, Inc. and Hemp Emu Announce Strategic Partnership to Enhance CBD Product Manufacturing • BLEG • Jun 27, 2024 8:30 AM
POET Wins "Best Optical AI Solution" in 2024 AI Breakthrough Awards Program • POET • Jun 26, 2024 10:09 AM
HealthLynked Promotes Bill Crupi to Chief Operating Officer • HLYK • Jun 26, 2024 8:00 AM
Bantec's Howco Short Term Department of Defense Contract Wins Will Exceed $1,100,000 for the current Quarter • BANT • Jun 25, 2024 10:00 AM