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Thursday, 09/06/2012 1:10:37 AM

Thursday, September 06, 2012 1:10:37 AM

Post# of 31752
I wonder if this article is correct or accurate when it mentions that sub-pennies are not worth shorting seeings how shorting of gfmd is a question?

http://seekingalpha.com/article/53225-sec-nyse-abetting-stock-fraud-with-margin-rules

"The symmetry between long and short breaks down, however, with stocks under $2.50 per share. The NYSE has a rule (rule 431 (c) 2) that requires $2.50 in cash or margin for every stock below $2.50 per share sold short. A comparable rule does not exist for long positions. So if I want to buy 1000 shares of a penny stock trading at $0.40, I need $400 in cash or margin ability from marginable stocks. But if I want to short 1000 shares of a $0.40 stock I need $2,500 in cash or margin. So any time someone shorts a stock under $2.50, they have negative leverage–the position value ($400) is but a fraction of the money needed to hold the position ($2,500). For this reason, very few short sellers sell short cheap stocks. Fraudulent companies or worthless shell companies trade at absurd valuations because their share prices are too low to attract short sellers."