Naked Short Selling


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Naked Short Selling

The sale of shares one has neither borrowed nor made arrangements to borrow. Under Regulation SHO, investors engaging in naked shorting much abide by a "locate" requirement and a "close-out" requirement. The locate requirement forces brokers to have reasonable grounds to believe that the short-sold security can be borrowed; the broker must document this prior to the security's sale. With some exceptions, the close-out requirement means that brokers who have failed to deliver a short-sold security for 13 days must purchase similar securities and present those instead. Naked shorting is very high risk.
References in periodicals archive ?
5 million for violating Regulation SHO, an SEC rule that established a regulatory framework to govern short sales and prevent abusive naked short selling.
However, the ban on naked short selling is to continue.
MEPs voted to set up authorities in London, Paris and Frankfurt to closely monitor regulators and, in emergencies, ban transactions such as naked short selling of shares and Government bonds.
Spain and Portugal adopted this proposal in May 2010 which in effect extended the obligation to report naked short selling to all Spanish and Portuguese shares while introducing the adoption of CESR thresholds of 0,2% and 0,5% of an issuer's capital for private and public disclosure
Naked short selling refers to transactions in which traders sell stocks without borrowing them first.
Market supervisors in the European Union could be given powers to temporarily ban naked short selling of credit default swaps and shares in times of extreme volatility, the bloc's executive body said on Monday.
I didn't bother to send him back to his work as I got engrossed in a TV programme on a ban imposed by Germany on naked short selling.
A new fast-track law in Germany to introduce broad restrictions on naked short selling will be permanent.
The equity market's nerves were pretty frayed to begin with but their mood worsened last week as the German authorities announced a ban on naked short selling on a number of key companies and certain fixed interest investments (naked short selling is the practice of short-selling a financial instrument without first borrowing the security or at least ensuring that the security can be borrowed, as is usually done in a short sale).
On Tuesday night the German financial regulator, Bafin, moved to outlaw so-called naked short selling and the naked short selling of Credit Default Swaps (CDS).
Meanwhile, a ban on naked short selling will continue as stipulated in the Financial Investment Services and Capital Markets Act.
Naked short selling didn't affect only Overstock, and while it didn't help the ailing economy, it probably didn't kill it.