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 ?
The public perception of short sellers, particularly those involved in a naked short sale, is that of being directly responsible for the decline of stock values.
When a trader short sells shares he doesn't own, it's termed a naked short sale.
They do not utilize the recently banned Credit Default Swaps or the Naked Short Sale which do destabilize the market and clearly contributed to the current financial crisis.
In the current instance, at least market makers are exempted from the naked short sale ban, which mitigates the adverse effects to some extent.
Shapiro states, "At any time, the DTCC could fully clear and settle every extended naked short sale or failure to deliver by doing what it once did routinely in such cases: Buy the shares itself in the market ("buying in") and charge the account of the naked short seller's broker.
In the event of a naked short sale, there are more electronic certificates than paper certificates until the naked short seller finds and buys stock to fill his short sale.
In the case of a naked short sale, the NSCC does not require the seller to deliver the shares -- as is the case with the Canadian naked short sellers, who hide behind IDA Rule 100, which allows them to short shares without borrowing them first.
A naked short sale of stock occurs when short positions are not declared, shares are not borrowed to cover the short sale, shares are sold without delivering the stock to the purchaser or shares are shorted that are not marginable.
Under a naked short sale, short positions are not declared, shares are not borrowed to cover the short sale, and the shares are sold without delivering the stock to the purchaser.
Under a naked short sale of stock, short positions are not declared, shares are not borrowed to cover the short sale and shares are sold without delivering the stock to the purchaser.
Under a naked short sale of stock, short positions are not declared, shares are not borrowed to cover the short sale, and shares are sold without delivering the stock to the purchaser.
Germany has declared war on speculators, wrongfooting European partners who said they were not consulted about an overnight ban on naked short sales of a range of assets, that sent markets reeling.