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Business Briefing / Wall Street

Short-selling rule made permanent

July 28, 2009|Times Wire Reports

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

The Securities and Exchange Commission's rule targeting "naked" short-selling had been due to expire Friday.

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

In "naked" short-selling, sellers don't even borrow the shares before selling them. They look to cover positions sometime after the sale.

The rule requires brokers to promptly buy or borrow securities to deliver on a short sale.

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