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Short Selling

New Curbs on Short-Selling

By Marcy Gordon, AP Business Writer

WASHINGTON – Federal regulators on Wednesday imposed new curbs on the practice of short-selling, hoping to prevent spiraling sales sprees in a stock that can stoke market turmoil.

The Securities and Exchange Commission, divided along party lines, voted 3-2 at a public meeting to adopt new rules.

The rules put in a so-called circuit breaker for stock prices, restricting for the rest of a trading session and the next one any short-selling of a stock that has dropped 10 percent or more.

Short-sellers bet against a stock, in a practice that is legal and widely used on Wall Street. They borrow a company’s shares, sell them and then buy them when the stock falls and return them to the lender — pocketing the difference in price.

The SEC move followed months of wrestling with the controversial issue. The SEC asked for public comment last April on several alternative approaches to restraining short-selling, and a bipartisan group of senators have been pushing the agency to act or face legislation.
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How do you profit from short selling, and how does it work?

I usually just buy stocks that the public drives the price up and then sell. I’ve made about 39% in one month doing this. I know I can make alot more, I just don’t understand short selling.

Short-selling?

How can we borrow stocks used for short selling?