Short Sale

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Related to short selling: hedging

Short Sale

A method of gaining profit from an anticipated decline in the price of a stock.

An individual who sells short sells either stock or Securities that he or she does not own and that are not immediately ready for delivery. Generally the seller borrows the shares needed to cover the sale from a Broker and then delivers these shares to the buyer. The seller deposits an amount that is equal to the value of the borrowed shares with the broker. This amount stays on deposit with the broker until the stock is returned. The seller must ultimately return the same number of shares of the same stock to the broker, and the transaction is not fully executed until the stock is returned. The broker lending the stock is entitled to all the benefits he or she would have received if the stock had not been lent. When a dividend is paid, then the seller-borrower is required to pay the broker-lender an amount equal to the dividend.

References in periodicals archive ?
SEC Chair Mary Schapiro, in a February 24, 2010 speech, said the rule "is designed to preserve investor confidence and promote market efficiency, recognizing short selling can potentially have both a beneficial and harmful impact on the market.
It also clarifies ASIC's policy for granting relief to allow naked short selling in some circumstances.
net, available to the company to help us fight the naked short selling of MRDY.
Short Selling is the practice of borrowing stock then selling it in hopes that the price will go down and it can be bought back at a lower price, thereby generating a profit and allowing one to return like shares for the borrowed ones.
The Company intends to vigorously pursue, with the assistance of regulatory agencies, stock exchanges and its industrial relations advisors, more definitive information on short selling practices and their possible impact on share performance.
James Brigagliano, assistant director of market regulation at the SEC, said, "While there may be instances of abusive short selling, 99% of all trades in dollar value settle on time without incident.
Naked short selling, or naked shorting, is an illegal practice of selling shares that have not been affirmatively determined to exist.
Manipulative naked short selling by broker-dealers operates as a fraud on the market causing investors to lose confidence in the fairness and legitimacy of OTC markets," Cromwell wrote in his petition.
While short selling may have its place in fair market practices," said PRRM President Dan Burgess, "naked short selling undermines the market's ability to justly and accurately reflect the price of equity securities, untowardly affecting issuers and investors alike.
The Depository Trust & Clearing Corporation (DTCC) has provided its bank and broker customers with a detailed explanation of its Stock Borrow program and the issue of naked short selling in an effort counter a widespread campaign of distortions and misleading information.
The list, maintained by NASD, is updated daily and includes securities with excessive certificate delivery failures most commonly associated with the illegal practice of "Naked Short Selling.
Company Advises Shareholders to Request Physical Delivery of Stock to Help Combat Naked Short Selling