SEC bans naked shortselling permanently

SEC has banned naked short-selling permanently. In 2005 , SEC’s view of naked short-selling was more sober:

Naked short selling is not necessarily a violation of the federal securities laws or the Commission’s rules. Indeed, in certain circumstances, naked short selling contributes to market liquidity. For example, broker-dealers that make a market in a security generally stand ready to buy and sell the security on a regular and continuous basis at a publicly quoted price, even when there are no other buyers or sellers. Thus, market makers must sell a security to a buyer even when there are temporary shortages of that security available in the market.

However even in 2005 it was concerned over naked short-selling being used for manipulative practices, but could not decide on it. In 2009 it banned naked short-selling altogether as a lesson from the crisis.

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