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Answered Question

davepamn

M$1.00 Funded By Mahalo ? | April 07, 2009 02:16 PM

Did the SEC short selling regulation restrictions help fuel the recent stock rally, in 2009?

1. A short sell can involve selling millions of shares using borrowed money. A short seller profits by betting the stock price will fall. The short seller profits by replacing the borrow shares with shares of a lower price. The profit is in the margin between borrowed stock sell-price and replace price.
2. The 2009, Security Exchange Commission rule change requires short sellers, who have sold to deliver shares by the fourth day. In the past, only, short sellers on the threshold list were required to close out failed deliveries by the 13th day. Traders not on the threshold list were not required to close out securities. The new SEC rule closed the loophole that allowed sold shares to go undelivered.
3. Pensions and other financial firms are cutting back on funding short selling. The short sale restrictions have fueled the recent stock rally and tampered manipulative trading. SEC regulations seem to be boosting consumer confidence.

Does the recent SEC short selling regulation restrictions help explain the 20 percent stock price rally?

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morriss003

April 08, 2009 01:49 AM

I don't think so. My guess is that it put the breaks on stocks that were under pressure, but did not correspondingly cause an increase in those prices. I think that the market has hit a bottom, and some long term investors are moving back in. I watch a chart of stock every day at motleyfool.com and my chart, which plunged starting in October, is definitely rising after moving sideways from the middle of November to the beginning of March.

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• Why do pension and large institutions wait and not enter into the stock market? What is their concern?

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