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SEC Extends Limit on Short Sales
 
  Hedgeweb - WED, JUL 30 2008
News The U.S. Securities and Exchange Commission extended an emergency limit on short sales in shares of Freddie Mac, Fannie Mae and 17 brokerages.

The SEC pushed back expiration of its ban on so-called naked short sales of the firms' stocks to Aug. 12, the Washington-based agency said in a statement yesterday.

The emergency order, focused on companies whose collapse might expose the U.S. government to losses, gives regulators time to weigh wider restrictions. SEC Chairman Christopher Cox last week told lawmakers the agency is examining additional proposals.

In traditional short selling, traders borrow shares and sell them. If the price drops, they profit by re-buying the stock, repaying the loan and pocketing the difference.

Naked short sellers don't borrow shares before settling sales. The SEC is concerned manipulative investors may use the sales, legal under some conditions, to drive down prices by flooding the market with orders to sell shares they don't have.

The SEC doesn't plan to extend the temporary order again.

 
 
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