Having the Cake and Eating it too…
Is short selling good or bad? That debate itself has not been settled. Now, the US stock market regulators have made permanent a rule aimed at reducing abusive short-selling. The emergency rule on “naked short-selling” was introduced at the height of last year’s market turmoil, and was due to expire on Friday.
The short-sellers usually borrow shares, sell them, then buy them back when the stock falls and return them to the lender keeping the difference in price. The problem is, in “Naked” short selling sellers do not even borrow the shares.
The US the Securities Exchange Commission (SEC) acknowledges that short selling can help limit market bubbles in individual shares. But it has been concerned that the practice can also be used to manipulate the market.
If it is allowed rampantly, it is going to ruin the market. You cannot have the cake and eat it too.
