"Short-selling," the legal but questionable tactic of betting against a stock in order to make a profit, is set to undergo strict rule changes from U.S. securities regulators.
Successful short-sellers borrow shares from a brokerage firm and then sells them, hoping that the price will go down so that when its time to pay the brokerage firm back, he can buy the same amount of shares at a lower price and realize a profit.
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"We can expect the proposal for short-sale reform will be calendared for Commission consideration in the next few months," Annette Nazareth, head of the market regulation division at the SEC told Financial Times.
The problem of "naked" short selling, in which un-borrowed shares are illicitly sold and company share prices plummet, will also be taken care of if the SEC rules are passed.
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