Business, Legal & Accounting Glossary
Shorting a stock or other asset is the selling of something not yet owned. Whereas buying, or going long an asset is an attempt to profit from a rise in price, shorting is a bet that price will decrease. In the United States, shorting is heavily regulated. Shorting requires the trader’s broker to “borrow” the stock from someone who is long the shares. Unless this can be arranged, shorting is not permitted. This restricts the number of shares available for shorting. In much of the world, so-called naked shorting, where no “borrow” is required, is completely legal.
Shorting is the subject of much speculation and numerous conspiracy theories. Companies involved in stock fraud will sometimes blame so-called illegal naked shorting for their low share price. In an attempt to provide more transparency, Nasdaq initiated the SHO list; stocks on the SHO list are not available for shorting until the exchange receives more detailed information on recent trading patterns.
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This glossary post was last updated: 22nd November, 2021 | 0 Views.