According to the Financial Investment Services and Capital Markets Act (FSCMA), short selling of listed shares is permitted only on borrowed securities. Short selling without securing borrowed securities ("naked short selling") is not permitted. This was sent to me obn regards to short selling stocks in korea. Can anyone decuipher this for me in plain english? thanks
but it saying that shortselling is only permitted on borrowed securities. Im alittle confused there. Does this mean i need to first buy the stocks i want to short sell and then when the stock goes down i would make money.
No, you borrow the shares from your broker. This is done automatically when you sell short. However, there is no guarantee that you can borrow (and thus sell short) every stock at every time, because the prerequisite for this is that the broker has the stock to borrow in its inventory. But with large caps and large ETFs like SPY or DIA this is usually less of a problem.
Isnt that naked short selling? Im wondering what it means when they say shortselling is only permitted on first borrowed securities
No, naked short selling is then you sell shares without borrowing them first. This is - at least in some countries - possible because there is a time difference between the short sale and the actual settlement, i.e. the "delivery" of the shares to the buyer. When shorting naked, you use this time difference, either buying back the shorted stock before settlement or borrowing it after you sold short, but before settlement.
oh i see. thanks for that. yeah im pretty retarded and a complete newb when it comes to technical terms and definitions