Business, Finance & Economics

Ban on short-selling

(What is short-selling?) Whenever you buy or sell shares you are speculating. short-selling is a riskier form of speculation. So if you think a share price will fall, you can borrow share prices from a bank or an investment fund and sell those shares as your own. once those shares fall, you buy them and make a profit and then return those shares back to the bank or the investment fund. The attraction of short-selling is that you pay a small fee to borrow the shares. (So you're borrowing something and then selling it�isn't that odd?) Well if you didn't return something when you said you would, then it doesn't work. But the point of short-selling is you borrow something, you sell it, you buy it back at a lower price and pocket the difference, and then go back and give the shares back. this is a standard piece of market trading. (Why then is it being banned?) Because there is a belief out there that short-selling is part of the amazing precipitous fall in the shares of banks. So this is a good idea just until everything calms down.

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(This story is based on a radio interview. Listen to the full interview.)

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