What are the rules governing short selling?

Short selling is a type of investment fraud law in Virginia which allows traders to borrow and sell stocks they do not own. This means that they can bet on the stock price going down, rather than up. The rules that govern short selling in Virginia have been set by the Securities and Exchange Commission (SEC). These rules are intended to protect all investors while also promoting fair and orderly trading. First, investors must have the financial resources to cover any potential losses on their short sale. This is known as the “uptick rule” and it prevents investors from taking on too much risk. Second, brokers must execute short sale orders at or above the current market price. This prevents traders from making a profit by placing orders below the current market price. Third, short sellers must wait until the stock has dropped in value before they can buy it back at a cheaper price. This is known as the “bid test” and it prevents traders from profiting by buying back the stock at the same price they sold it at. Finally, short sellers must hold the borrowed stock for at least one day before they can close out the position. This is known as the “locate” rule and it prevents traders from using short selling to manipulate the market. By following these rules, investors can confidently short sell stocks in Virginia, while still protecting themselves from potential losses.

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What are the rules governing short selling?

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