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short selling speech - 1 Introduction The article Short...

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1. Introduction The article “Short Selling, Big Concerns” from The Age July 17 th 2008 explores the issues of Short selling in light of the recent crisis in the United States. The issue of “naked shorting” was forced to the forefront of investor consciousness when the Securities and Exchange Commission in the US placed a temporary ban on the use of naked short selling. This ban extended to include 19 large investment banks, including most notably the mortgage giants Freddie Mac and Fannie Mae. Experts argued that aggressive short selling was responsible for he downward turn and that the ban was intended to protect the companies and investors from further falls driven by fear and speculation 2. What is short selling Short selling is the practice of selling securities that you do not actually own but have borrowed. The seller is committed to eventually purchase the security previously sold. They are used in the expectation of a price decline where instead of the usual situation where you
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