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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,
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To: LPS5 who wrote (58567)8/14/2000 1:36:31 PM
From: WhoLovesYa  Read Replies (1) of 122087
 
Please let me put your mind at ease.

A stock does not need to be Marginable to be Shortable. This is a fabrication introduced by idiot brokers and proclaimed truth by even bigger idiot investors. In fact, short sales do NOT take place in a Marginable account. They take place in a third type of account usually noted as a type 3 account. (type 1 cash, type 2 margin. Get it?)

So no, a short sale would never be able to take place in a cash (type 1) account. Nor would it take place in a margin (type 2) account. This is why there is all this confusion on why non-marginable stocks are or are not shortable.

If you read Regulation T Title 12 CFR Part 220 especially section 12c, 12d, 12e. No where in there does it say you can not short non-marginable securites. In fact it doesn't even cover shorting rules (NASD does that). It only mandates what MINUMUM margin requirements a broker/dealer must use. Often brokerages will have higher restrictions than these. Many brokerages won't allow non-marginable securities to be shorted. THIS IS A BROKERAGE ISSUE, NOT A B.O.G. FEDERAL RESERVE ONE (or issuses the NASD has which is a whole other ball game).

And thus, the idiots, enter the picture. "My broker does not allow me to short non-marginable stocks, therefore, all non-marginable stocks are not shortable" You can now see how this quickly becomes distorted.

Just for reference, this is the section of regulation T listed above. frwebgate.access.gpo.gov

Happy reading :)
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