To: steve goldman (4207 )
From: steve goldman
Wednesday, Feb 17 1999 8:55PM ET
Reply # of 4209
Some additional material relating to short selling:
I wanted to clarify my understanding of short sales rules. There is no per se rule which
says that stocks under five dollars, penny stocks or bulletin board stocks can not be
shorted. They can be shorted if the stock can be borrowed. If your clearing firm has it,
and can be borrowed, you can short it. Obviously such stocks typically are more
difficult to borrow and may not be marginable, but it can be done.
Note that if the stock is under five dollars, the position may not have any loan value, that
is, it may be nonmarginable. As a result you may need to come up with 100% equity for
the short position, or upto $5 per share depending on the clearing firms' margin
requirements.
Shorting IPOs. IPOs may be shorted as soon as the clearing firm has a position which is
hypothecated by the client. In my experience, while a firm could theoretically have such
a position on the first day the stock comes to market, I have rarely ever seen this.
Typically, the position becomes available on settlement day, when positions of the
clearing firms' clients settle. At that moment, the clearing firm, holding the clients' stock
in street name, now has settled securities.
Thus, if a stock comes to market on Tuesday, the clearing firm may have settled
positions in the stock on Friday. Friday would probably be the first day the stock can
be borrowed and thus shorted. The exception would be larger firms which have
inventory from clients who received the stock as a result of the IPO. That is they
received the shares ahead of it coming to market as part of the IPO. Syndicate
members though must 30 days to short the position.
Regards,
Steve@yamner.com |
