New SEC Naked Short-Selling Rules Receive Mixed Response

On July 15, the SEC issued emergency and temporary rule prohibiting naked short selling. The rule was designed to protect the welfare of 19 financial stocks particularly at risk from the naked shorting; the practice of placing a short stock order with no intention of actually borrowing the stock shares. In response to this new rule, some hedge fund managers have voiced concern that it will become harder and more expensive to execute legitimate short sales. Said Charles Jones, professor of finance at Columbia Business School, (the new rule) will definitely make it harder on the shorts. It could have an effect on liquidity.