Bridge Baron, although I don't short sell stocks I do believe there is a place for short selling. There needs to be a balance to the ramping and manipulations that occur day to day and if used in a proper manner shorting can be an effective hedging tool. (Yes I know there are other ways to hedge but not everyone wants to use derivatives) Not all stocks deserve to increase in price.
That said I disagree with naked short selling (short selling without borrowing the stock) and I think institutions like super funds should be forced to ask their clients if they are willing to lend out their stocks for short selling. If share owners have the choice on whether to lend out their shares for short selling I think the amount available for shorting would become quite limited and probably balance out the practice. The premium that could be demanded for someone to borrow your shares would also increase as supply dropped, benefiting the share owner more as well.
I think the ol you sell what you don't own and go to jail saying is appropriate. If you have asked the owners permission to sell it, paid them a premium and then sold it, there is no reason to go to jail in my book.
I also appreciate everyone has a different opinion on this subject. Not trying to pick an efight, just voicing my opinion.
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