News.com.au- AUSTRALIA’S investment watchdog is investigating the stock market trading practice of short selling to see if it is adding to volatility in share prices, a Senate committee heard today.
Short selling is a common practice among private investment funds, or hedge funds – selling shares they don’t own with the intention of buying the shares back later, at a lower price, to book a profit.
The Australian Securities and Investment Commission (ASIC) is investigating whether hedge funds have colluded by targeting specific shares that have a large number of margin calls which, if triggered, would force the price of those shares down.
Margin lending is a practice whereby an investor pays for only a percentage of a stock but is liable to pay more if the price falls to a certain level or sell the shares.
