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Which of the following statements is NOT correct? In the Australian regulation, A
Which of the following statements is NOT correct? In the Australian regulation,
A. the sell order of a security for which the borrowing arrangements are made after the sell order is a naked short sale.
B. the sell order of a security for which borrowing arrangements were made before the sell order and the delivery took place also before the sell order is not a short sale.
C. the sell order of a security for which the borrowing arrangements were made after the sell order but may be delivered on time for the sale settlement date is a covered short sale.
D. the sell order of a security that has been borrowed but has not been delivered before the sell order is a covered short sale.
Expert Solution
The correct answer is B: the sell order of a security for which borrowing arrangements were made before the sell order and the delivery took place also before the sell order is not a short sale.
Short sell refers to the sale of stock and securities, which the seller does not own. The seller borrows the stock or security and sells them when the price is high and hopes to buy and return the same amount of securities when the stock price drops. A sell order is categorized under a short sale when either the borrowing arrangement or delivery occurs before the sell order. Thus, the above statement is false because it argues that a sell order made before borrowing arrangement and delivery is not a short sale.
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