You will find that anything to do with either stocks or trading will involve lots of acronyms to explain a process.
This example today is SSR which stands for short sale restriction. It is really important to know all of the or most of the jargon that traders tend to use to understand the process system of stocks and trading.
You never want to be left out of the loop because you don’t understand concepts that might benefit you.
This particular acronym is definitely one to learn because it is used very commonly, everyday in fact in American trading. This guide will be outlining exactly what SSR means in terms of the stock market and also what can make it happen and why it is so common.
What Is A Short Sell?
It is always important to understand all of the compartments that are linked to this acronym and short sell is one of them. When you are working in trading you are either going to be buying or selling so where does shorting come into this?
When you short you are looking for the market to go downwards instead of increase on those shares.
Therefore, it is the concept of borrowing, letting the price fall, then buying them back and returning them. It is a very complicated system that works. However, you definitely need to know how the market works to be able to do this.
Short Sale Restriction?
This is a process that was put in place to help stop the amount of shorting in the market. Therefore, it is attempting to stop people from making the shares of companies lower.
Certain aspects in the market have changed, for example, if a particular stock is falling below a certain percentage, it will automatically stop traders from piling onto this stock. Once it has dropped below 10% then it will be impossible to actually short that stock.
What Rules Have Been Put In Place?
- The stocks have to have dropped below 10% in one day for this rule to be triggered.
- This can be put in place for the whole day and can even be extended to the following day as well.
- It applies to all.
- Enforced by brokers.
Is The SSR Beneficial?
Obviously you can make a lot of money from shorting stock but it has definitely been considered something that is beneficial for the stock market in modern society.
This has also prevented flash crashes in stock and stopped those traders from actually creating that situation.
This also comes back to traders that have less experience in the business who might think shorting a stock would be a good idea when they haven’t been doing it long enough. With research comes experience and better results because there is less of a calculated risk that might not go your way.
Can You Even Short Stocks In The SSR?
It is pretty much impossible to try and short a stock that is under the SSR which means that they are doing the job very well but preventing this from happening. The rules are put in place for a reason and it is important that people follow them to keep the market flowing better.
History Of SSR
SSR has been around for quite a while but hasn’t always been the way it is now. The SEC decided to reexamine the way the SSR worked in trading and stocks.
This was because of the financial crisis which made them rethink the rule for shorting. In 2010, the rule was changed and it was in the interests of the investor to make sure they were able to be confident in market efficiency.
They realized that there are a few benefits but also overriding damaging aspects to shorting that needed to be eliminated.
Frequently Asked Questions
What Does SSR Mean In Stocks?
Short Sale Restriction
Short sale restriction is a rule that came out in 2010 and it’s also referred to as the alternate uptick rule, which means that you can only short a stock on an uptick. This is kind of an unusual thing when you first think about it. It restricts the ability to short a stock as it’s dropping down.
Is SSR Good For Stock?
This means that there often will be more buyers in the stock with SSR than sellers (since short sellers need to buy to exit their positions).
It can be more difficult to short and get targets on a stock that has the SSR enabled, as there will be no short sellers driving the price lower with market orders.
What Triggers A Short Sale Restriction?
SEC short-sale rule 201 is triggered when a security’s price declines by 10 percent or more from the previous trading session closing price.
For example, if a stock closes at $1.00 on Monday and then drops by 10% to $. 90 on Tuesday, the circuit breaker is triggered and Rule 201 comes into effect.
Overall, it is extremely important that you learn what all of these concepts mean because if you are looking to start trading or you already have, you will need to know the basics to start.
People get really wrapped up in getting straight into it, but with this type of work, you need to be logical and tactical with your analysis. You need to know the market before making rash decisions because the risk can be higher than you might think.
When it comes to protecting the market, the SSR is definitely a beneficial system that cuts out the majority of shorting past a certain level of falling stock.
The SEC are definitely making a difference in this industry and changing things up. They are also forcing investors to send updates each month to make sure that everything is being ran by the book and how they want it to be.