short sale

short sale
A sale of that, usually corporate stock, which the seller does not at the time possess, but which, by the future date or time agreed upon for its delivery to the purchaser under the terms of the contract, the seller must in some way acquire for the purpose of such delivery. Provost v United States, 269 US 443, 70 L Ed 352, 46 S Ct 152. In a short sale, ordinarily the customer does not actually produce the stock for delivery; the broker borrows the securities or furnishes his own. The broker charges the price of the borrowed stock to the customer, and the account is carried until the customer orders the broker to repurchase the securities, after which an adjustment is made between the broker and customer on the difference between the selling and purchasing price. 12 Am J2d Brok § 116. The margin in such case is the sum of money deposited with the broker to protect him from any loss he might be subjected to by reason of a subsequent rise in the market price of the stock.

Ballentine's law dictionary. . 1998.

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