Short selling can cross the line into prohibited conduct when it is done in a coordinated fashion in order to drive down a company’s stock by creating fear or panic in the market for such stock as a form of stock price manipulation .

Big trades often are executed through Wall Street market makers who, in many cases, buy and sell using their own inventories of stock for their own account. The market makers quote a price based on their assessment of the market conditions at the time of the offer and proposed sale.

Market makers who receive a buy or sell order from a speculator may assume the speculator has some insight about the firm; otherwise the speculator would do nothing.

Speculators who coordinate short sales in order to drive down the price of a company’s publicly-traded shares actually reduce the market’s efficiency, enhancing the prospects for share prices to fall and make the short sale profitable.

Short selling can cross the line into prohibited conduct when it is done in a coordinated fashion in order to drive down a company’s stock by creating fear or panic in the market for such stock as a form of stock price manipulation.

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