How Stockholders Can Help Combat Short Selling. To carry out short sales, traders need to borrow stock from brokers that is registered in "street name", or held in a margin account. However, if enough stock is taken out of street name or margin accounts, short sellers will have difficulty maintaining the current volume of short sales. Therefore, shareholders can do the following:
Promptly call your brokers and have your stock taken out of the street name, or put into a cash account. This only means that instead of your shares being registered in your broker's name or being held in a margin account, they would be registered in your name or placed in a cash account. You would still own the stock, and your ability to hold or sell the stock would not change.
What would change? A short seller would not be able to borrow your stock for short sales without your permission. So long as the stock is registered in the broker's name, the broker is the legal owner of record, and can lend your stock to a short seller without your permission. Similarly, so long as you have your stock in a margin account, it is available for loan by your broker. If you have the stock registered in your own name or placed in a cash account, brokers will not be able to do this.
Would there be any downside for stockholders having shares registered in their own names or held in cash accounts? From an economic point of view, the answer is no -- nothing will have changed. The only difference would be administrative including some possible paperwork and expenses you may incur in re-registering or moving your shares. When you want to sell, you would have to send your broker instructions to move the stock back into street name or into a margin account, and the broker may ask you to sign some transfer documents. We think this is a small price to pay for relieving heavy short selling pressure. When can shares be taken out of street name or a margin account? Anytime you decide to pursue it.