illustration of a limit on short selling

A participant has a portfolio valued at CAD 200,000 and currently has no short positions. If brokerage fees are not taken into account, this participant may make one or more short sales for an aggregate value of CAD 200,000. This sale will allow him to cash CAD 200 000, which will bring the portfolio's assets to CAD 400 000. The value of the short positions then represents a liability of CAD 200 000 for this account. Since the assets represent double the short positions, the required minimum coverage is respected here, even though the participant has reached the limit of the short positions that can be maintained at that moment.