March 2, 2010
The Latest SEC Proposal on Short Selling
The short selling saga continues. In 2005, the Commission's Regulation SHO eschewed strong medicine in favor of record keeping and operational changes; meanwhile, reformers called for (at least) the end of "naked" short selling. Right before the financial crisis, the SEC did away with the exchanges' traditional 'uptick rule,' which had worked to contain downward price spirals. In 2008, market turmoil prompted outright bans on the short selling of the stock of certain financial companies.
Last week, the Commission proposed a rule that would implement a stock-specific circuit breaker whenever the issue dropped 10% in one day. While the measure aims to prevent short sellers from driving down stock prices while according priority to "long sellers," it is nonetheless sure to spark more debate. Overall, it just feels good to see the Commission back in the game of directly regulating stock exchange behavior. For details on the proposal, see the text of the Chair's speech at http://www.sec.gov/news/speech/2010/spch022410mls-shortsales.htm.
March 2, 2010 | Permalink