Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, April 7, 2009

SEC Will Consider Short Sale Restrictions at April 8 Meeting

The SEC's Open Meeting Agenda for its April 8, 2009 meeting has one item that is being closely watched:

Item 1: Amendments to Regulation SHO
Office:  Division of Trading and Markets
Staff:  James Brigagliano, Josephine Tao, Victoria Crane, Joan Collopy, Christina Adams, Matthew Sparkes

Item 1: Amendments to Regulation SHO
The Commission will consider whether to propose rules restricting short sales under certain circumstances.

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The SEC explicitly admitted this morning that they have no evidence that short sellers played any role in the market decline.

I find this astounding. On September 22nd, the SEC implemented Form SH, where all large firms are required to report their short positions to the SEC on a weekly basis.

On September 22nd, the Dow was at 11,000. It fell to 6,500 in the next 6 months, or about 40%. So the SEC has data on all meaningful short positions over a 40% market decline, and they are still unable to find any evidence shorts are to blame.

And yet they still think the uptick rule, or a new version of it, is an important thing to spend time and money on.

Posted by: Eric Newman - TFS Capital, LLC | Apr 8, 2009 1:52:00 PM

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