SEC makes rule on 'naked' short-selling permanent
Post# of 72440
Posted On: 04/09/2016 8:44:07 PM
SEC makes rule on 'naked' short-selling permanent
Federal regulators on Monday made permanent an emergency rule aimed at reducing abusive short selling, put in at the height of last fall's market turmoil.
The Securities and Exchange Commission announced that it took the action on the rule targeting so-called naked short selling, which was due to expire Friday.
Short sellers bet against a stock. They generally borrow a company's shares, sell them, then buy them when the stock falls and return them to the lender — pocketing the difference in price.
"Naked" short selling occurs when sellers don't borrow the shares before selling them, then look to cover positions sometime after the sale.
The SEC rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.
At the same time, the SEC has been considering several new approaches to reining in rushes of regular short selling that also can cause dramatic plunges in stock prices.
Investors and lawmakers have been clamoring for the SEC to put new brakes on trading moves they say worsened the market's downturn starting last fall.
SEC Chairman Mary Schapiro has said she is making the issue a priority.
Some securities industry officials, however, have maintained that the SEC's emergency order on naked short selling brought unintended negative consequences, such as wilder price swings and market turbulence.
The five SEC commissioners voted in April to put forward for public comment five alternative short-selling plans.
One option is restoring a Depression-era rule that prohibits short sellers from making their trades until a stock ticks at least one penny above its previous trading price. The goal of the so-called uptick rule is to prevent selling sprees that feed upon themselves — actions that battered the stocks of banks and other companies in the last year.
Another approach would ban short selling for the rest of the trading session in a stock that declines by 10% or more.
Schapiro said last week the SEC could decide on a final course of action in "the next several weeks or several months."
The SEC and its staff are working with major stock exchanges to make data on short-sale transactions and volumes publicly available through the exchanges' websites, the SEC announcement said. That will result in "a substantial increase" over the amount of information currently required, the agency said.
The SEC said it will hold a public hearing on Sept. 30 to address stock lending for short selling and possible new disclosure rules.
http://abcnews.go.com/Business/story?id=8188665&page=1
(This is obviously an ancient article despite the current background. Notice the webpage shows current articles but no date on the article? Mary Shapiro was out after 2012. We have Mary Jo White, started 2013 and whose term expires in 2019. Nothing done by this Administration to get rid of naked shorts.)
Federal regulators on Monday made permanent an emergency rule aimed at reducing abusive short selling, put in at the height of last fall's market turmoil.
The Securities and Exchange Commission announced that it took the action on the rule targeting so-called naked short selling, which was due to expire Friday.
Short sellers bet against a stock. They generally borrow a company's shares, sell them, then buy them when the stock falls and return them to the lender — pocketing the difference in price.
"Naked" short selling occurs when sellers don't borrow the shares before selling them, then look to cover positions sometime after the sale.
The SEC rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.
At the same time, the SEC has been considering several new approaches to reining in rushes of regular short selling that also can cause dramatic plunges in stock prices.
Investors and lawmakers have been clamoring for the SEC to put new brakes on trading moves they say worsened the market's downturn starting last fall.
SEC Chairman Mary Schapiro has said she is making the issue a priority.
Some securities industry officials, however, have maintained that the SEC's emergency order on naked short selling brought unintended negative consequences, such as wilder price swings and market turbulence.
The five SEC commissioners voted in April to put forward for public comment five alternative short-selling plans.
One option is restoring a Depression-era rule that prohibits short sellers from making their trades until a stock ticks at least one penny above its previous trading price. The goal of the so-called uptick rule is to prevent selling sprees that feed upon themselves — actions that battered the stocks of banks and other companies in the last year.
Another approach would ban short selling for the rest of the trading session in a stock that declines by 10% or more.
Schapiro said last week the SEC could decide on a final course of action in "the next several weeks or several months."
The SEC and its staff are working with major stock exchanges to make data on short-sale transactions and volumes publicly available through the exchanges' websites, the SEC announcement said. That will result in "a substantial increase" over the amount of information currently required, the agency said.
The SEC said it will hold a public hearing on Sept. 30 to address stock lending for short selling and possible new disclosure rules.
http://abcnews.go.com/Business/story?id=8188665&page=1
(This is obviously an ancient article despite the current background. Notice the webpage shows current articles but no date on the article? Mary Shapiro was out after 2012. We have Mary Jo White, started 2013 and whose term expires in 2019. Nothing done by this Administration to get rid of naked shorts.)
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