We now have "New" rules on shorting.... Help Cent
Post# of 5066
Posted On: 08/09/2013 1:24:29 PM
We now have "New" rules on shorting....
Help Center: Alternative Uptick Rule (Rule 201)
What is the Alternative Uptick Rule (Rule 201)?
The Alternative Uptick Rule is an amendment to Regulation SHO in Rule 201 under the Securities Exchange Act of 1934. Under the amendment, the SEC is adopting a short sale-related circuit breaker that will impose a short sale price test restriction, or the Alternative Uptick Rule, on the prices at which securities may be sold short when a stock is experiencing significant downward price pressure. Combining the Alternative Uptick Rule with a circuit breaker is intended to promote market stability and preserve investor confidence.
How does the Alternative Uptick Rule (Rule 201) work?
If the price of a security decreases by 10% or more from the security's closing price as determined by the listing market as of the end of the regular trading hours on the prior day, the short sale price test restriction will apply for the remainder of the day as well as the following day. The short sale price test restriction prevents the execution or display of a short sale order of a security at a price that is less than or equal to the current National Best Bid.
When would a short sale-related circuit breaker be triggered?
The circuit breaker would be triggered for a security any day in which the price declines by 10 percent or more from the prior day's closing price.
Which securities are covered under the Alternative Uptick Rule (Rule 201)?
The rule generally applies to all equity securities that are listed on a national securities exchange, whether traded on an exchange or in the over-the-counter market.
How long will the short sale restriction remain effective once triggered?
Unless the circuit breaker is triggered erroneously, the restriction will last until the end of the next trading day, unless re-triggered on the second day.
Why did the SEC pass the Alternative Uptick Rule (Rule 201)?
Short selling may be used improperly to drive down the price of a security or to accelerate a declining market in a security. The short sale-related circuit breaker aims to prevent manipulative or abusive short selling from driving down further the price of a security that has already experienced a significant intra-day price decline and will facilitate the ability of long sellers to sell first upon such a decline. Addressing short selling in connection with such declines in individual securities will help address erosion of investor confidence in the markets generally.
What is short selling?
Short selling involves the selling of a security that an investor does not own or has borrowed. When shorting a stock, the investor expects that he or she can buy back the stock at a later date for a lower price than it was sold for. Rather than buying low and selling high, the investor is hoping to sell high and then buy low. Short selling can serve useful market purposes, including providing market liquidity and pricing efficiency.
Once a circuit breaker has been triggered will short sale orders be accepted?
Yes, short selling is permitted and short sale orders will be accepted. However, all short sale trades will be subject to the short sale price test restriction while the circuit breaker is in effect.
Does the Alternative Uptick Rule (Rule 201) also apply to the extended hours trading session (outside of 9:30-4:00)?
Yes, the restriction will apply to all trading sessions, including pre and post market trading.
Help Center: Alternative Uptick Rule (Rule 201)
What is the Alternative Uptick Rule (Rule 201)?
The Alternative Uptick Rule is an amendment to Regulation SHO in Rule 201 under the Securities Exchange Act of 1934. Under the amendment, the SEC is adopting a short sale-related circuit breaker that will impose a short sale price test restriction, or the Alternative Uptick Rule, on the prices at which securities may be sold short when a stock is experiencing significant downward price pressure. Combining the Alternative Uptick Rule with a circuit breaker is intended to promote market stability and preserve investor confidence.
How does the Alternative Uptick Rule (Rule 201) work?
If the price of a security decreases by 10% or more from the security's closing price as determined by the listing market as of the end of the regular trading hours on the prior day, the short sale price test restriction will apply for the remainder of the day as well as the following day. The short sale price test restriction prevents the execution or display of a short sale order of a security at a price that is less than or equal to the current National Best Bid.
When would a short sale-related circuit breaker be triggered?
The circuit breaker would be triggered for a security any day in which the price declines by 10 percent or more from the prior day's closing price.
Which securities are covered under the Alternative Uptick Rule (Rule 201)?
The rule generally applies to all equity securities that are listed on a national securities exchange, whether traded on an exchange or in the over-the-counter market.
How long will the short sale restriction remain effective once triggered?
Unless the circuit breaker is triggered erroneously, the restriction will last until the end of the next trading day, unless re-triggered on the second day.
Why did the SEC pass the Alternative Uptick Rule (Rule 201)?
Short selling may be used improperly to drive down the price of a security or to accelerate a declining market in a security. The short sale-related circuit breaker aims to prevent manipulative or abusive short selling from driving down further the price of a security that has already experienced a significant intra-day price decline and will facilitate the ability of long sellers to sell first upon such a decline. Addressing short selling in connection with such declines in individual securities will help address erosion of investor confidence in the markets generally.
What is short selling?
Short selling involves the selling of a security that an investor does not own or has borrowed. When shorting a stock, the investor expects that he or she can buy back the stock at a later date for a lower price than it was sold for. Rather than buying low and selling high, the investor is hoping to sell high and then buy low. Short selling can serve useful market purposes, including providing market liquidity and pricing efficiency.
Once a circuit breaker has been triggered will short sale orders be accepted?
Yes, short selling is permitted and short sale orders will be accepted. However, all short sale trades will be subject to the short sale price test restriction while the circuit breaker is in effect.
Does the Alternative Uptick Rule (Rule 201) also apply to the extended hours trading session (outside of 9:30-4:00)?
Yes, the restriction will apply to all trading sessions, including pre and post market trading.
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