“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,” Marcy Gordon reports for The Associated Press. “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, and then buy them when the stock falls and return them to the lender – pocketing the difference in price,” Gordon reports. “‘Naked’ short-selling occurs when sellers don’t even borrow the shares before selling them, and 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.”
Gordon reports, “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.”
“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 over the last year,” Gordon reports. “Another approach would ban short-selling for the rest of the trading session in a stock that declines by 10 percent or more.”
Gordon reports, “Schapiro said last week the SEC could decide on a final course of action in ‘the next several weeks or several months.'”
More info in the full article here.
MacDailyNews Take: Miracles do happen. Now, bring back the uptick rule!
[Thanks to MacDailyNews Reader “Cubert” for the heads up.]
