SEC EXTENDS SHORT-SELLING LIMITATIONS THROUGH OCTOBER 17 AND BEYOND
The SEC has extended several of its temporary and emergency orders affecting short selling. The extensions are intended to minimize “abusive short selling” as Congress prepares a “comprehensive plan to stabilize credit markets and the financial system.” The ban on short selling designated financial companies will continue until three days after Congress passes a plan or October 17, whichever is earlier. The requirement for institutional manager to disclose short positions to the SEC will continue after October 17 as an interim final rule open to comments. The hard T+3 close-out requirement will also continue as an interim final rule.
OUR TAKE: Many in the industry question whether banning short-selling really helps. Even the SEC says that short-selling contributes to “efficient price discovery, mitigating market bubbles, increasing market liquidity, promoting capital formation, facilitating hedging and other risk management activities, and importantly, limiting upward market manipulations.” We applaud the SEC’s efforts to investigate and enforce illegal and abusive short-selling, but we expect significant response to the SEC’s interim final rules.