SEC Adopts Alternative Uptick Rule for Shorts
The SEC voted to approve a new alternative uptick rule for short selling that would restrict short sales once a stock declines 10% from the previous day’s close. Once the circuit breaker is triggered, short sales would be prohibited for the remainder of that trading day and the next trading day unless the price is above the current national best bid. The SEC is concerned that short selling “may be used improperly to drive down the price of a security or to accelerate a declining market in a security.” Firms will have 6 months to comply with the new rule following its publications.
OUR TAKE: Most of the industry expected some form of short sale restriction. This rule is probably the least burdensome of the proposals contemplated as it reverts back to an uptick methodology with which many investment pros are already familiar.