SEC issues rules against abusive short sales

Discussion in 'Wall St. News' started by crgarcia, Sep 17, 2008.

  1. Reuters
    SEC issues rules against abusive short sales
    Wednesday September 17, 10:21 am ET

    WASHINGTON (Reuters) - New rules aimed against abusive naked short selling of stock in all publicly traded companies were issued by the U.S. Securities and Exchange Commission on Wednesday.

    The SEC's new rules, which include a requirement to deliver a security by the settlement date, are effective on Thursday.

    "These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling," SEC Chairman Christopher Cox said in a statement.

    Short sellers and their broker dealers are now required to deliver securities by the close of business on the settlement date, which is three days after the sale, or they will face penalties.

    Broker-dealers failing to comply will be prohibited from further short sales in the same security unless the shares are pre-borrowed. That prohibition on the broker-dealer's activity will also apply to all short sales for any customer.

    The SEC also adopted a rule that deems it fraudulent for customers to deceive broker-dealers about the intention or ability to deliver securities in time for settlement.

    The third measure the SEC adopted requires option market makers to deliver securities by settlement date.

    A "naked" short sale occurs when an investor sells stock that has not yet been borrowed.

    Broker-dealers will sometimes accidentally fail to deliver stock to investors who have arranged to borrow it. If this is done intentionally, it is already illegal.

    (Reporting by Rachelle Younglai; Editing by Tim Dobbyn)
  2. This means that it only requires ONE customer who fails to deliver the shares, and all broker' customers may not short the same stock naked again.
  3. wtf, is this supposed to mean? that the pump and dumpers can now freely abuse the markets without the pesting of those who would identify bubbles and overpriced stocks and punish them for trying to mislead the masses?!
    if the fkng stock is strong enough and is worth it's price, then no shorting should affect it since it's offering true value.
    the fkng leh and others went to ground zero because they deserved it, period.
  4. I don't under stand what delivering means. Does it mean you have to cover your short within T-3?
  5. sumosam


    Its not that simple. Regulations are better than bailouts. Naked shorting has hurt many pension funds, and probably a few mutual funds.
  6. How about NO Big Brother in neither case, Regs. or Bail out and allow the free markets to sort themselves out so people will at least learn on their own by experience from the school of hard knocks run by Charlatans?
    What is the purpose of all these Fund Managers at Pension funds etc.? Are they not supposed to NOT get themselves into such mess?
    Let the people learn to not trust their pensions with fund managers who when they see a bubble can't recognize one.
    I mean how difficult is it to read a chart?! Just take a look at the DOW Monthly...45 degrees UP to 14,000+!!!
    They had NO business buying at DOW 14,000 but they did, so what now? Financial Markets is spelled RISK, which part of that don't people understand?
    If any new Regs. needed IMHO should be more geared towards running the Pension Managers through extreme filters before allowing them to manage a P. Fund.
    Without such Forest Fires the inflation would have soared sky high, let the nature take care of itself...

  7. Lucky


    Knee-jerk regulations are worse than bailouts because they can stick around long after a bailout is over. When FNM and FRE were on the no-naked list, IB was charging an extra fee to short them (according to others) and my broker put them on the hard-to-borrow list even when they weren't hard to borrow. Had to call in and ask to please short the stock etc. etc. even though plenty of shares were available.

    Considering how hard it is for a retail investor to borrow shares on a genuinely hard-to-borrow stock with crappy fundamentals, I can only imagine how uptight brokers are gonna be with the entire market on this list.

    Short selling and market manipulation are both currently illegal. All the SEC needed to do was *enforce* current regulations in a reasonable manner, and everything would be peachy.

    It will be funny to see how MMs react to not being able to naked short... this will be interesting.
  8. dealer


    I wouldn't be surprise to see the SEC panic and re-introduce the uptick rule or some modification of it.

    The sad thing is that it probably won't help as current moves are being driven by liquidation not short selling.
  9. mokwit


    Agree. "shorts" will be the scapegoat though.
  10. Lucky


    Yeah, I was thinkin an uptick rule on all trades would solve all our problems right-quick.

    why would anyone liquidate in a market like this?
    gotta be naked shorts...
    #10     Sep 18, 2008