SEC propose repeal of short sale price test

Discussion in 'Wall St. News' started by Lights, Dec 17, 2006.

  1. The Securities and Exchange Commission Dec. 4 proposed unanimously to repeal a short-sale price test--the outmoded Tick Test--adopted in 1938 to prevent downward manipulations of stock prices, or "bear raids," and to ban the use of price tests by NASD and other self-regulatory organizations.
    At an open meeting, the commission also voted unanimously to propose amendments to another anti-manipulation rule, Rule 105 under Regulation M, which is addressed at abusive short-selling just prior to the pricing of a public offering.

    The comment deadline for both proposals--the first of which poses some 90 questions for comment--will be 60 days after publication in the Federal Register.

    Commissioner Paul Atkins called the proposed elimination of the Tick Test "groundbreaking." He remarked that the SEC found in its pilot study under Regulation SHO--on short sales--that the rule "simply was not needed" (36 SRLR 1156, 6/28/04 ).

    Former SEC Chief Economist Larry Harris, now the Fred V. Keenan Chair in Finance at the University of Southern California Marshall School of Business, told BNA Dec. 4 in a telephone interview, "It's a very welcome development. The removal of these tick tests will eliminate an essentially completely ineffective regulation that, frankly, had little purpose." Harris urged that next, the SEC should tackle the issue of naked short selling.

    Chairman Christopher Cox described the Tick Test--Rule 10a-1 under the 1934 Securities Exchange Act--as a price test that permits short-selling only at a price above the last sale price or at the last sale price if that is higher than the previous price. The Tick Test applies only to listed securities, except Nasdaq-listed securities.
  2. ttbodnar


    Any idea of a timeframe when this may actually start?
  3. silk


    6 months might be a good guess.
  4. zdreg


    anything to do with revison of short selling rules takes years. if a sharp downturn should occur there will be no change or possibly even making it even more difficult to short.
  5. thorn


    This is a totally ridiculous statement. I told this board many months ago this would happen. It will happen, the pilot program shows that the "uptick rule " exempt stocks have performed alot better than the others. So they came to the obvious conclusion to scrap the rule altogether.

    Wow, how did thorn know this so far ahead of the curve?
  6. that's good news although u were already able to get your short sale instantly filled by routing arca.
    we'll get no more hassle of direct routing and maybe even better pricing although it may also be the exact opposite.
  7. "In addition, because of the proposal to remove all current price test restrictions, and prohibit any price test by any SRO, the SEC is proposing to amend Rule 200(g) of Regulation SHO to remove the requirement that a broker-dealer mark a sell order of an equity security as "short exempt" if the seller is relying on an exception from the price test of Rule 10a-1, or any price test of any exchange or national securities association. [SEC Release No. 34-54891]"
  8. zdreg


    because you suffer from hubris and grand delusions.

    I suggest you look at the timeline for short sale rule revision in the past.
  9. Does this mean that all stocks are gonna become SHO?

    If so, then whatever advantage we had in non-SHO stocks will be gone. For example: Using conversions/bullets to short ahead of a short seller as he steps down..

    Day by day, they're milking away our advantages..Or perhaps I should say milking away the scalper's advantages.
  10. 100% disagree with this.

    All the "market manipulation" scams are being shut down one by one.
    Pseudo-"front-running" shorts was never a way to make an "honest dollar" anyway...
    But you guys are gonna have an exhibit in the Specialist Museum.

    As for actual Quants scalping ** market inefficiencies **...
    They have been unaffected for the most part.

    The impact of changes over the last 2 years on my trading has been ZERO...
    And may even become positive in 2007 as the Leaches fade away.

    Evolve... or die.
    #10     Dec 30, 2006