Short Sales: An Integral Part of Price Discovery
Short Sales Status:
- On Feb. 24, 2010, the SEC approved a new short sale rule:
- Short sale restrictions would be implemented for an individual stock if a circuit breaker is triggered by a 10% drop in the stock based on the prior day's closing price.
- The price test restriction would be in place for the remainder of the day once a circuit breaker is triggered and for the next trading day.
- No options market maker (OMM) exemption is currently included in the new rule.
- The new rule will be effective 60 days after the publication of the release in the Federal Register and will have a six-month implementation period following that.
- CBOE filed comments on short sales in June 2009 and in September 2009 urging the SEC to take into account the crucial role of options market makers in considering short sales price tests/uptick rules.
- Others supporting an OMM hedge exemption from any price test included: ISE, Nasdaq, NYSE, BATS, and Direct Edge; the Options Coalition (includes all U.S. options exchanges and the Options Clearing Corporation); SIFMA and the Security Traders Association; and U.S. Rep. Barney Frank.