SEC May Seek Additional Comment On Short-Selling Restrictions

Aug 6 2009 | 12:05pm ET

The Securities and Exchange Commission may reopen the comment period on a raft of proposed restrictions on short-selling, a move that could delay their implementation.

In April, the SEC offered five possible rules to curb short sales amidst heavy pressure from lawmakers. Two were versions of the uptick rule, which barred short sales unless a stock’s most recent trade was higher than its previous price, which the commission abolished two years ago. The other three were versions of a “circuit-breaker” rule, which come into effect when a stock price falls 10% during a single trading session.

Hedge funds has lambasted short-selling restrictions, which have been pushed by banks, arguing that those banks saw their share prices plummet because they were overlevered and made bad investments, not because they were shorted. The industry has said the SEC’s short-lived emergency ban on shorting financial names proves that short-selling was not the cause of the market crisis.

Bloomberg News reported on the possible reopening of the comment period, which expired on June 19; the SEC said it received more than 5,000 comments. It is unclear why the agency might reopen the comment period: It may have deemed the input it received insufficient, or it may be mulling a change to its approach, among other possibilities.

SEC Chairman Mary Schapiro has said she wished to put new short-selling rules into place.


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