The SEC consults on whether short-sale price restrictions or circuit breaker restrictions should be imposed. It decided to re-evaluate the issue after voting to eliminate price restrictions in June 2007.
The SEC consults on whether short-sale price restrictions or circuit breaker restrictions should be imposed and whether such measures would help promote market stability and restore investor confidence. It decided to re-evaluate the issue after voting to eliminate price restrictions in June 2007.
The Commission voted to propose two approaches to restrictions on short-selling. One would apply on a market wide and permanent basis, while the other would apply only to a particular security during severe market declines in that security. They include:
Market-Wide, Permanent Approach
- Proposed Modified Uptick Rule: A market-wide short-sale price test based on the national best bid (a proposed modified uptick rule).
- Proposed Uptick Rule: A market-wide short-sale price test based on the last sale price or tick (a proposed uptick rule).
Security-Specific, Temporary Approach
- Circuit Breaker: A circuit breaker that would either:
Ø Ban short-selling in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker halt rule).
Ø Impose a short-sale price test based on the national best bid in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker modified uptick rule).
Ø Impose a short-sale price test based on the last sale price in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker uptick rule).
"Since the Commission eliminated short-sale price tests two years ago, we have seen market conditions and events that differ sharply from those of previous years," said Erik Sirri, Director of the SEC's Division of Trading and Markets. "In that time, the Commission has received many requests to reinstate short-sale price test restrictions.
In addition, the Commission proposed amendments to Regulation SHO to require that a broker-dealer mark a sell order "short exempt" if the seller is relying on an exception to a short-sale price test restriction or a circuit breaker rule.
The comment period ends 60 days after their publication in the Federal Register.
The full text of the rule proposals will be posted to the SEC Web site as soon as possible.
Press release
Video on open meeting
Statement Shapiro
Statement Paredes
Statement Aguilar
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