The Securities and Exchange Commission has said that it will make the temporary rule of banning naked short selling permanent. Those shorting a stock will now have to take delivery of the stock within days, rather than naked short selling, where the short seller does not borrow the stock in question.
“Today’s actions demonstrate the Commission’s determination to address short selling abuses while at the same time increasing public disclosure of short selling activities that affect our markets,” said SEC Chairman Mary Schapiro in a statement.
Despite the fact that the SEC listed a number of positions from short selling,such as increased liquidity and price discovery, and that no evidence has been found that links short selling to volatility, the naked shorting ban is unlikely to be the last word from the SEC concerning the industry.
In the UK, the Financial Services Authority has extended, without a time limit, the current disclosure regime for significant net short positions in the stocks of UK financial sector companies. Japan’s Financial Services Agency will extend curbs on short-selling of shares by three months to the end of October, the financial regulator said recently.
Giles TurnerNews Editor