Market Regulator SEC Adds New Restrictions To Short Selling

Today the SEC announced new actions and penalties applying to the short selling of stocks.

Effective at 12:01 a.m. ET on Thursday, September 18th, 2008 new penalties will apply to traders who sell short securities without actually borrowing the security and delivering it back into the market, or what is known as a naked shorting.

Traders and broker/dealers will be held to T+3 settlement. In the event of a fail, the broker/dealer can no longer offer short selling in the failed security to any client unless the shares are already located and pre-borrowed.

The SEC also eliminated a provision that now holds option market makers to the same “hard T+3″ settlement requirements of all market participants on short sales.

To add some teeth to the changes the Securities and Exchange Committee adopted the “Short Selling Anti-Fraud Rule” that criminalizes lying about intention or ability to deliver a security when transacting a short sale.

Tags: Naked Shorting, Regulators, SEC, Short Selling

This entry was posted on Wednesday, September 17th, 2008 at 3:42 pm and is filed under SEC. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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