June 20, 2011
I believe that these regulations should be enacted and short positions should be reported in much the same way that long positions must be reported. For instance, insiders and 5% holders must regularly report their positions. Why should large shorters be exempt from similar regulations? The purpose should be transparency. The same goes for fund positions. They must report long positions, but not short positions resulting in a greatly skewed public perception of their actual position. Short information should be as readily available as long information.
In addition, the SEC should take more proactive approach to securities on the SHO list. While there are instances in which a FTD (failure to deliver) goes over 10 days for legitimate reason, some of the FTD go on for far longer. There should be a secondary timeline within which firms are forced to cover their FTDs. I would propose 30 days as being far more than sufficient time to resolve any legitimate FTD situation. All firms and individuals should be required by law to resolve an FTD by 30 days or be prohibited from shorting any security at all until their over 30 day FTDs are resolved. This would ensure an orderly marketplace. Allowing FTDs to go on indefinitely could result in those firms or individuals who instigate the FTDs to go out of business with no means to resolve the FTD. This jeopardizes the integrity of the marketplace and must be prevented at all costs.
Regards,
T.K. Horeis