Statement of SEC Division of Trading and Markets Regarding Technical Amendments to Short Sale Order
FOR IMMEDIATE RELEASE
Washington, D.C., Sept. 21, 2008 — The Securities and Exchange Commission's Division of Trading and Markets today issued the following statement:
The Commission has approved technical amendments to the Emergency Order banning short selling in financial stocks. The technical amendments were made to ensure the continued smooth operation of orderly markets, and to coordinate to the extent possible with similar actions restricting short sales by foreign regulators.
The technical amendments keep in place the exception contained in the original order for short selling related directly to bona fide market making in derivatives, including over-the-counter swaps, in the securities of any Included Financial Firm. However, this exception now requires that, for new positions, a market maker may not sell short if the market maker knows a customer or counterparty is increasing an economic net short position in the shares of the Included Financial Firm.
The technical amendments thus incorporate concepts included in the limitations on increasing net short positions imposed by the U.K. Financial Services Authority (FSA) in its response to short selling. The provisions are not identical because unlike the FSA, the Commission does not have statutory authority over swap contracts and other non-security over-the-counter derivatives. (other than prohibitions on fraud, manipulation, or insider trading regarding securities based swaps).
The technical amendments also provide criteria by which the listing exchanges will select the individual financial institutions with securities covered by the Order. The categories include banks, savings associations, broker-dealers, investment advisers, and insurance companies, whether domestic or foreign, and the owners of any of these entities. Issuers can opt out by notifying the exchange to exclude their securities from the list.