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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Opening Statement at May 5, 2009, Roundtable on Short Selling


Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

Washington, D.C.
May 5, 2009

Good morning.

Welcome to the Securities and Exchange Commission’s Roundtable on Short Selling. The Commission is grateful that so many have agreed to participate in today’s meeting. I believe I speak for my colleagues on the Commission in saying that we look forward to the panelists’ comments, insights and recommendations on this very important subject.

As I noted at our recent open meeting where we proposed a variety of short sale restrictions, my brief tenure as Chairman has seen the issue of short selling outpace any other in terms of the number of inquiries, suggestions and expressions of concern we have received. Indeed, well before I arrived at the Commission, I heard from many investors on this issue. We know that the practice of short selling evokes strong opinions from both its supporters and detractors. I have made it a priority to evaluate the issue of short selling regulation and ensure that any future policies in this area are the result of a deliberate and thoughtful process. That is why we are here today.

On April 8, 2009, we unanimously voted to propose two distinct approaches to short selling restrictions. One approach would impose a permanent, market-wide short sale price test, while the other would impose temporary short selling restrictions upon individual securities during periods of severe declines in the prices of those securities. We proposed these amendments to Regulation SHO with the knowledge that any short selling restrictions must balance the goal of helping to prevent abusive short selling with the view that legitimate short selling can provide tangible market benefits such as improved liquidity and pricing efficiency.

As we seek public comment on the proposed rules, we believe that this roundtable discussion will help in advancing the debate over short sale price tests and short sale circuit breakers.

Throughout the day, we will hear from three panels. Each panelist will take a few moments to share his or her thoughts on the issues being discussed, and when opening statements are complete, the floor will be opened to questions from the Commission.

The first panel will discuss the necessity and effectiveness of short sale price tests and short sale circuit breakers. The panelists will also comment on whether they believe a short sale price test or short sale circuit breaker could help restore investor confidence, which has been seriously eroded during the current financial crisis.

The second panel will take a closer look at the Commission’s recent proposed amendments to Regulation SHO and evaluate the costs and benefits of the regulatory alternatives outlined in the release. The panelists will discuss the operational implications of these proposed rules, and what impact they may have on market function and market quality if adopted.

The third panel will explore the empirical side of the debate over short sale restrictions. The panelists will discuss academic research on the subject of short selling and evaluate the recent proposals from a quantitative and academic perspective.

The panelists we will hear from today are leaders in their respective fields and represent a range of constituencies that includes issuers, financial services firms, self-regulatory organizations, investors and the academic community. We are privileged to have them here and look forward to a spirited and substantive discussion.

I’ll now turn the meeting over to Jamie Brigagliano, Acting Co-Director of the Division of Trading and Markets, who will introduce and moderate our first panel.



Modified: 05/05/2009