SEC Will Limit Short Sales of Finance Stocks

Agency worried negative bets by traders are hurting the market
By Jim O'Neill,  Newser User
Posted Jul 16, 2008 9:48 AM CDT
U.S Chairman of the securities and exchange commission, Christopher Cox.   (AP Photo/Jacques Brinon)
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(Newser) – The SEC will step in to police naked short-selling of 17 financial firms, as well as Fannie Mae and Freddie Mac, the Wall Street Journal reports. The agency said it plans to impose short-term, emergency rules on Monday that curtail traders betting on the stocks to drop, worried the short selling is worsening the crisis in the financial sector.

The new rule would require traders to hold contracts for shares before attempting a short sale, and the SEC said it might attempt to apply the rule to the overall market after the 30-day emergency order expires. Critics say the move could injure legitimate short sellers, and allege that the SEC is grandstanding, attempting to make headlines during troubled times.