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Short Sellers Reined In by SEC, Lenders

By Kevin Spak,  Newser Staff

Posted Apr 7, 2009 8:31 AM CDT
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(Newser) – After years of criticism, the SEC is reigning in short sellers, the Wall Street Journal reports. First it cracked down on “naked” short selling, the practice of selling stock one doesn’t actually possess, and tomorrow it could reinstate the “uptick rule,” which had, until 2007, forced traders to wait for a stock to rise before betting against it. At the same time, financial firms are cutting back on lending to short sellers.

As a result of all this, the number of shares that haven’t been properly delivered has plummeted to an average of 79 per day in the first 3 months of this year, down from  529 in the first 9 months of 2008. But critics say the SEC took too long to do too little. “The majority of these failures-to-deliver are not the result of honest mistakes,” said a former SEC commissioner. “These companies are instead targets of illegal and manipulative trading.”

Traders work on the floor of the New York Stock Exchange, Tuesday, March 31, 2009 in New York.
Traders work on the floor of the New York Stock Exchange, Tuesday, March 31, 2009 in New York.   (AP Photo/Mary Altaffer)
A lunchtime visitor to the Australian Securities Exchange watches a board showing stock prices and a graph of the day's trade in Sydney, Australia, Wednesday, Jan. 16, 2008.
A lunchtime visitor to the Australian Securities Exchange watches a board showing stock prices and a graph of the day's trade in Sydney, Australia, Wednesday, Jan. 16, 2008.   (AP Photo/John Pryke)
A broker works as his control screen shows a graph of activity on the French Stock Exchange in Paris on Friday, Aug. 10, 2007.
A broker works as his control screen shows a graph of activity on the French Stock Exchange in Paris on Friday, Aug. 10, 2007.   (AP Photo/Remy de la Mauviniere)
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SEC mulling two short-sale circuit breakers
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Not everyone cheering plan to limit short selling
New York Times

 
SEC • short selling • Securities and Exchange Commission • uptick rule

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