SEC battles “naked short selling,†makes promptness rule permanent
Seeking to reduce market manipulation, U.S. securities regulators today made permanent a temporary rule to reduce the potential for abusive “naked short selling.”
The Securities and Exchange Commission on Monday made permanent an interim final temporary rule to reduce the potential for abusive “naked short selling” in the securities market.
Rule 204 requires broker-dealers to promptly purchase or borrow securities to deliver on a short sale. The rule approved in fall of last year, was set to expire at the end of July.
The temporary version of rule 204 requires that a broker-dealer, as opposed to the seller “locate” an entity that the broker reasonably believes can deliver the shares within three days after the trade.
The Commission also said it is working with several self-regulatory groups to make short sale volume and transaction data available through their web sites, resulting in a “substantial increase” over the amount of information required by another temporary rule set to expire August 1.
The Commission said it will hold a public discussion on September 30 to discuss additional short sale disclosures.
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