Tagged: short sales

“We determined that it was appropriate to re-examine the appropriateness of short sale price test restrictions.”

We copied that sentence from the SEC’s 334-page charter instituting Rule 201 amendments for short sales. While it’s amusing that the authors modified the word appropriate with the word appropriateness, what’s important is that the rule took effect yesterday, Feb 28. What is it and how might it impact investor relations?

It’s hard to summarize a document consuming 60% of a ream of paper in one sentence. But Rule 201 implements an uptick rule – which regulators removed as part of Reg NMS in 2007 – when securities drop 10% from the preceding day’s closing price. If that happens, an uptick rule will be enforced in which long sellers matching at the best bid or offer will be able to sell ahead of short-sellers, and shorts will only be able to sell if the price ticks up above the last bid.

The idea is that if long sellers get called up to the front of the line, it’ll promote investor confidence by reducing the severity of short-driven price swings. And it’ll improve market-efficiency by letting those with long positions off the boat, thus discouraging short sellers from trying to sink the boat. (more…)

Pay Attention to Your Trading

We’re leaving most of this week’s email to our friend Joe Saluzzi at Themis Trading. Joe is a groundbreaking and thoughtful critic of contemporary trading, and among the smartest people we know. Last October, Steve Kroft interviewed Joe on 60 Minutes about our machine-driven markets.

Read what Joe says below about the recent Nasdaq website security issue. Even if you trade elsewhere. You all trade everywhere today. Do you know how much of your volume trades on your listing exchange?

How about your volume at other venues? The brokers executing these trades? The smallest investor trading just 100 shares can know whether a trade is executed on an agency or principal basis. But public companies don’t even know the brokers behind the majority of trades.

How about your daily short volume? Exchanges are currently implementing circuit breakers on short trades as required under SEC amendments to Reg SHO. But public companies don’t even know what part of their daily volume is short. (more…)