In testimony delivered today during a U.S. Financial Services Committee hearing in Washington, Securities and Exchange Commission Chairman Christopher Cox stated that he is interested in SPREADING recently imposed Short-Selling restrictions from a small group of 19 financial stocks to the ENTIRE stock market.news/newsfeeds/articles/djf500/200807241703DOWJONESDJONLINE000879_FORTUNE
Quoted from the Above Link:
* The SEC issued an emergency order last week, which took effect Monday (7/21/08), to tighten requirements for short sales focused on 19 U.S. financial companies including Fannie Mae (FNM) and Freddie Mac (FRE), the federally sponsored housing-finance giants. In addition to the two Government Sponsored Enterprises (GSE's), the order included 17 Federal Reserve primary dealers in U.S. Treasury debt. FYI, for a list of The U.S. Fed's Primary Dealers please refer to my 3/16/08 post labelled 'REF - U.S. Fed Primary Dealers (Discount Rate)'.
* SEC Chairman Cox said the 19 stocks were originally targeted because they were institutions able to borrow from the Federal Reserve. But he said the SEC aims to extend "operational protections" marketwide.
* Short sellers sell borrowed shares which they hope to replace later at lower prices, profiting from stock price declines...The SEC has put restrictions in place in recent years to curb illegal "naked" short sales, in which stocks are NOT borrowed before short sales. That effort was extended with the emergency order which calls for borrowing or arranging to borrow shares in advance of short sales in the 19 targeted stocks.
* Cox told reporters after the hearing that the SEC staff also is discussing changes that would require disclosure of significant short positions, similar to requirements to divulge big long position in stocks.
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RTOB - When there's only TWO SIDES to the Stock Market (Up or Down...Long or Short...Bull or Bear...Black or Red), there's No way one can assert that increased SEC regulation imposed on one side will NOT benefit the other...Skipping the always lively ethics debate (Is the SEC overstepping its 'free market' bounds ?), I'd rather focus on the decision and what it represents. Besides being a psychological victory for those individuals 'long' stocks (and possibly a catalyst leading to another short-squeeze induced stock market rally), this event also marks the Beginning of a New ERA...An ERA that is governed by a much more active and vigilant Securities and Exchange Commission. Maybe I'm being too optimistic, but it seems like the 'New' SEC is More Willing THAN EVER to SWIFTLY Re-examine and Address stock market MANIPULATION. Regardless of your SIDE, score one for the Longer term Sustainability of the GAME.
Data Courtesy: CNN Money
Full Disclosure: I own shares of GS.
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