SEC makes permanent its rule to rein in short selling
But lawmakers say the measure doesn't effectively limit the practice
By Ronald D. Orol & Alistair Barr, MarketWatch
WASHINGTON (MarketWatch) -- The Securities and Exchange Commission on Monday made permanent a temporary commission rule seeking to rein in "naked shorting," but some lawmakers argued the regulation is weak and they proposed an alternative approach.

  "Until the SEC actually toughens its rules so that abusive short selling can be stopped effectively with enforceable standards, I am concerned that the abuses that took place last year that hastened the demise of Lehman Brothers and Bear Stearns could happen again," said Sen. Ted Kaufman, D-Del.
"Instead of proposing action today to deal with the problem, the SEC apparently is content to let potential solutions sit on the shelf for another two months," Kaufman said.
Naked short selling is the practice of selling a stock short without first borrowing the security or ensuring that the security can be borrowed as is done in a conventional short sale.
  The regulator introduced a rule last year to limit naked shorting by requiring broker-dealers to promptly purchase or borrow securities that they would use to deliver on a short sale. That was set to expire July 31, and the SEC said Monday it made the rule permanent.
  However, Kaufman and a group of lawmakers argued that the SEC's steps to rein in naked short selling aren't effective at clamping down on naked short sellers. They are hoping the agency considers a pre-borrow requirement that they believe could end the problem of naked short selling.
  With a pre-borrow requirement an institution would be required to arrange formally to borrow shares, or "pre-borrow" before engaging in a short sale. Without a pre-borrow requirement it is generally enough for a broker to determine that it has a reasonable basis to deliver the securities when an investor seeks to borrow shares for a short sale.
  In an emergency action last year, the SEC temporarily required hedge funds and other short-selling institutions to pre-borrow shares, but it let that provision expire.
  The SEC proposed discussing a pre-borrow requirement and other short sale provisions at a public roundtable discussion it has scheduled for Sept. 30. Kaufman and other lawmakers want SEC to launch a pilot program to study whether a pre-borrow requirement would end the problem of naked short selling.
  "I am pleased that the SEC has announced some new transparency measures and a roundtable on September 30 on the agenda to curb the abuses of naked short selling," Kaufman said.
Collection of data
  The SEC also said it would no longer require hedge funds and other institutional investors to provide short-sale position data to the agency on a weekly, confidential basis. That provision, which was adopted in October, is set to expire on Aug. 1.
  Instead of collecting data on short-sales, the regulator said it was taking steps to increase the public availability of information related to short sales, including an effort that would make public short-sale volume and transaction data available publicly.
In the next few weeks, the SEC said it expects self-regulatory organizations such as stock exchanges to start publishing aggregate short-selling volume in individual equity securities daily on their Web sites. However, short sellers would not be required to make their positions publicly available.
"These actions should provide a wealth of information to the commission, other regulators, investors, analysts, academics and the media," the SEC said in a statement.
Uptick
  Separately, under pressure from lawmakers and financial institutions, the SEC in April approved the release of five different proposals for reinstating the up-tick rule, a provision that would limit short selling. SEC Chairwoman Mary Schapiro said last week the agency plans to adopt one or more up-tick rules by the end of summer.
  The five SEC proposals, which were put out for comment vary from reinstating an old rule to creating a new rule that would only apply in severe market conditions.
The uptick rule, which was removed in 2007 after 70 years, allowed short sales only if the preceding sale boosted a company's stock price by at least a penny. The uptick rule was designed to make sure short sellers couldn't dominate trading in a stock to drive its price lower.
Ronald D. Orol is a MarketWatch reporter, based in Washington.

Alistair Barr is a reporter for MarketWatch in San Francisco.

金融工程的教材岂不是得重写？

RELATED DESCRIPTION
Normal shorting
Short selling is a form of speculation that allows a trader to take a "negative position" in a company. Conventionally, the trader will "borrow" securities from a current shareholder, typically a bank or prime broker, agreeing to return them on demand. The seller delivers these shares to a buyer, who takes full ownership and likely does not know that he is participating in a short sale. When the seller wants to "unwind" the position, he buys back equivalent shares in the market and returns them to the lender.
This short/borrow system provides the trader with shares to sell at current prices, in the hope that he will profit by repurchasing them later when the price has lowered. Because the seller/borrower is generally required to make a deposit for the full share price with the lender, it also provides the lender with interest on a position that he was not actively trading.


Naked shorts in the United States
Naked short selling is a case of short selling without first arranging a borrow. If the stock is in short supply, finding shares to borrow can be difficult. The seller may also decide not to borrow the shares, in some cases because lenders are not available, or due to the costs of lending. When shares are not borrowed within the clearing time period and the short-seller does not tender shares to the buyer, the trade is considered to have "failed to deliver."[12] Nevertheless, the trade will continue to sit open or the buyer may be credited the shares by the DTCC until either the short-seller closes out the position or borrows the shares.
It is difficult to measure how often naked short selling occurs. Fails to deliver are not necessarily indicative of naked shorting, and can result from both "long" transactions (stock purchases) and short sales.
Naked shorting can be invisible in a liquid market, as long as the short sale is eventually delivered to the buyer. However, if the covers are impossible to find, the trades fail. Fail reports are published regularly by the SEC[14], and a sudden rise in the number of fails-to-deliver will alert the SEC to the possibility of naked short selling. In some recent cases, it was claimed that the daily activity was larger than all of the available shares, which would normally be unlikely.

The Economics of Naked Short Selling
BY CHRISTOPHER L. CULP
CompassLexecon
AND J.B. HEATON
Bartlit Beck Herman Palenchar & Scott LLP

一般的金融工程教材都会提到Normal shorting，Normal shorting 还是没有被禁止的吧。这件事可以看做是加强监管的一项举措吧。

我穿这双鞋子的时候我感到很温馨，很舒服。我感谢我的老婆。感谢她的眼光。



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