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SEC extends short-selling timetable

Friday 5 November 2010 - by Andrew Hickley

The Securities and Exchange Commission has announced a three month extension to the time firms will have to comply with a new short selling directive, warning that the previous implementation date would have "increased risks of technical or market problems".

In a statement released yesterday, the SEC said that it had become aware that certain exchanges require additional time to comply with the amended Rule 201 of the SEC's Exchange Act.

The Rule adopts a short sale related circuit breaker, aimed to prevent the execution or display of a short sale order for less than the highest market quoted bid of the security if the price of the security has decreased by 10 per cent or more from its closing price from the previous day.

However, the SEC noted that exchanges which conduct single-priced transactions would have had problems enforcing the national best bid at the time of execution, leading to "operational concerns".

As a result the compliance date for the rule has been extended from 10 November to 28 February 2011, although the effective date of the rule remains 10 March 2011.


Rule 200(g), which means that broker-dealers may mark qualifying short sale orders as "short exempt", will also be pushed back to this date.

The SEC said that the extension will also allow industry participants additional time to programme and test their short selling models.


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