SEC short-sale rule ending, market move being debated

August 10, 2008 by · Leave a Comment
Filed under: Economic News 

It was very interesting to see this rule that has been on the books for some time and now they decide to enforce it when naked short selling happens on the GSEs or investment banks.  What made this so odd is that the offenders of using naked short selling they are almost the same crowd this rule is being used to protect.   The real question that should be asked is “who are the naked short sellers?”, but it looks like no one is really asking that question.


Short trading in 19 major U.S. financial stocks will revert to rules governing other shares on Wednesday as a Securities and Exchange Commission experiment against abusive short selling expires.

Market data company S3 Matching Technologies says short sales in the affected companies dropped after the emergency rule took effect but there is little consensus on how the market will react come Wednesday.

“My guess is that while this curtailed naked short selling in the short run, I suspect people found clever and sophisticated ways to work around (it) through derivatives,” said John Welborn, an economist with investment firm The Haverford Group who studies short selling.

But Dylan Wetherill, founder of, a Web site that tracks short interest, said the emergency rule maintained strength and balance in the affected stocks.

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