The Securities and Exchange Commission ("SEC") has issued the following final rules that address short selling. The rules can be accessed online at http://www.sec.gov/rules/final.shtml.
Hard T+3 Close-Out Requirement for Naked Short Selling
The SEC has issued an interim final temporary rule to require a "hard" T+3 close-out requirement in all equity securities. Rule 204T was effective on October 17, 2008 and will expire on July 31, 2009. This temporary rule is meant to address the concerns that resulted in the SEC's issuance on September 17, 2008 of an emergency order under Section 12(k) of the Exchange Act (the "September Emergency Order"). Unlike the September Emergency Order, however, the temporary rule does not require a Market Maker to which a fail to deliver position at a registered clearing agency is attributable to attest in writing to the market on which it is registered that the fail to deliver position at issue was established solely for the purpose of meeting its bona fide market making obligations and the steps the Market Maker has taken in an effort to deliver securities to its registered clearing agency.
Repeal of Exception for Options Market Makers from Short Selling Close-Out Provisions of Regulation SHO
This exception was repealed pursuant to a final rule and is not set to expire. It includes a one-time 35-day phase-in period. Under this phase-in, a previously excepted fail to deliver position in a threshold security must be closed out within 35 consecutive settlement days of the effective date of the amendments (October 17, 2008).
Rule 10b-21 Naked Short Selling Anti-Fraud Rule
This new rule covers short sellers who deceive broker-dealers or any other market participants about their intention or ability to deliver securities in time for settlement and that fail to deliver securities by settlement date. The effective date of this final rule was October 17, 2008.
Requirement that Institutional Money Managers Report Certain Short Sales
The SEC has issued an interim final temporary rule to require certain institutional investment managers to file information on Form SH concerning their short sales and positions of section 13(f) securities, other than options. The new rule extends the reporting requirements established by the SEC's Emergency Orders dated September 18, 2008, September 21, 2008 and October 2, 2008, with some modifications. The extension will be effective until August 1, 2009.
Please direct any questions on this Notice to Chris Twomey at 212-306-1857 or ctwomey@nyx.com, Rick Farber at 212-306-5310 or rfarber@nyx.com or to Ellen O'Rourke at 212-306-5310 or eo'rourke@nyx.com.