U.S. SEC issues emergency rule to curb short selling
Güncelleme Tarihi:
The Securities and Exchange Commission is adopting an emergency rule that will limit the ability of traders to bet on a drop in the shares of brokerage firms, the agency said in a statement on Tuesday.
The rule, which will go into effect on Monday, July 21, and last through July 29, is the latest effort by the United States Securities and Exchange Commission to clamp down on market manipulation that some blame for the sharp declines in financial stocks and the demise of investment bank Bear Stearns in March.
The SEC will require traders to hold the shares of the two mortgage buyers and the brokerages before they execute a short sale. The emergency order, to be in effect for 30 days, will bar a practice known as naked short selling, in which traders bet that the share prices will fall.
The SEC said that a loss of confidence in markets can lead to panic selling, which may be further exacerbated by certain types of short selling.
"As a result, the prices of securities may artificially and unnecessarily decline well below the price level that would have resulted from the normal price discovery process," the SEC said. "If significant financial institutions are involved, this chain of events can threaten disruption of our markets."
The emergency rule applies to 19 financial firms including Lehman Brothers, Goldman Sachs, Merrill Lynch, Morgan Stanley, JPMorgan Chase & Co and Citigroup Inc.
Short sellers, who borrow shares betting that they will decline, are spreading rumors about Lehman in an organized attempt to depress the stock, Richard Bove, bank analyst at Ladenburg Thalmann & Co. in Lutz told Bloomberg.