SEC PROPOSES SHORT SALE DISCLOSURE RULE AND OTHER AMENDMENTS
The Securities and Exchange Commission (SEC) has proposed changes to its short sale disclosure requirements aimed at providing greater transparency to investors and regulators by increasing the public availability of short sale related data. The proposal would require certain institutional investment managers to report short sale related information to the SEC monthly. The SEC then would make aggregate data about large short positions available to the public for each individual security. This new data would supplement the short sale data that is currently publicly available from FINRA and stock exchanges.
The SEC also proposes a new provision of Regulation SHO, Rule 205, which would establish a new “buy to cover” order marking requirement for broker-dealers. The proposed rule would require a broker-dealer to mark a purchase order as “buy to cover” if the purchaser has any short position in the same security at the time the purchase order is entered. The SEC indicates this information will be especially useful in reconstructing significant market events and identifying potentially abusive trading practices including short squeezes. As part of its proposals, the “buy to cover” information would also need to be reported to the consolidated audit trail (CAT) by CAT reporting firms.
Additionally, the SEC has re-opened the comment period for Proposed Rule 10c-1 which proposes to increase the transparency and efficiency of the securities lending market by requiring any person that loans a security on behalf of itself or another person to report the material terms of those securities lending transactions and related information to a registered national securities association. Comments are due April 1, 2022.
Additional information can be found on the SEC FACT SHEET.