Alert March 02, 2010

SEC Issues Adopting Release for Amendments to Regulation SHO

The SEC issued the adopting release for amendments to Regulation SHO that impose an alternative uptick rule on short selling in a security covered by the rules once trading in the security trips a “circuit breaker” by causing the security to experience a price decline of at least 10 percent from the prior day’s close.  Under the alternative uptick rule, short selling is permitted only if the price of the security is above the current national best bid.  The restriction applies to short sale orders in that security for the remainder of the day on which the circuit breaker is tripped and on the following day.  The alternative uptick rule generally applies to all equity securities that are listed on a national securities exchange, whether traded on an exchange or in the over-the-counter market.  This new requirement will be implemented by requiring trading centers to establish, maintain, and enforce written policies and procedures that are reasonably designed to prevent the execution or display of a prohibited short sale.  The compliance date for the amendments is November 10, 2010.