Sunday, May 10, 2009

Short-selling Roundtable

The SEC held another one of its "roundtables" last week.

This one, on Tuesday, May 5, concerned short sales and the best way to check a bear raid. The SEC under its new leadership seems to have made up its mind that one of two checks ought to be in place -- either a trae-by-trade uptick rule or a day by day circuit breaker rule. Maybe both. It appears that the roundtable was convened to assist it in making up its mind among those alternatives.

The circuit breaker proposal would mean, specifically, that if a particular stock declined by more than 10% in a given day, something would happen to staunch the bleeding. Under the most restrictive of the three variants of the circuit-breaker proposal, such a decline would simply result in an end to the trading in that stock for the remainder thereof.

One of the panelists was James Angel, an associate professor at the McDonough School of Business at Georgetown University, and the co-author (with Douglas McCabe, of "The Business Ethocs of Selling Short and of Naked Short Selling," which you can find here.

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