SEC May Reinstate Rule to Restrict Short Selling

No more short selling?

Marcy Gordon reports for the Associated Press that Mary Schapiro has settled into her new role as SEC Chairman and is ready to take a serious step to restore investor confidence in a flailing stock market.

In April, federal regulators may reinstate the “uptick rule,” with Schapiro’s support. In short, the uptick rule mean restricting certain trades where investors are betting against a stock. This former Depression-era regulation could go a long way toward restoring investor confidence in the stock market and curbing the extreme volatility that has been the norm of late.

Betting against a stock

This practice is legal and has been widely used on Wall Street since the uptick rule was removed in 2007. According to Gordon, it involves “borrowing a company’s shares, selling them, and then buying them when the stock falls and returning them to the lender. The short-seller pockets the difference in price.”

Democratic Rep. Barney Frank of Massachusetts, who is the chairman of the House Financial Services Committee, said he had spoken with Schapiro and she told him the agency would take up the issue soon. “I’m hopeful that the uptick rule will be restored within a month,” he told reporters.

Look for long term profit, not a quick fix that won’t hold

According to Gordon, Democratic Rep. Gary Ackerman of New York has previously proposed legislation that “would order the SEC to reinstate the rule, saying it was essential to rein in such abuses of the market and restore much-needed stability and confidence to America’s financial markets.” ... click here to read the rest of the article titled "SEC May Reinstate Rule to Restrict Short Selling"