Renewed scrutiny lately, against “naked” short selling is pushing the Securities and Exchange Commission (SEC) to extend its measures in order to prevent further market manipulation.
According to WSJ – many Wall Street executives are hoping the SEC will expand the temporary limits, it has placed on short-selling, and widen them to cover additional stocks beyond the 19 primary dealers at commercial and investment banks it originally targeted several weeks ago.
Since the limits are set to expire by 12:00 p.m. EDT Tuesday, the impact of the SEC’s rule has been and continues to be closely monitored from the moment the restrictive rules went into effect for all brokers and dealers. Evidently the rules seem to be working since their intended effect has been felt, resulting by halting the slide in shares of Freddie Mac (FRE), Fannie Mae (FNM), and Lehman Brothers (LEH).
The Journal notes, that executives and hedge-fund representatives of the biggest hedge-fund industry group: Managed Funds Association, have been talking over the weekend – trying to find different ways of approaching the SEC in order for it to reconsider the expansion of its original rule.
SEC Chairman Christopher Cox only last week – indicated that the rules might be extended to all stocks.
Furthermore, as pressure mounts on the U.S. Securities and Exchange Commission to broaden the measure – according to people familiar with the talks, a call with regulators on Friday gave the funds group some hope..
“and a fair degree of certainty” that the SEC intends to seek an extension of the emergency period. Regulators said an extension could be for as short as 60 days and could involve insurance, housing-industry and a broader range of financial stocks.
The SEC has already expressed its views of considering rules to address abusive short selling issues across the entire stock market, and that it is also working to make short-selling rules permanent. However, it is yet unknown how the rule will be crafted by the agency.