The US Securities and Exchange Commission (SEC) has adopted a rule to increase transparency around short selling, as well as amending the National Market System Plan (NMS Plan) governing the consolidated audit trail (CAT)
Rule 13f-2 will provide greater transparency to investors and other market participants by increasing the availability of short sale related data.
SEC chair Gary Gensler said: “In the wake of the 2008 financial crisis, Congress directed the SEC to enhance the transparency of short selling of equity securities. Today’s adoption will promote greater transparency about short selling both to regulators and the public. This rule addresses Congress’s mandate and improves upon existing sources of short sale-related data in the equity markets. Given past market events, it’s important for the Commission and the public to know more about short sale activity in the equity markets, especially in times of stress or volatility.”
Rule 13f-2 will require institutional investment managers that meet or exceed certain thresholds to report on Form SHO specified short position data and short activity data for equity securities.
The SEC will collate this data by security, thereby maintaining the confidentiality of the reporting managers, and disseminate the aggregated data via EDGAR on a delayed basis. This new data will supplement the short sale data that is already publicly available.
The amendment to the National Market System Plan (NMS Plan) governing the consolidated audit trail (CAT). The amendment will require each CAT reporting firm reporting short sales to indicate when it is asserting use of the bona fide market making exception in Rule 203(b)(2)(iii) of Regulation SHO.
The final rule, Form SHO, and the amendment to the CAT NMS Plan will become effective 60 days after publication of the adopting release in the Federal Register. The compliance date for Rule 13f-2 and Form SHO will be 12 months after the effective date of the adopting release, with public aggregated reporting to follow three months later, and the compliance date for the amendment to the CAT NMS Plan will be 18 months after the effective date of the adopting release.
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