Floyd Norris, NYT, Notions on High and Low Finance, April 8, 2009:
The S.E.C. is putting out for comment a bunch of possible short-selling restrictions today. There are several variations on two ideas. First is an uptick rule, like one we used to have, that bars short-selling at a price lower than the last different price. Second is some type of circuit breaker, like barring further short sales of a particular stock on a day that stock has fallen 10 percent.
I assume the commission will eventually adopt something. The pressure from Congress, and the public, is great.
And I suspect that the eventual impact of what they adopt will be modest, at best.
Listening to the five commissioners speak was refreshing, in contrast to the unlamented S.E.C. during the chairmanship of Christopher Cox. Last fall, the S.E.C. introduced panic measure after panic measure to halt or reduce short-selling. There was little effort to carefully consider whether there was any evidence to support the measures, which seemed to change every hour or two. Then they had to be tweaked as unanticipated consequences piled up.
This time, all five commissioners, led by Chairwoman Mary Schapiro, seemed to understand that there is no empirical evidence to support the belief that short-sellers are to blame for much of anything, even if there is public outrage. Whatever rule is adopted will be chosen after everyone has a chance to comment and point out unintended consequences.
It sounds as if panic is receding at the commission.