On July 18, 2008, the SEC issued an amendment to its July 15, 2008 Emergency Order related to short selling securities of certain specified substantial financial firms (see Appendix A below). The Amended Order provides that, in order to permit bona fide market makers to facilitate customer orders in a fast-moving market without possible delays, the borrow and arrangement-to-borrow requirement of the original Order does not apply to these bona fide market makers.
The exemption to the borrow requirement applies to:
Registered market makers, block positioners, and other market makers obligated to quote in the over-the-counter market, that are selling short as part of bona fide market making and hedging activities related directly to bona fide market making in: (a) Appendix A Securities; (b) derivative securities based on Appendix A Securities, including standardized options; and (c) exchange traded funds of which Appendix A Securities are a component.
The Amended Order states that settlement date delivery requirement continues to apply to these market makers. In addition, the Amended Order discusses the required documentation, sales of restricted securities, and syndicate offerings.
The July 15 Emergency Order provided that no person may effect a short sale in the specified securities unless such person (or agent) has pre-borrowed or arranged to borrow the security or otherwise has the security. Further, the securities must be delivered on settlement date. In order to allow market participants time to adjust their operations to implement the enhanced requirements, this Order shall take effect at 12:01 a.m. EDT on Monday, July 21, 2008. This Order shall terminate at 11:59 p.m. EDT on Tuesday, July 29, 2008, unless further extended by the Commission.
Appendix A
| Company Name | Symbol |
| BNP Paribas Securities Corp. | BNPQF or BNPQY |
| Bank of America Corporation | BAC |
| Barclays PLC | BCS |
| Citigroup Inc. | C |
| Credit Suisse Group | CS |
| Daiwa Securities Group Inc. | DSECY |
| Deutsche Bank Group AG | DB |
| Allianz SE | AZ |
| Goldman, Sachs Group Inc | GS |
| Royal Bank ADS | RBS |
| HSBC Holdings PLC ADS | HBC and HSI |
| J. P. Morgan Chase & Co. | JPM |
| Lehman Brothers Holdings Inc. | LEH |
| Merrill Lynch & Co., Inc. | MER |
| Mizuho Financial Group, Inc. | MFG |
| Morgan Stanley | MS |
| UBS AG | UBS |
| Freddie Mac | FRE |
| Fannie Mae | FNM |
SEC Release
SEC Order
SEC Amended Order
Category: Operations
