The regulator takes measures to increase confidence in markets, follows similar moves by the FSA
The Securities and Exchange Commission (SEC) has banned short selling in financial stocks for 10 days.
The regulator said it took the emergency action to protect the integrity and quality of the securities market and strengthen investor confidence.
The action halts short selling in 799 financial institutions.
The UK’s FSA took similar action on Thursday.
SEC Chairman Christopher Cox said the temporary measure would ‘restore equilibrium to markets’.
“The action calls a halt to aggressive short selling in financial stocks, because of the essential link between stock price and confidence.
The action calls a halt to aggressive short selling in financial stocks, because of the essential link between stock price and confidence.
Said the SEC in a statement: ‘It appears that unbridled short selling is contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation. Financial institutions are particularly vulnerable to this crisis of confidence and panic selling because they depend on the confidence of their trading counterparties in the conduct of their core business.’
The Commission will continue to consider measures to address short selling in other publicly traded companies.
The Commission said it would not extend the order for more than 30 days in total duration.
The Commission also has taken the following steps to address the recent market conditions:
Temporarily requiring that institutional money managers report their new short sales of certain publicly traded securities. These money managers are already required to report their long positions in these securities.
Temporarily easing restrictions on the ability of securities issuers to re-purchase their securities. This change will give issuers more flexibility to buy back their securities, and help restore liquidity during this period of unusual and extraordinary market volatility.
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