Securities Exchange Act of 1934 Amendment to Emergency Order Pursuant to Section 12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action To Respond to Market Developments, 55556-55557 [E8-22502]
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Federal Register / Vol. 73, No. 187 / Thursday, September 25, 2008 / Notices
Room 10230, New Executive Office
Building, Washington, DC 20503.
Charles Mierzwa,
Clearance Officer.
[FR Doc. E8–22593 Filed 9–24–08; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 58611]
Securities Exchange Act of 1934
Amendment to Emergency Order
Pursuant to Section 12(k)(2) of the
Securities Exchange Act of 1934
Taking Temporary Action To Respond
to Market Developments
September 21, 2008.
mstockstill on PROD1PC66 with NOTICES
Pursuant to Section 12(k)(2) of the
Securities Exchange Act of 1934,1 on
September 18, 2008, the Securities and
Exchange Commission (‘‘Commission’’)
issued an Emergency Order (the
‘‘Order’’) related to short selling the
publicly traded securities of certain
financial firms.2 The Order was effective
immediately. The Commission is
issuing this amendment to address
current and anticipated technical and
operational concerns resulting from the
requirements of the Order.
A. Included Financial Firms
The Order applies to the publicly
traded securities of certain financial
firms, which entities are identified in
Appendix A to the Order (‘‘Included
Financial Firms’’). We are amending the
Order to modify the list of Included
Financial Firms. As we stated in the
Order, recent market conditions have
raised concerns that short selling in the
securities of a wide range of financial
institutions may be causing sudden and
excessive fluctuations of the prices of
such securities in such a manner to
threaten fair and orderly markets.
Difficulties with the classification
criteria led to the omission of financial
institutions falling within these
categories. In light of the familiarity of
the exchanges listing financial
institutions with the nature of their
respective businesses, the Commission
has determined to amend this Order to
provide that the listing markets shall
select the individual financial
institutions with securities covered by
the Order. The Commission expects
each national securities exchange listing
financial institutions to immediately
publish a list, on its Internet Web site,
1 15
U.S.C. 78l(k)(2).
Securities Exchange Act Release No. 58592
(Sept. 18, 2008).
2 See
VerDate Aug<31>2005
17:50 Sep 24, 2008
Jkt 214001
of individual listed companies with
common equity that will be covered by
the Order’s prohibition on short sales.
The Commission expects these lists to
cover banks, savings associations,
broker-dealers, investment advisers, and
insurance companies, whether domestic
or foreign, and the owners of any of
these entities.
To the extent an issuer chooses not to
be covered by the Order’s prohibition on
short sales, we have authorized the
applicable national securities exchange
to exclude that issuer from its list of
covered financial firms.
It is therefore ordered that, pursuant
to our Section 12(k)(2) powers, the
Order applies to the publicly traded
common equity securities of any issuer
identified by any national securities
exchange listing such securities as being
a financial institution (each a ‘‘Covered
Security’’ and collectively, ‘‘Covered
Securities’’).
B. Options and Futures Contract
Expiration
The Order includes an exception from
its requirements to allow short sales that
occur as a result of automatic exercise
or assignment of an equity option held
prior to effectiveness of the Order due
to expiration of the option. We are
amending the Order to also allow short
sales that occur as a result of the
expiration of futures contracts held
prior to effectiveness of the Order.
It is therefore ordered that, pursuant
to our Section 12(k)(2) powers, the
requirements of the Order shall not
apply to any person that effects a short
sale in any Covered Security as a result
of automatic exercise or assignment of
an equity option, or in connection with
settlement of a futures contract, that is
held prior to effectiveness of the Order
due to expiration of the option or
futures contract.
C. Options Assignments
To allow for creation of long call
options, we are amending the Order to
except from its requirements, short sales
that occur as a result of assignment to
call writers upon exercise.
It is therefore ordered that, pursuant
to our Section 12(k)(2) powers, the
requirements of the Order shall not
apply to the writer of a call option that
effects a short sale in any Covered
Security as a result of assignment
following exercise by the holder of the
call.
D. Market Making and Derivatives
In the Order we included an
exception until 11:59 p.m. on
September 19, 2008 for any person that
is a market maker that effects a short
PO 00000
Frm 00061
Fmt 4703
Sfmt 4703
sale as part of bona fide market making
and hedging activity related directly to
bona fide market making in derivatives
on the publicly traded securities of any
Included Financial Firm. We are
amending the exception so that it
continues for the duration of the Order.
In addition, we are clarifying that the
exception applies to all market makers,
including over-the-counter market
makers, and that it applies to bona fide
market making and hedging activity
related directly to bona fide market
making in exchange traded funds and
exchange traded notes of which Covered
Securities are a component. The
purpose of this accommodation is to
permit market makers to continue to
provide liquidity to the markets.
To help ensure that this hedging
exception does not result in increased
short exposure in Covered Securities,
we are limiting the exception so that if
a customer or counterparty position in
a derivative security based on a Covered
Security is established after 12:01 a.m.
E.D.T on September 22, 2008, a market
maker may not effect a short sale in the
Covered Security if the market maker
knows that the customer’s or
counterparty’s transaction will result in
the customer or counterparty
establishing or increasing an economic
net short position (i.e., through actual
positions, derivatives, or otherwise) in
the issued share capital of a firm
covered by this Order.
It is therefore ordered that, pursuant
to our Section 12(k)(2) powers, the
requirements of this Order shall not
apply to any person that is a market
maker, including an over-the-counter
market maker, that effects a short sale as
part of a bona fide market making and
hedging activity related directly to bona
fide market making in (a) derivative
securities based on Covered Securities,
or (b) exchange traded funds and
exchange traded notes of which Covered
Securities are a component. Provided,
however, if a customer or counterparty
position in a derivative security based
on a Covered Security is established
after 12:01 a.m. E.D.T on September 22,
2008, a market maker may not effect a
short sale in the Covered Security if the
market maker knows that the customer’s
or counterparty’s transaction will result
in the customer or counterparty
establishing or increasing an economic
net short position (i.e., through actual
positions, derivatives, or otherwise) in
the issued share capital of a firm
covered by this Order.
All market makers relying on this
exception to the limitation on short
selling shall, as soon as operationally
practicable, publish a notice on their
Internet Web site that, pursuant to this
E:\FR\FM\25SEN1.SGM
25SEN1
Federal Register / Vol. 73, No. 187 / Thursday, September 25, 2008 / Notices
Order, the market maker may not
knowingly effect a short sale as part of
bona fide market making and hedging
activity related directly to bona fide
market making in a derivative security
based on a Covered Security, if the
customer’s or counterparty’s transaction
will result in the customer or
counterparty establishing or increasing
an economic net short position (i.e.,
through actual positions, derivatives, or
otherwise) in the issued share capital of
a firm covered by the Order.
E. Sales of Restricted Securities
We are also amending the Order to
clarify that the Order does not apply to
persons that effect sales of Covered
Securities pursuant to Rule 144 of the
Securities Act of 1933 (‘‘Rule 144
Securities’’).3 This accommodation is
necessary because sales of Rule 144
Securities are sales of owned securities.
It is therefore ordered that, pursuant
to our Section 12(k)(2) powers, the
Order does not apply to any person that
effects a sale pursuant to Rule 144 of the
Securities Act of 1933 (17 CFR 230.144)
in a Covered Security.
We believe that these amendments are
necessary in the public interest and for
the protection of investors to maintain
fair and orderly securities markets, and
to prevent substantial disruption to
securities markets.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22502 Filed 9–24–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 58591A]
Securities Exchange Act of 1934;
Amendment to Emergency Order
Pursuant to Section 12(k)(2) of the
Securities Exchange Act of 1934
Taking Temporary Action To Respond
to Market Developments
mstockstill on PROD1PC66 with NOTICES
September 21, 2008.
Pursuant to Section 12(k)(2) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’),1 on September 18,
2008, the Securities and Exchange
Commission (‘‘Commission’’) issued an
Emergency Order (‘‘Order’’) requiring
institutional investment managers to
report short sales of certain publicly
traded securities.2 The Order takes
effect on September 22, 2008 and
3 17
CFR 230.144.
U.S.C. 78 l(k)(2).
2 See Exchange Act Release No. 58591 (September
18, 2008).
1 15
VerDate Aug<31>2005
17:50 Sep 24, 2008
Jkt 214001
requires the filing of a Form SH on
September 29, 2008. This amendment
relates to the public availability of the
information provided by the
institutional investment managers when
they report such sales and also includes
technical amendments.
The Commission is aware of the
continued potential of sudden and
excessive fluctuations of securities
prices and disruption in the functioning
of the securities markets that could
threaten fair and orderly markets. As
evidenced by our recent publication of
emergency orders under Section 12(k) of
the Exchange Act,3 we are concerned
about the possible unnecessary or
artificial price movements based on
unfounded rumors regarding the
stability of financial institutions and
other issuers exacerbated by short
selling. We also believe that some
persons may take advantage of issuers
that have become temporarily weakened
by current market conditions to engage
in inappropriate short selling in the
securities of such issuers.
Given the importance of confidence in
our financial markets as a whole, we
have become concerned about sudden
and unexplained declines in the prices
of securities. Such price declines can
give rise to questions about the
underlying financial condition of an
issuer, which in turn can create a crisis
of confidence without a fundamental
underlying basis. This crisis of
confidence can impair the liquidity and
ultimate viability of an issuer, with
potentially broad market consequences.
As a result of these recent
developments, the Commission
concluded that there continues to exist
the potential of sudden and excessive
fluctuations of securities prices
generally and disruption in the
functioning of the securities markets
that could threaten fair and orderly
markets. Based on this conclusion, the
Commission is exercising its powers
under Section 12(k)(2) of the Exchange
Act.4 Pursuant to Section 12(k)(2), in
appropriate circumstances the
Commission may by order summarily
take action to alter, supplement,
suspend, or impose requirements or
restrictions with respect to matters or
actions subject to regulation by the
Commission.
We have concluded that it is
necessary to require certain institutional
3 See Exchange Act Release No. 58166 (July 15,
2008), Exchange Act Release No. 58572 (September
17, 2008).
4 This finding of an ‘‘emergency’’ is solely for
purposes of Section 12(k)(2) of the Exchange Act
and is not intended to have any other effect or
meaning or to confer any right or impose any
obligation other than set forth in this Order.
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
55557
investment managers to report
information concerning daily short sales
of securities. For purposes of this Order,
we believe that section 13(f) of the
Exchange Act and Rule 13f–1 provide
useful and tested terms and definitions
that provide a basis for requiring new
disclosure. The Order therefore requires
that an institutional investment manager
that exercises investment discretion 5
with respect to accounts holding section
13(f) securities 6 having an aggregate fair
market value on the last trading day of
any month of any calendar year of at
least $100,000,000 must file a new form
with the Commission. Specifically, an
institutional investment manager who
has filed or was required to file a Form
13F for the calendar quarter ended June
30, 2008 under section 13(f) of the
Exchange Act and Rule 13f–1(a)
thereunder will be required to file a
report on new Form SH with the
Commission on the first business day 7
of every calendar week immediately
following a week in which it effected
short sales.
The Form SH, which must be filed
electronically using the Commission’s
EDGAR system,8 must include
disclosure of the number and value of
securities sold short for each section
13(f) security, except for short sales in
options, and the opening short position,
closing short position, largest intraday
short position, and the time of the
largest intraday short position, for that
security during each calendar day of the
prior week.9 This disclosure
requirement will apply only to short
sales effected after the effective date of
5 The term ‘‘investment discretion’’ has the same
meaning as in Exchange Act Rule 13f–1(b). See 17
CFR 240.13f–1(b).
6 The term ‘‘section 13(f) securities’’ has the same
meaning as in Exchange Act Rule 13f–1(c). See 17
CFR 240.13f–1(c).
7 See Exchange Act Rule 0–2 for a description of
the business hours of the Commission. 17 CFR
240.0–2.
8 Although we are requiring managers to
electronically file Forms SH using our EDGAR
system, the Forms SH will be filed on a non-public
basis. The Commission is permitting the non-public
filing of Form SH in order to maintain fair and
orderly securities markets and prevent substantial
disruption in the securities markets. The
Commission believes that the non-public
submission of Form SH may help prevent artificial
volatility in securities as well as further downward
swings that are caused by short selling, while at the
same time, providing the Commission with useful
information to combat market manipulation that
threatens investors and capital markets. Two weeks
after the due date for the Forms SH, the
Commission will make the Forms available to the
public. We believe that by two weeks after the due
date the reasons to maintain the information as nonpublic will have diminished.
9 No Commission procedure for seeking
confidential treatment of information filed with or
transmitted to the Commission, such as those in 17
CFR 200.80, 200.83, or 240.24b–2, shall apply to the
information that this Order requires to be filed.
E:\FR\FM\25SEN1.SGM
25SEN1
]]>Agencies
[Federal Register Volume 73, Number 187 (Thursday, September 25, 2008)]
[Notices]
[Pages 55556-55557]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-22502]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 58611]
Securities Exchange Act of 1934 Amendment to Emergency Order
Pursuant to Section 12(k)(2) of the Securities Exchange Act of 1934
Taking Temporary Action To Respond to Market Developments
September 21, 2008.
Pursuant to Section 12(k)(2) of the Securities Exchange Act of
1934,\1\ on September 18, 2008, the Securities and Exchange Commission
(``Commission'') issued an Emergency Order (the ``Order'') related to
short selling the publicly traded securities of certain financial
firms.\2\ The Order was effective immediately. The Commission is
issuing this amendment to address current and anticipated technical and
operational concerns resulting from the requirements of the Order.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78l(k)(2).
\2\ See Securities Exchange Act Release No. 58592 (Sept. 18,
2008).
---------------------------------------------------------------------------
A. Included Financial Firms
The Order applies to the publicly traded securities of certain
financial firms, which entities are identified in Appendix A to the
Order (``Included Financial Firms''). We are amending the Order to
modify the list of Included Financial Firms. As we stated in the Order,
recent market conditions have raised concerns that short selling in the
securities of a wide range of financial institutions may be causing
sudden and excessive fluctuations of the prices of such securities in
such a manner to threaten fair and orderly markets. Difficulties with
the classification criteria led to the omission of financial
institutions falling within these categories. In light of the
familiarity of the exchanges listing financial institutions with the
nature of their respective businesses, the Commission has determined to
amend this Order to provide that the listing markets shall select the
individual financial institutions with securities covered by the Order.
The Commission expects each national securities exchange listing
financial institutions to immediately publish a list, on its Internet
Web site, of individual listed companies with common equity that will
be covered by the Order's prohibition on short sales. The Commission
expects these lists to cover banks, savings associations, broker-
dealers, investment advisers, and insurance companies, whether domestic
or foreign, and the owners of any of these entities.
To the extent an issuer chooses not to be covered by the Order's
prohibition on short sales, we have authorized the applicable national
securities exchange to exclude that issuer from its list of covered
financial firms.
It is therefore ordered that, pursuant to our Section 12(k)(2)
powers, the Order applies to the publicly traded common equity
securities of any issuer identified by any national securities exchange
listing such securities as being a financial institution (each a
``Covered Security'' and collectively, ``Covered Securities'').
B. Options and Futures Contract Expiration
The Order includes an exception from its requirements to allow
short sales that occur as a result of automatic exercise or assignment
of an equity option held prior to effectiveness of the Order due to
expiration of the option. We are amending the Order to also allow short
sales that occur as a result of the expiration of futures contracts
held prior to effectiveness of the Order.
It is therefore ordered that, pursuant to our Section 12(k)(2)
powers, the requirements of the Order shall not apply to any person
that effects a short sale in any Covered Security as a result of
automatic exercise or assignment of an equity option, or in connection
with settlement of a futures contract, that is held prior to
effectiveness of the Order due to expiration of the option or futures
contract.
C. Options Assignments
To allow for creation of long call options, we are amending the
Order to except from its requirements, short sales that occur as a
result of assignment to call writers upon exercise.
It is therefore ordered that, pursuant to our Section 12(k)(2)
powers, the requirements of the Order shall not apply to the writer of
a call option that effects a short sale in any Covered Security as a
result of assignment following exercise by the holder of the call.
D. Market Making and Derivatives
In the Order we included an exception until 11:59 p.m. on September
19, 2008 for any person that is a market maker that effects a short
sale as part of bona fide market making and hedging activity related
directly to bona fide market making in derivatives on the publicly
traded securities of any Included Financial Firm. We are amending the
exception so that it continues for the duration of the Order. In
addition, we are clarifying that the exception applies to all market
makers, including over-the-counter market makers, and that it applies
to bona fide market making and hedging activity related directly to
bona fide market making in exchange traded funds and exchange traded
notes of which Covered Securities are a component. The purpose of this
accommodation is to permit market makers to continue to provide
liquidity to the markets.
To help ensure that this hedging exception does not result in
increased short exposure in Covered Securities, we are limiting the
exception so that if a customer or counterparty position in a
derivative security based on a Covered Security is established after
12:01 a.m. E.D.T on September 22, 2008, a market maker may not effect a
short sale in the Covered Security if the market maker knows that the
customer's or counterparty's transaction will result in the customer or
counterparty establishing or increasing an economic net short position
(i.e., through actual positions, derivatives, or otherwise) in the
issued share capital of a firm covered by this Order.
It is therefore ordered that, pursuant to our Section 12(k)(2)
powers, the requirements of this Order shall not apply to any person
that is a market maker, including an over-the-counter market maker,
that effects a short sale as part of a bona fide market making and
hedging activity related directly to bona fide market making in (a)
derivative securities based on Covered Securities, or (b) exchange
traded funds and exchange traded notes of which Covered Securities are
a component. Provided, however, if a customer or counterparty position
in a derivative security based on a Covered Security is established
after 12:01 a.m. E.D.T on September 22, 2008, a market maker may not
effect a short sale in the Covered Security if the market maker knows
that the customer's or counterparty's transaction will result in the
customer or counterparty establishing or increasing an economic net
short position (i.e., through actual positions, derivatives, or
otherwise) in the issued share capital of a firm covered by this Order.
All market makers relying on this exception to the limitation on
short selling shall, as soon as operationally practicable, publish a
notice on their Internet Web site that, pursuant to this
[[Page 55557]]
Order, the market maker may not knowingly effect a short sale as part
of bona fide market making and hedging activity related directly to
bona fide market making in a derivative security based on a Covered
Security, if the customer's or counterparty's transaction will result
in the customer or counterparty establishing or increasing an economic
net short position (i.e., through actual positions, derivatives, or
otherwise) in the issued share capital of a firm covered by the Order.
E. Sales of Restricted Securities
We are also amending the Order to clarify that the Order does not
apply to persons that effect sales of Covered Securities pursuant to
Rule 144 of the Securities Act of 1933 (``Rule 144 Securities'').\3\
This accommodation is necessary because sales of Rule 144 Securities
are sales of owned securities.
---------------------------------------------------------------------------
\3\ 17 CFR 230.144.
---------------------------------------------------------------------------
It is therefore ordered that, pursuant to our Section 12(k)(2)
powers, the Order does not apply to any person that effects a sale
pursuant to Rule 144 of the Securities Act of 1933 (17 CFR 230.144) in
a Covered Security.
We believe that these amendments are necessary in the public
interest and for the protection of investors to maintain fair and
orderly securities markets, and to prevent substantial disruption to
securities markets.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-22502 Filed 9-24-08; 8:45 am]
BILLING CODE 8010-01-P
