Amendments to Regulation SHO
The Securities and Exchange Commission (``Commission'') is proposing amendments to Regulation SHO under the Securities Exchange Act of 1934 (``Exchange Act''). We are proposing two approaches to restrictions on short sellingone is a price test that would apply on a market wide and permanent basis (``short sale price test'' or ``short sale price test restriction'') and one that would apply only to a particular security during severe market declines in that security (``circuit breaker''). With respect to the first approach, we propose two alternative short sale price tests: One based on the national best bid and the second based on the last sale price. With respect to the second approach, we propose two basic alternatives: One alternative is a circuit breaker rule that would temporarily prohibit short selling in a particular security when there is a severe decline in the price of that security (a ``halt''), which could operate in place of, or in addition to, a short sale price test rule; and the second alternative is a circuit breaker rule that would trigger a short sale price test rule; we propose that such a short sale price test either be based on the national best bid for any security for which there has been a severe price decline or be based on the last sale price for any security for which there has been a severe price decline.