May 10, 2009 (By
Peter Chepucavage)
From “Plexus Nexus”, by Peter Chepucavage
The elimination of the tick test is perhaps the most significant deregulation move in memory and should be done cautiously especially for the the smaller issuers and in light of the acknowledged current weaknesses of Reg. SHO –IASBDA COMMENT LETTER 12/19/06.
The Commission has proposed a reinstitution of the uptick and or circuit breaker rule 10 years from the date it first sought comments on eliminating the rule in its 1999 concept release and 2 years after it eliminated it. These rules are generally referred to as price tests. It is understandable why public pressure brings about this reversal, but we wish to focus on the uncertainty of price tests vs. the absolute certainty of a pre-borrow rule as explained in former Commissioner Campos letter of March 25,2009. The history of price tests shows that in good markets they are orphans but in bad markets they have many parents. We previously warned that the total removal of the tick test was neither required nor justified but our warnings were summarily rejected because in our view the policy was fixed in advance of the comments. In addition neither our comments or Amex’s are referenced in the current release so we are compelled to reference them.
In response to IASBDA’s comment regarding allowing issuers to have a choice as to whether or not they want their stock to be subject to a price test, we have determined not to take such action at this time. A primary goal of the amendments is to bring uniformity to, and simplify, short sale regulation. To allow issuers to have a choice as to whether or not their stock is subject to a price test would undermine this primary objective. In addition, we note that in the Proposing Release we specifically requested comment from issuers regarding their views of the impact of the proposed amendments on their securities.62 We did not, however, receive any comments from issuers. [entire post]
Tags: amex, circuit breaker, commissioner campos, fail position, hedge, iasbda, index(es), inspector general, leslie boni, listing, naked short selling, nscc, otcbb, pre-borrow, proposing release, reg sho, regulation(s), restriction(s), russell 3000, sec, shorting, small public compan(y)(ies), threshold security, tick test, uptick rule, volatility
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