Whenever SEC Chairman Christopher Cox speaks, we just have to get under our desks to hide. It’s like the old “duck and cover” reflex from our childhood war days kicks back in. So, if we correctly understand the methodology behind his latest move to change short-selling rules, Cox isn't opposed to legitimate short selling, but he is opposed to “unlawful manipulation through 'naked' short selling” that might undermine the stability of financial institutions. OK, fine. But if it’s now being acknowledged that no such uptick in naked short selling took place isn’t that sort of the same thing as admitting this particular emergency action is toothless?
The federal crackdown on short selling is causing a scramble on Wall Street, with brokerage firms racing to implement new controls before the rules take effect on Monday.
The unprecedented get-tough action by the Securities and Exchange Commission means that securities firms will have to fine-tune their back-office operations to comply with the requirements.
The biggest potential headache: Existing rules allow brokers to sell stock short as long as they reasonably believe they can locate the needed shares and deliver them on time. Under the new curbs, short sellers will need to make formal arrangements to borrow the shares before selling them.
"You need to have certainty that you have the stock," one Wall Street executive said Wednesday.
The mechanics of such arrangements, as well as the charges likely to be levied for the extra legwork, are still being discussed. Wall Street brokerage executives held a conference call Wednesday morning with the Securities Industry and Financial Markets Association, a trade group, to discuss how to respond to the SEC's new rules and seek clarification from the agency.
SEC Chairman Christopher Cox acknowledged that the crackdown will create additional work for brokerage firms, though he said he sees "no obstacles to implementation." Agency officials delayed the effective date of the stricter short-selling requirements to "provide appropriate operational relief to the exchanges," he added.
The unprecedented get-tough action by the Securities and Exchange Commission means that securities firms will have to fine-tune their back-office operations to comply with the requirements.
The biggest potential headache: Existing rules allow brokers to sell stock short as long as they reasonably believe they can locate the needed shares and deliver them on time. Under the new curbs, short sellers will need to make formal arrangements to borrow the shares before selling them.
"You need to have certainty that you have the stock," one Wall Street executive said Wednesday.
The mechanics of such arrangements, as well as the charges likely to be levied for the extra legwork, are still being discussed. Wall Street brokerage executives held a conference call Wednesday morning with the Securities Industry and Financial Markets Association, a trade group, to discuss how to respond to the SEC's new rules and seek clarification from the agency.
SEC Chairman Christopher Cox acknowledged that the crackdown will create additional work for brokerage firms, though he said he sees "no obstacles to implementation." Agency officials delayed the effective date of the stricter short-selling requirements to "provide appropriate operational relief to the exchanges," he added.
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