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Strategies & Market Trends : Arbitrage Plays
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To: Allen Furlan who wrote (32)7/14/1999 4:32:00 PM
From: Q.  Read Replies (1) of 376
 
Allen, to answer some of your questions:

Discount brokers that allow shorting stocks below 5 include Schwab, Yamner, and Vanguard. I'm told DLJ direct allows shorting of stocks above 4. Probably there are more that I am unaware of.

Most brokers limit you to stocks above 5 because of their own house rule; I assume this is because cheaper stocks are more volatile and therefore an unhedged short position will leave you at greater risk for a margin call. I found Brown to be unfriendly to shorts because, at least at one time, they had house rules requiring a minimum 1000 shares to short stocks below about 10, and they also had a rule against shorting closed end funds (which are often useful for arb plays).

The time it takes after a co. files an S-3 prospectus until the SEC deems it effective varies from probably 3 weeks if they are lucky to many months if the co. is lazy and messed-up. It typically takes 3 weeks or more after the initial S-3 for the SEC either to deem it effective or more likely to send back comments. In the latter case the co. must prepare an amended S-3/a prospectus, which will take the co. time, then file it and wait at least a week before that is either deemed effective or the SEC gives the co. more comments. Nobody knows in advance how many iterations will be required until it is deemed effective. Moreover, there is no way for you to know if the SEC has yet deemed it effective, other than to call the co. and ask.
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