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Biotech / Medical : Biotech vs. Shorts
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To: Torben Noerup Nielsen who wrote (356)2/11/2000 9:08:00 AM
From: Biomaven  Read Replies (1) of 427
 
Torben,

UPC 11830:

A security becomes restricted pursuant to UPC 11830 when the total
number of shares that market participants have failed to deliver in that security
exceeds 0.5% of the total shares outstanding. In practice, securities with large
fail-to-deliver positions are difficult to borrow.

You can search for these at:

nasdaqtrader.com

Now what does this actually mean?

Here is one version:

In 1993, the U.S Securities and Exchange commission approved a new section of the uniform Practice Code (UPC) requiring NASD members to close out short sales in Nasdaq securities that meet a certain clearing short position threshold. Under the rules, the short seller's broker/dealer must close out a short sale of specific securities 10 days after the normal settlement date if delivery of the security has not occurred and the transaction is not exempt. Securities subject to the close-out requirement are those with an aggregate "clearing" short position of 10,000 shares or more that equals or exceeds one half of one percent of the total shares outstanding. The NASD will identify these securities daily.

Note that the short is not closed out immediately, only if they can't locate the shares within 10 days.

As I understand it, brokers typically have a "hard to short" list - if a security isn't on the list, some may let you short it without first actively locating shares to short. If it's UPC restricted, it automatically goes on the list, and the broker has to positively locate shares to short before letting you enter a new short position.

Incidentally, all real-time displays are required by NASDAQ rules to flag these UPC Restricted securities.

Peter
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