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Strategies & Market Trends : Trade/Invest with Options Jerry a Point & Figure Chartist -- Ignore unavailable to you. Want to Upgrade?

To: YourKing who wrote (3251)	8/21/2001 12:23:25 AM
From: Luce Wildebeest	Respond to of 5893

Check this out.... SEC Studies Lifting Ban on Selling Short When Prices Falling New York, Aug. 17 (Bloomberg) -- The Securities and Exchange Commission may allow short selling when share prices are falling, repealing a prohibition adopted in the agency's earliest days to prevent a rerun of the 1929 crash. SEC regulations bar short sales -- selling borrowed shares with the aim of replacing them later at a lower price -- when a stock's last move was a ``downtick,'' or drop. The rules were written to keep short sellers, who profit from declining prices, from accelerating a stock's decline. The SEC staff is preparing a proposal to temporarily exempt the most active stocks from the short sale rule as a test of whether it should be permanently eliminated or altered. Mary Bender, regulatory chief of the Chicago Board Options Exchange, said she expects the test to include 100 to 150 stocks. ``If you start with the most active stocks that are the least susceptible to manipulation, you can get a good sense of whether the doomsayers are right,'' she said. Larry Bergmann, the SEC's senior associate director of market regulation, declined to provide specifics about the plans. ``We're preparing proposals to modernize short sale regulations,'' he said. To take effect, any proposal by the SEC staff must be backed by the commission and circulated for public comment. SEC Chairman Harvey Pitt couldn't be reached for comment. Hurts Hedging The CBOE, some brokerages and the Managed Funds Association, a hedge fund trade group, have told the SEC they want the 63-year- old short sale rule modified. They say it hampers hedging -- selling short to protect portfolios from market declines -- as well as arbitrage, or trading to profit from discrepancies between related securities or markets. The New York Stock Exchange said it wants the rule preserved because it prevents manipulation and fraud. The Nasdaq Stock Market, which isn't covered by the SEC regulation, adopted its own short sale rule in 1994 and wants to maintain it in part because it's popular with companies that trade on the electronic market. Short sales are bets that a stock will decline, and can push down a stock price if sellers overwhelm buyers. Shorting isn't a sure thing, though: buying back the stock can lift a thinly traded issue higher. In 2000, NYSE short sales accounted for 11 percent of Big Board volume. ``It carries a negative connotation, because people don't like it when stock prices go down,'' said Greg Rogers, head trader at Aronson & Partners, a Philadelphia money management firm that oversees $5 billion. In the aftermath of the 1929 crash, President Herbert Hoover and much of Congress and Wall Street blamed organized short selling for worsening the panic. In the 34 months ending in July 1932, NYSE prices fell 83 percent. General Electric Co. tumbled from 396 1/4 to 8 1/2. Otto Kahn, a partner with Kuhn, Loeb, one of the largest investment banks at the time, testified in a congressional hearing that shorting was ``inherently repellent to a right-thinking man'' and a ``social evil.''