The U.S. Securities and Exchange Commission (SEC) has proposed a rule to increase the public availability of short sale data, providing greater transparency for investors and regulators.
The proposed rule would require certain institutional investment managers to report short sale related information to the SEC on a monthly basis. The Commission would then make aggregate data about large short positions, including daily short sale activity data, available to the public for each security.
“Proposed Rule 13f-2 would make aggregate data about large short positions available to the public for individual equity securities,” SEC Chair Gary Gensler said. “This would provide the public and market participants with more visibility into the behavior of large short sellers. The raw data reported to the Commission on a new Form SHO would help us to better oversee the markets and understand the role short selling may play in market events. It’s important for the public and the Commission to know more about this important market, especially in times of stress or volatility.”
The SEC would aggregate the resulting data by security, maintaining the confidentiality of the reporting managers. This new data would supplement the short sale data that is currently publicly available from FINRA and stock exchanges.
Further, the SEC voted to propose a new provision of Regulation SHO, Rule 205, which would establish a new “buy to cover” order marking requirement for broker-dealers. The proposed rule would require a broker-dealer to mark a purchase order as “buy to cover” if the purchaser has any short position in the same security when the purchase order is entered. This information will be especially useful to the SEC in reconstructing significant market events and identifying potentially abusive trading practices, including short squeezes.
In addition, the SEC voted to amend the national market system plan governing the consolidated audit trail (CAT). The amendment would require CAT reporting firms to report “buy to cover” information to CAT.