WASHINGTON (CN) – The Securities and Exchange Commission may use the “alternative uptick rule” in its amendments to Regulation SHO proposed in April, and requests public comment. This method would restrict short selling to a greater extent than the two proposed methods.
It may be easier to monitor, quicker to implement, and less costly because it would be easier to program into the trading computers, according to those who commented on the proposed rule.
The alternative price test is one that would allow short selling only at a price above the current national best bid. The test initially was not one of the proposed approaches, but four national securities exchanges, Goldman Sachs, the Securities Industry and Financial Markets Association, and others expressed an interest in its use.
According to the SEC, the alternative uptick rule would be similar to the proposed modified uptick rule in that both would use the current national best bid as a reference point for short sale orders. Unlike the proposed modified uptick rule (and the proposed uptick rule), however, the alternative uptick rule would not allow short selling at the current national best bid (or last sale price). Instead, in an advancing or declining market, the alternative uptick rule would only permit short selling at an increment above the current national best bid, unless an exception applies.
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