“We are pleased that the SEC plans to go forward with the pilot,” said Ann Vlcek, an SIA vice president and associate general counsel, referring to the commission’s unanimous decision to lift short-selling restrictions on the shares of 1,000 companies included in the Russell 3000 index. “The SEC chose a thoughtful approach. We have maintained that a pilot enables all market participants to evaluate the most appropriate short-selling program that protects investors’ interests and contributes to the markets’ important function of determining the value of securities.”
Vlcek said the industry welcomed the commission’s retention of the existing short-sale rules for the remaining companies that are not participating in the pilot, rather than implementing a new test to determine whether an investor could sell stocks short.
“Deferring a decision on changes in the existing trading rules until after the pilot results are evaluated is prudent,” Vlcek said. “Had the SEC approved its initial proposal to change the rule for the shares of those companies that are not pilot participants, investors and the industry would have confronted considerable costs in reprogramming trading systems to comply with rules that conceivably could change after the pilot evaluation.”
Under the rule adopted today, the pilot program will begin in about six months and involve one-third of the Russell 3000 stocks (as the index will be reconstituted this Friday). The selections will be based on the average trading volume for companies in the index, using every third stock. The commission plans to announce shortly the specific stocks in the pilot.
Vlcek said the association will be studying the specifics of the proposed pilot, along with other provisions of the short-sale rule dealing with “locate and delivery” requirements. “We outlined our concerns in a comment letter,” she said. “We need to examine the final rule when it is published to see if our concerns have been addressed.”
SIA’s comment letter is available on the association’s Web site: http://www.sia.com/2004_comment_letters/pdf/SEC01-30-04.pdf.
