Short selling under rule 3210.
HFBV is under rule 3210 if you did not notice.
Regulation SHO Threshold List for Pink Sheet Stocks Available Beginning July 11th
The new NASD Rule 3210 applies a delivery framework to non-SEC reporting OTC equity securities substantially similar to the Regulation SHO delivery framework. Rule 3210 requires clearing agency participants to close out all failures to deliver in non-SEC reporting threshold securities that have existed for 13 consecutive settlement days.
On July 3, 2006, NASD will begin to calculate whether securities qualify as non-SEC reporting threshold securities, and July 11, 2006 is the first day for which NASD will provide a non-SEC reporting threshold list. Until a security appears on a non-SEC reporting threshold list for 13 consecutive settlement days and an open fail position for such security exists for that same period, Rule 3210 does not require a broker-dealer to close out the open fail position. Therefore, the first day on which a close-out action would be required under Rule 3210 is July 28, 2006.
For purposes of Rule 3210, a non-SEC reporting threshold security is any equity security that is not an SEC reporting security and, for five consecutive settlement days, has:
* aggregate fails to deliver at a registered clearing agency of 10,000 shares or more; and
* a reported last sale during normal market hours (9:30 a.m. to 4 p.m., ET) for the security on that settlement day that would value the aggregate fail to deliver position at $50,000 or more.
If the fail to deliver position is not closed out in the requisite time period, a clearing agency participant or any broker-dealer for which it clears transactions would be prohibited from effecting further short sales in the particular specified security without borrowing, or entering into a bona-fide arrangement to borrow, the security until the fail to deliver position is closed out. To the extent that the participant can identify the broker-dealer(s) that have contributed to the fail to deliver position, the requirement to borrow or arrange to borrow prior to effecting further short sales may apply only to those particular broker-dealers to which the participant has allocated such fail to deliver position.
To be removed from the Rule 3210 Threshold Securities List, a security must not meet either of the threshold tests in Rule 3210 for five consecutive settlement days.
September 21, 2007
FINRA Changes to Short Sales Delivery Requirements
Executive Summary of Notice to Members 07-45, Short Sale Delivery Requirements:
FINRA is issuing this Notice to advise firms and other interested parties of changes to NASD Rule 3210 (Short Sale Delivery Requirements) to conform with amendments to the SEC's Regulation SHO delivery requirements.
Beginning on October 15, 2007, firms are required to close out within 35 consecutive settlement days any previously "grandfathered" fail-to-deliver positions in a non-reporting threshold security1 that is on the Rule 3210 threshold list on that date. Any new fails in a non-reporting threshold security after October 15, 2007 will be subject to Rule 3210's 13 consecutive settlement day close-out requirements. There is, however, one exception; as of October 15, 2007, firms will have 35, rather than 13, consecutive settlement days to close out fails to deliver resulting from sales of non-reporting threshold securities pursuant to SEC Rule 144.
