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SEC Staff Recommends Extending Option Market-Maker Exception
09/19 4:25 am (ON)
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By Judith Burns

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The Securities and Exchange Commission staff is recommending the commission modify its temporary ban on short sales in 799 financial stocks to exempt option market makers for the duration of the ban.

An SEC emergency order banning short sales in designated stocks took effect Friday, but the SEC exempted option market makers from it for the day, citing the expiration of September options contracts. Options market makers had raised concerns about the ban. In an announcement Friday afternoon, the SEC's staff said it will recommend that options market makers remain exempt from it as long as the ban is in effect. The ban, set to run for 10 days, could be extended for up to 30 calendar days.

If the commission agrees with the staff's proposed change, the short-sale ban would not apply to hedging activities by exchange and over-the-counter market makers in derivatives on the 799 financial stocks targeted by the ban, the SEC said.


Short-sellers seek to profit from stock price declines by borrowing shares for sale and replacing them later at a lower price. The practice is legal but the SEC issued an emergency ban on short sales for publicly traded banks, insurance companies and other financial firms, citing concerns that short selling might be causing "excessive fluctuations" in stock prices that threaten fair and orderly markets.

-By Judith Burns, Dow Jones Newswires; 202 -862 -6692; [e-mail]

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(END) Dow Jones Newswires

09 -19 -08 1625ET

Copyright (c) 2008 Dow Jones & Company, Inc.

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