Experts Sound Off on SEC's Potential Curbs on Short-Selling
Dallas Morning News (TX) (04/15/09) Hall, Cheryl
The Securities and Exchange Commission (SEC) recently announced proposals to rein in short-selling by reinstating the uptick rule or setting up a circuit-breaker rule that halts short-selling after a stock's price has dipped 10 percent, and a number of experts weigh in on the value of such actions. Rebecca Szelc of Deloitte Financial Advisory Services says that "shoddy underwriting and lax risk-management practices," and not short-selling, were responsible for the dive that financial stocks took, but she acknowledges that the reinstatement of the uptick rule might help buoy the average investor psychologically. The idea that the uptick requirement or any combination of the SEC's proposals can restore confidence among investors is echoed by Commerce Street Capital President Dory Wiley, while Belmont Global Advisors Chairman John Boone says that short-selling ought to be regulated to keep abuses to a minimum, "but without restrictions which inhibit desirable practices." Texas Christian University professor Daniel Short opines that the circuit-breaker rule might allow the market to partition price movement fueled by trading strategies from ones driven by changes in company fundamentals. John Standerfer of S3 Matching Technologies contends that the SEC is incorrect in its thinking that short-sellers and not fundamentals were the cause of financial stocks' decline. "If there really are situations where undue short-selling pressure drove stocks down intentionally and unjustly, then by all means the SEC should do something to combat it," he notes. "But if that were the case, why haven't they provided any examples of this, and why didn't they present a single proposal designed to combat that scenario?"
