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The U.S. Securities and Exchange Commission voted unanimously Wednesday to issue proposed curbs on short selling, including a return of the ''uptick rule'', for a 60-day public comment period.
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The five proposed measures would restrict a type of investing blamed by some lawmakers and executives for worsening the financial crisis and driving down share prices.
The uptick rule allowed short sales—a bet that a stock's price will fall—only when the last sale price was higher than the previous price.
Another proposal would only allow shorting if the best available bid was higher than the last bid.
Three other possible measures would use a circuit breaker approach to trigger a temporary suspension of short selling in a particular stock, or temporary application of the uptick or bid rule in a security.
Under one proposal, if a stock fell by 10 percent or some other amount, a circuit breaker would kick in and trigger the application of the "bid test.'' This approach has the support of the largest U.S. exchanges, the New York Stock Exchange, the Nasdaq Stock Market and BATS exchange.
Another circuit breaker proposal would ban short selling in a particular stock for the rest of the day once triggered. A third circuit breaker proposal would trigger the application of the uptick rule for the rest of the day.
SEC Chairman Mary Schapiro opened the meeting without tipping whether she definitely favors short-selling restrictions, but acknowledged investor concerns.
"Investors themselves feel less confidence in putting their capital in markets without additional restrictions on short selling,'' she said, adding the issue had generated more letters and comments in her short time as chairman than any other.
The SEC previously concluded that advances in the marketplace had rendered the uptick rule ineffective and abolished it in summer of 2007.
Kathleen Casey, one of the commissioners who voted to abolish the uptick rule, said she had not yet been persuaded that its repeal had anything to do with the economic and market conditions of the past 18 months.
The SEC said there will be an SEC roundtable discussion of the issues on May 5. Any final action is likely months away.
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