By Nathaniel Luce
Publication: THE DEAL.COM
Market participants are bracing for the extension of temporary limits on “naked” short selling. Limits on shorting stocks of 19 financial companies were initiated by an emergency order last week and are set to expire at midnight Tuesday, July 29. It is expected that regulators will not only extend the order’s life but possibly expand it to the rest of the market.
The Securities and Exchange Commission has said the order could be extended for 30 calendar days if it determines that it is necessary for the public interest and to protect investors. If that happens, the order would be effective through Aug. 20.
Short sellers, in particular hedge funds, are not pleased with the prospects of extending and expanding the order. The Managed Funds Association, a Washington-based group representing hedge funds, and the Coalition of Private Investment Companies have been urging the SEC not to extend the emergency order or the list of designated securities.
HANS STOLL, a finance professor and director of the financial markets research center at the Vanderbilt Owen Graduate School of Management, agreed that the emergency order should expire. “Short sellers are an important part of an orderly market and making policy on the fly” is never a good idea, he said.
