United States SEC New Rules for Short Selling Transparency Approved
The U.S. Securities and Exchange Commission takes steps to make short selling clearer.
The U.S. Securities and Exchange Commission (SEC) is introducing new rules to bring more clarity to short selling, a way of betting against stocks. This has been a controversial practice, especially after the GameStop situation. These rules will make investors tell the SEC when they do short selling. Also, companies that lend out shares must tell the Financial Industry Regulatory Authority (FINRA), a group that makes sure brokers follow the rules.
Short selling is when people borrow stocks to sell them, hoping the price will go down. They then buy the shares back at a lower price and keep the difference. However, if the price goes up, they might lose a lot.
Some people think short sellers are trying to harm companies. Others believe they help find dishonesty and bad behavior in businesses.
When everyday people pushed up the price of GameStop's shares, it caused big losses for investment groups that had bet against the company. The head of the SEC, Gary Gensler, promised to make the market more transparent.
For a while now, the Justice Department and the SEC have been looking into possible trickery by short sellers and investment groups when they publish negative reports about companies.
Big investors will have to tell the SEC about their short positions every month. They will also have to report certain short activities on specific dates. This information will be published later, without revealing individual stock names.
Companies lending out stocks, as well as some broker-dealers, will need to share details about the loans. This includes information like the stock's name and amount, collateral, loan dates, and when the loan ends. This data will be shared by FINRA, but in a way that keeps it anonymous.
Some adjustments were made in the rule to address industry concerns. One change is that the release of loan amounts will be delayed by 20 business days.
These new rules will make it easier for the SEC to keep an eye on short-selling activities and ensure fair practices.
Predicting what could come next in rules for short selling and how it might affect the market.