The SEC extended the date for compliance with amendments to Rules 201 and 200(g) of Regulation SHO to 2/28/11.  They had been slated to begin 11/10/10.  Rule 201 adopts a short sale-related circuit breaker that, if triggered, will impose a restriction on the prices at which securities may be sold short (“short sale price test restriction”).  Amendments to Rule 200(g) provide that a B/D may mark certain qualifying short sale orders “short exempt.” 

The Commission is extending the compliance date for the amendments to Rule 201 and Rule 200(g) to give certain exchanges additional time to modify their current procedures for conducting single-priced opening, reopening, and closing transactions for covered securities that have triggered Rule 201’s circuit breaker in a manner that's consistent with the goals and requirements of Rule 201.  The extension will give market participants additional time for programming and testing for compliance with the requirements of the Rule.

    Amendments to Rule 201.   Rule 201 requires, among other things, that a trading center establish, maintain, and enforce written pols and procedures to prevent the execution or display of a short sale order of a covered security at a price that is less than or equal to the current national best bid (NBB) if the price of that covered security decreases by 10% or more from its closing price.  Once the restriction is activated, trading centers must impose this short sale price test restriction for the remainder of the day and the following day when an NBB for the covered security is calculated and disseminated on a current and continuing basis by a plan processor pursuant to an effective national market system plan.

Part of the problem is that certain exchanges may encounter difficulties in applying Rule 201, which uses the NBB as a reference point, to their single-priced transactions.  These transactions involve the queuing and ultimate execution of multiple orders at a single price, and the single equilibrium price determined through this process is based on orders on the exchange, without any reference to the NBB at the time of execution. 

    Amendments to Rule 200(g).  These provide that broker-dealers may mark certain short sale orders “short exempt.”

For further details, click to access:   [ SEC PR 10-215, 11/4 ]   and  [ SEC Final Rule Rel. 34-63247, 11/4 ]