Certain amendments to the Securities and Exchange Commission’s Regulation SHO delivery requirements become effective on October 15. The amendments eliminate the “grandfather” provision contained in Rule 203(b)(3)(i) of Regulation SHO and extend the close-out requirement from 13 to 35 consecutive settlement days for fails to deliver resulting from sales of threshold securities pursuant to SEC Rule 144.

The “grandfather” provision previously excluded from the Regulation SHO close-out requirement fail-to-deliver positions that (i) occurred before the January 3, 2005 Regulation SHO effective date, and (ii) were established on or after January 3, 2005, but prior to the security appearing on the Regulation SHO threshold securities list. If the fail-to-deliver position has persisted for 35 consecutive settlement days from October 15, 2007, the clearing firm, including market makers, are prohibited from accepting any short sale orders or effecting further short sales in the particular non-reporting threshold security without borrowing, or entering into a bona fide arrangement to borrow, the security until the participant closes out the entire fail-to-deliver position by purchasing securities of like kind and quantity.