On February 24, 2010, the Securities and Exchange Commission (the “SEC”) adopted new short selling rules. The SEC adopted what is referred to as the “Alternative Uptick Circuit-Breaker”. Under this rule, if an equity security listed on a national market declines in price 10% or more in a day, a short sale may not be executed at a price at or below the national best bid price for the rest of that trading day and the following trading day.
During the open meeting, Chairman Schapiro stated that the new rule will limit the potential for abusive short selling. However, Commissioners Casey and Paredes stated that there was no evidence that short selling created the market volatility of last year, and they were unsure of how the new rules would increase investor confidence.