SHO list implemented by SEC to tighten rules on short selling

The implementation of Regulation SHO was put in place by the Securities and exchange Commission (SEC) to create a rule to of addressing continual failures to deliver stock on trade-settlement dates and to target potentially abusive naked short-selling in equity securities.

This comes at the U.S. financial sector is going through one of its biggest shake-ups in financial history, after the collapse of Lehman Brothers, the government bailout of AIG and possible takeover of HBOS.

The New York Stock Exchange and the Nasdaq compiled a list of “threshold securities,” on Tuesday which is the latest list that reveals that a large range of stocks across a number of industries have been subject to higher-than-normal trade-settlement failures, both markets had to do this as part of the regulation SHO.

If stocks have five or more consecutive days of abnormally high delivery failures they have to be identified as threshold securities. Regulation SHO is used when the level of fails-to-deliver is so great that it could affect the market for that particular security according to the SEC. Although reports show that most trades do settle on time.

Read the full article in thestreet