Short Sale Pilot Program to Go Into Effect Monday May 2
April 28, 2005
On June 24, 2004, the United States Securities and Exchange Commission ("the Commission") adopted Regulation SHO (Release No. 34-50103). As part of Regulation SHO, the Commission will commence a one year pilot program to determine whether to discontinue, in part or in whole, the "tick" test found in Rule 10a-1(a) under the Securities Exchange Act of 1934, which allows short selling in a security only if the last prior sale of the security was at the same or higher price.
Beginning May 2, 2005 and ending on April 28, 2006, all securities will fall into one of three categories to determine whether short sale restrictions will apply to a trade. A brief description of the categories follows.
Category A—No Tick Test During Market Hours—Russell 3000 Index Securities
A subset of securities found on the Russell 3000 Index will be tradable without regard to the tick test or any SRO short sale price test during market hours. The list of these securities may be found at http://www.sec.gov/spotlight/shopilot/currentpilota41305.txt.
Category B—No Tick Test after 4:15 pm—Russell 1000 Index Securities
From 4:15 pm until the open of the consolidated tape the following morning (4:00 am), all securities found on the Russell 1000 Index will be tradable without regard to price test restrictions. The list of these securities may be found at http://www.sec.gov/spotlight/shopilot/currentpilotb41305.txt .
Category C—No Tick Test in After Hours Trading—All Other Securities
For all securities other than the Category A and Category B securities discussed above, price test restrictions with regard to short selling will be removed from the close of the consolidated tape (8:00 pm) until the open of the tape the following morning.
For further questions regarding the operation of Regulation SHO and its application to trading practices, please contact Maria Gabriela Bianchini at +1 212.756.2214.