- SEC proposed new SRT Rule 13f-2, and corresponding Form SHO, require institutional investment managers to report short sale and related information on a monthly basis.
- SEC would then make aggregate data about large short positions, including daily short sale activity data, available to public for each individual security so more transparency.
- SEC also published fact sheet on proposed enhancements to short sale disclosures.
- Related CAT revisions; reopen of comments on securities loans.
Proposed Rule 13f-2 and Proposed Form SHO
- Rule 13f-2 designed to provide greater transparency via publication of short sale data.
- By requiring manager to file report in structured data language, using two information tables on proposed Form SHO; managers would file proposed Form SHO in EDGAR.
- Must publish within 14 calendar days after end of each calendar month for each equity security that manager and all accounts over which manager has investment discretion.
- For each equity security in which manager meets reporting threshold, required to file proposed Form SHO via EDGAR within 14 calendar days after end of calendar month.
- Public disclosure of certain short sale information at minimum will occur every month.
- Consistent with Reg SHO, proposed Rule 13f-2 would apply to equity securities.
- As such, short selling related data that would be published would provide additional context to market participants on equity securities subject to Reg SHO requirements.
Potential Alternative Approach
- Proposed Rule 13f-2 would require manager provide identifying information including name and active LEI, if manager has an active LEI, when filing Proposed Form SHO.
- SEC seeks comment on alternative approach regarding how the information reported on proposed Form SHO by reporting managers would be published by the Commission.
- Under this alternative approach, SEC would not alter proposed reporting thresholds or information that would be reported by reporting manager on proposed Form SHO.
- Information reported by manager on proposed Form SHO would be published as it is reported, and would not be aggregated with information reported by other managers.
- Reported information would therefore be published at the individual manager level, rather than aggregated across all reporting managers prior to publication.
- Reporting manager identifying information, including name and active LEI, if manager has active LEI, would be removed in an effort to anonymize the information published.
Reg SHO to Aid Short Sale Data (Buy to Cover)
- Proposed new Rule 205 of Reg SHO, would collect more data on lifecycle of short sales.
- Establish new buy to cover order marking requirement for certain purchase orders by broker-dealer for own account or the account of another person at the broker-dealer.
- B/D required to mark purchase order as buy to cover if, at order entry, purchaser has gross short position in security in specific account for which purchase made at B/D.
- Must mark purchase order as buy to cover regardless of size of such purchase order in relation to size of purchaser’s gross short position in such security in the account.
- Regardless if gross short position offset by long position held in purchaser’s account.
- SEC believes buy to cover order marking data provide additional context on lifecycle of short sales by identifying timing of purchases that close out open short positions.
- To reduce burden, cost, require B/D to determine only if purchase made for account at B/D that has gross short position in equity security in that account at time of purchase.
- Buy to cover likely create programming costs, ongoing costs with order marking.
- Such order mark determination distinct from that made by B/D on existing order marking systems designed for compliance with Reg SHO Rule 200 (17 CFR 242.200).
- Thus, must update systems, processes to account for compliance with new Rule 205.
- Chair Gensler issued statement, support proposal; if adopted, would strengthen transparency of area of markets that would benefit from greater visibility, oversight.
- Commissioner Peirce statement, looks forward to comment on proposed framework.
- Comments on due later of 30 days after publish in federal register or 26 April 2022.