A majority of the SEC’s five commissioners will vote today to temporarily restrict short sales of a company’s shares once it falls 10 percent, according to two people with direct knowledge of the rule. When the 10 percent threshold is triggered, traders could only execute short sales for the stock at a price above the market’s best bid, said the people, who declined to be identified before the decision.
There’s no evidence the SEC proposals will reduce abusive short selling or boost investors’ confidence, Paul Russo, the head of U.S. equities trading for Goldman Sachs, wrote in a September letter to the SEC. Bearish bets help expose fraud and prevent companies from becoming overvalued, he added, unless Goldman Sachs shares are being targeted. In the latter instance we recommend a complete moratorium on short selling and derivative bets.