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Abstract: 

Regulation SHO1 requires broker-dealers to mark sales in all equity securities as long, short, or short exempt, and includes procedures for the Securities and Exchange Commission to suspend temporarily the operation of the current “tick” test and any short sale price test of any exchange or national securities association, for certain securities. The SEC is deferring consideration of replacing the tick test with a uniform bid test restricting short sales to a price above the consolidated best bid, and also deferring consideration of proposed exceptions to the uniform bid test. The final rule, released in August,2 does require short sellers in all equity securities to locate securities to borrow before selling and imposes additional delivery requirements on broker-dealers for securities in which a substantial number of failures to deliver have occurred. The SEC is also adopting amendments to remove the shelf offering exception.

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