U.S. Senators Johnny Isakson, R-Ga., and Saxby Chambliss, R-Ga., yesterday sent a letter to Securities and Exchange Commission Chair Mary Schapiro urging the SEC to reinstate some form of the "uptick rule" at its meeting on April 8 and promulgate clear regulations to end abusive short selling. The letter states Congress will be compelled to act if the SEC does not act on the issue.
"Our stock market still languishes today somewhere down near what we hope is the bottom," Isakson said. "One way to ensure that bottom exists is to stop rewarding those who would feed off of it and instead reinstate good discipline that ensures good practices and allows the market to restore itself back to a good equilibrium."
"Reinstating the uptick rule is critical to stopping the artificial manipulation of stock prices and will help restore confidence in the market," said Chambliss. "Protecting against exploitation of market declines is paramount to the stabilization of our economy."
Sens. Ted Kaufman, D-Del., Jon Tester, D-Mont., Carl Levin, D-Mich., and Arlen Specter, R-Pa., joined Isakson and Chambliss on the letter. The full text of the letter is attached.
Isakson and Chambliss are also co-sponsoring legislation with Kaufman that directs the SEC to write regulations within 60 days to end abusive short selling. These regulations must reinstate the substance of the uptick rule that prohibited short sales that are not made on an increase in the price of the stock as well as require exchanges and other trading venues to execute the trades of long sellers ahead of short sellers, all other things being equal.
With the concurrence of the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System, the bill also directs the SEC to prohibit short sales of the securities of any financial institution unless that trade is affected at a price (in minimum lots specified by the Commission) at least 5 cents higher than the immediately preceding transaction in such securities.
Additionally, the legislation directs the SEC to prohibit any person from selling securities short unless that person has at the time of the short sale a demonstrable legally enforceable right to deliver the securities at the required delivery date and require that all short sales settle on the same time frame employed for long sales of the same securities.