The Securities and Exchange Commission today held its first policymaking session of the year, and under political pressure, introduced several proposals to restrict the short-selling of stock that many economists, including those inside the agency, say are likely to have little effect.
A number of financial firm executives, investors and lawmakers have blamed aggressive short-selling for collapsing the stocks of banks and other Wall Street companies last fall. In a short sale, traders make money when a firm's shares decline in value.
Today's meeting, the first held under new SEC chairman Mary Schapiro, examined several proposals to curb short sales. The commission formalized the proposals, and will allow for 60 days of comment before deciding to vote on whether to implement them.
The proposals would make it more difficult for short sellers to push down a stock's price when it is already declining. One way to do so would be to allow speculators to bet against a stock only when it moves at a higher price than its last trade. On any given day, a stock may trade more than tens of thousands of times.
A more dramatic proposal would ban short-selling in a stock if it has declined by a set percentage in a day.
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