New SEC Short Sale Regulations – Is Your House In Order?

Now available, please download the full transcript of the discussion with Robert Sloan provided by GLG.

The Securities and Exchange Commission (SEC) has implemented new rules affecting both buy-side and hedge funds, focusing on short sale reporting and securities lending. These rules aim to enhance transparency, requiring daily reporting and full transparency after 20 days. Short sale durations will shorten, impacting liquidity windows and changing historical short-side profit strategies. Reporting thresholds are stringent and missing them mandates daily reporting. The regulations pose challenges for factor-driven investors and raise concerns about mismatches in reporting due to quicker disclosure. The changes may drive increased interest in swap-based shorts, impacting market dynamics and potentially leading to increased volatility. However, the jury is still out on whether these changes will ultimately improve the market. The SEC is also implementing rules on borrowing fees, adding complexity to compliance for the buy side. Managers are advised to prepare by understanding the rules, consulting compliance experts, and engaging with relevant services. Overall, the impact of these regulations on shorting practices remains uncertain, with potential opportunities and challenges emerging in the evolving financial landscape.

Follow along in the transcript as Bloomberg’s Larry Tabb leads a discussion with S3’s Robert Sloan on:

• • Rationale and impetus of the SEC transparency regulations
  • Overview of the new rules and timelines for implementation
  • Industry winners and losers, and best practices for investors and banks to ensure compliance

Robert Sloan
Founder & CEO of S3 Partners, Author of “Don’t Blame the Shorts” & 2022 Emmy Award Nominee for “Eat the Rich: The GameStop Saga”

Larry Tabb (Moderator)
Director of Market Structure Research at Bloomberg & Founder of TowerGroup’s Securities & Investments Practice