SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

Reg SHO Pilot Report 2/12/2007
Before comparing the Pre-Pilot Period to the Pilot Period, we first examine whether the
pilot and control samples appear comparable over the Pre-Pilot Period. Table 2 gives this
comparison separately for Listed and Nasdaq NM Stocks. The statistics are daily levels
averaged over the Pre-Pilot Period. We use trade and quote data obtained from the Securities
Industry Automation Corporation (SIAC) to estimate stock volume, price, spread, depth, and
intraday returns, data from the Center for Research in Securities Prices (CRSP) to estimate
market capitalization and daily returns, data from the Option Price Reporting Authority (OPRA)
to estimate option volume and open interest, and the SRO Pilot data to estimate short selling
levels. 47 Short interest, reported monthly, comes from the NYSE, Amex, and Nasdaq. Most of
the measures in Table 2 are qualitatively similar for pilot and control stocks, according to a
statistical t-test run at the 95% and 99% confidence levels (also stated as 5% and 1% significance
levels). This evidence suggests that the two groups are a good match and supports the validity of
further comparison of pilot and control stocks.
The statistics of Table 2 are divided into groups. The first group of statistics measures
general stock characteristics such as volume, price, market capitalization, and short interest. The
first three rows of Table 2 show that the pilot stocks have similar average volume to the control
stocks whether volume is measured by the number of trades per day, the average daily share
volume, or turnover. The average volume-weighted average price (VWAP) and average market
capitalization diverge slightly. For both Listed and Nasdaq NM Stocks, the VWAP is higher for
pilot stocks but the market capitalization is lower. Neither difference is statistically significant.
47 The SRO Pilot data refers to the short selling records available from each of nine markets: American Stock
Exchange, Archapelago Exchange (now a part of NYSE Group), Boston Stock Exchange, Chicago Stock Exchange,
NASD, NASDAQ Stock Market (now NASDAQ Stock Exchange), New York Stock Exchange (now a part of
NYSE Group), National Stock Exchange, and the Philadelphia Stock Exchange. This analysis aggregates the short
selling data without regard to whether there exists a SIAC report for the short sale transaction.
Prepared by the Office of Economic Analysis 25