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SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

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security on each calendar day of the week, with a few exceptions, most notably<br />

that no filing is required unless the value of the short sale exceeds $10,000,000. 2<br />

2. Motivation for the Rule<br />

4. The interim final temporary rule was motivated by a concern that “some persons<br />

may manipulate the stock of issuers that have become temporarily weakened by<br />

current market conditions.” 3 In particular, the rule notes that short selling may<br />

exacerbate “unnecessary or artificial downward price movements.” 4<br />

5. One of the anticipated benefits of the rule is that “the Form SH disclosure will<br />

enable staff in our Office of Economic Analysis [“<strong>OEA</strong>”] and Office of<br />

Compliance, Inspections, and Examinations to analyze short selling patterns and<br />

use the data along with other information to study the impact of short selling on<br />

the market in times of financial crisis.” 5<br />

6. In particular, prior to the adoption of the rule, <strong>OEA</strong> staff had indicated that the<br />

data from Form SH could be used to provide:<br />

Basic information regarding the identities of short sellers. This data<br />

allows us to answer, at least in part, the question, “Who is short selling<br />

this security?” 6<br />

2 No Form SH filing is required when no short sales occurred during the week, or when all short sales and<br />

short positions are below the following thresholds: (a) The short sales and short positions are less than<br />

0.25% of that class of the issuer’s section 13(f) securities issued, and (b) The fair market value of the short<br />

sale and short position is less than $10,000,000.<br />

3 Federal Register, Vol. 73, No. 202, October 17, 2008, page 61686<br />

4 Federal Register, Vol. 73, No. 202, October 17, 2008, page 61686<br />

5 Federal Register, Vol. 73, No. 202, October 17, 2008, page 61687<br />

6 As noted by the exceptions to filing requirements above, our ability to identify shortsellers with these data<br />

is limited to 13F filers with large short positions.<br />

Privileged and Confidential – DRAFT DOCUMENT<br />

For Internal <strong>SEC</strong> Discussion Purposes Only<br />

Page 2<br />

<strong>SEC</strong>_<strong>OEA</strong>_<strong>FCIC</strong>_001874

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