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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

SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

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10. Percentage of short positions captured: We compared the total short positions<br />

reported through Form SH for a specific security to the aggregate open short<br />

interest which is publicly reported on a twice-monthly basis. The median<br />

percentage of short positions captured through Form SH is 68%, a much higher<br />

percentage than the median short-selling volume.<br />

4. How can we use the data: Identifying potential violations<br />

11. Criteria: Using input from staff in the Division of Enforcement and the Office of<br />

Compliance, Inspections and Examinations, we developed a set of criteria to<br />

identify potential instances of manipulation and insider trading. These criteria<br />

include:<br />

where a filer has engaged in short selling prior to, or concurrent with, a<br />

significant drop in the stock price, and<br />

the filer’s short volume is a high percentage of the daily trading<br />

volume, and<br />

there is unusual volume, either for the security, or for the filer, and<br />

short selling occurred prior to a news release which was associated<br />

with a drop in the stock price. 11<br />

These criteria are combined into a scoring mechanism to identify cases of interest.<br />

12. Output: We developed computer programs to generate charts for specific filers’<br />

activity in specific securities that had generated a particularly high level of<br />

interest, based on the criteria identified above. Attached to this document are a<br />

11 In addition, this criterion requires that the short position remain open at the time of the disclosure.<br />

Privileged and Confidential – DRAFT DOCUMENT<br />

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

Page 4<br />

<strong>SEC</strong>_<strong>OEA</strong>_<strong>FCIC</strong>_001876

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