Sen. Kaufman was joined by Sen. Johnny Isakson (R-GA) in introducing the legislation, which directs the SEC to write regulations within 60 days that accomplishes five things to end abusive short selling:
(1) reinstate the substance of the uptick rule that prohibited short sales that are not made on an increase in the price of the stock; this prevents short sellers from piling on a declining stock, driving prices down.
(2) require exchanges and other trading venues to execute the trades of long sellers ahead of short sellers, all other things being equal.
(3) with the concurrence of the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System, prohibit short sales of the securities of any financial institution unless that trade is affected at a price (in minimum lots specified by the Commission) at least 5¢ higher than the immediately preceding transaction in such securities. Our financial sector, and financial stocks, are in a fragile state – and our taxpayers now hold substantial shares of many institutions. If the Treasury and Fed believe they need additional protection in these times, this legislation permits it.
(4) prohibit any person from selling securities short unless that person has at the time of the short sale a demonstrable legally enforceable right to deliver the securities at the required delivery date. Under current law, many short sellers fail to deliver – we must tighten up the rules.
(5) require that all short sales settle on the same time frame employed for long sales of the same securities. There is no reason short sellers should have 13 days to deliver shares when long sellers have only three days.