Kyle Siskey
Americas staff writer
In the past year investors saw as much flux in the US Securities and Exchange Commission's (SEC) short-selling rules as in the stock market. The SEC banned short selling; then it reinstated it with temporary disclosure rules; finally it practically outlawed naked short selling.
Now investors await new rules that seem certain to make short selling harder. And the convertible bond market, which relies on short-selling strategies to function, faces disruption. Not only will convertible investors (mostly hedge funds) lose out, but distressed companies will also lose a prime way to raise capital.
"You're looking at a major change to short-sale regulation," says Russell Sacks at Shearman & Sterling. "The adoption of close-out rules and a price-test rule are a wholesale change to short selling that's going to affect short and long-term convertibles."
The SEC's proposals include a circuit-breaker rule and the return of the up-tick rule...