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The morning of the conference, many STA members spent at an SEC roundtable providing comments and feedback to regulators on what would happen if the Uptick Rule was reinstated.
STA Chairman Peter Driscoll and STA President and CEO John Giesea delivered a letter on May 4 to SEC Chairman Mary Schapiro outlining an alternative Short Sale Circuit Breaker Proposal. The proposal can be viewed on the STA's web site.
The letter read:
Dear Commissioner Schapiro:
The Security Traders Association (STA) has been involved in the short sale discussions for decades. We have long respected short sales as a valid investment alternative. We have held equally strong support for strict enforcement of locate and delivery rules that service to eliminate illegal and abusive short selling, including naked shorts.
The current discussions on how to combat abusive short selling and the attributed volatility have been trading centric (trading triggers result in trading restrictions). We believe that the past 18 months have taught us that we need to think outside the box. The STA has communicated our concerns about "tick tests" and "bid tests" on many occasions in the past. We believe that price tests (such as the "bid tests" or "tick tests") have been rendered ineffective by structural changes to the markets and that price tests would be unable to dampen volatility even if they were to be reinstituted. It is the considered position of the Board of Directors of the STA that an objective means of establishing benchmarks for these tests does not exist in today-'s market structure.
We continue to believe that both tests are seriously flawed and if they were to be implemented gaming of these types o trading restrictions would become rampant again. Neither price test would represent any appreciable resistance for abusive short selling in downward spiraling issues and thus would be ineffective in solving the current quandary.
The STA believes that rules should be promulgated to control identifiable and measurable problems, and does not believe that reincarnating discredited regulations of yesteryear will position us top effectively compete in today's markets. In this vain the Security Traders Association has developed an alternative Short Sale Circuit Breaker Proposal.
