This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

42033 

Vol. 74, No. 160 

Thursday, August 20, 2009 

1See Proposal, 74 FR 18042. 

2See id. 

3See id. 

4See Proposal, 74 FR at 18072, 18081, 18082. 

5See id. 

6The full text of comments to the Proposal, 

including the text of standard letter types and a 

petition, is publicly available at: http:// 

www.sec.gov/comments/s7-08-09/s70809.shtml. 

7See letter from Glen Shipway, dated June 19, 

2009. 

8See letter from Erik Swanson, SVP and General 

Counsel, BATS Exchange, Inc., dated May 14, 2009 

(‘‘BATS’’); letter from Johnny Peters, ChFC, dated 

May 20, 2009; letter from Dan Mathisson, Managing 

Director, Credit Suisse Securities (USA), LLC, dated 

June 16, 2009 (‘‘Credit Suisse’’); letter from Ira D. 

Hammerman, Senior Managing Director and 

General Counsel, SIFMA, dated June 19, 2009 

Continued 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 242 

[Release No. 34–60509; File No. S7–08–09] 

RIN 3235–AK35 

Amendments to Regulation SHO 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule; notice of reopening of comment period and 

supplemental request for comment. 

SUMMARY: The Securities and Exchange 

Commission is re-opening the comment 

period to the ‘‘Amendments to 

Regulation SHO’’ it proposed in 

Securities Exchange Act Release No. 

59748 (Apr. 10, 2009), 74 FR 18042 

(Apr. 20, 2009) (the ‘‘Proposal’’). As a 

supplement to our request for comment 

on the Proposal, we are soliciting 

additional feedback regarding an 

alternative price test, on which we 

solicited comment in the Proposal, that 

would allow short selling only at a price 

above the current national best bid (the 

‘‘alternative uptick rule’’). We are 

publishing this supplemental request for 

comment and reopening the comment 

period to help ensure that the public has 

a full opportunity to provide comments 

on the alternative uptick rule. 

DATES: Comments should be received on 

or before September 21, 2009. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/proposed.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–08–09 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–08–09. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. We will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/proposed.shtml). Comments are 

also available for public inspection and 

copying in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549 on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; we do 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 

FOR FURTHER INFORMATION CONTACT: Jo 

Anne Swindler, Acting Associate 

Director; Josephine J. Tao, Assistant 

Director; Victoria Crane, Branch Chief; 

or Katrina Wilson, Staff Attorney, 

Division of Trading and Markets, at 

(202) 551–5720, at the Commission, 100 

F Street, NE., Washington, DC 20549– 

6628. 

SUPPLEMENTARY INFORMATION: On April 

8, 2009, we proposed to re-examine and 

seek comment on whether to impose 

price test restrictions or circuit breaker 

restrictions on short selling.1 The 

Proposal was published for comment on 

April 20, 2009 and the comment period 

initially closed on June 19, 2009.2

I. Introduction 

In the Proposal, we proposed two 

approaches to restrictions on short 

selling: one that would apply on a 

market-wide and permanent basis 

(‘‘short sale price test’’ or ‘‘short sale 

price test restriction’’) and one that 

would apply only to a particular 

security during a severe market decline 

in the price of that security (‘‘circuit 

breaker’’).3 With respect to the first 

approach, we proposed two alternative 

short sale price tests: one based on the 

current national best bid (the ‘‘proposed 

modified uptick rule’’) and the second 

based on the last sale price (the 

‘‘proposed uptick rule’’). With respect to 

the second approach, we proposed two 

alternative circuit breaker tests: one that 

would temporarily prohibit short selling 

in a particular security when there is a 

severe decline in the price of that 

security; and one that would 

temporarily impose either the proposed 

modified uptick rule or the proposed 

uptick rule on short sales in a particular 

security when there is a severe decline 

in the price of that security. Although 

we sought comment on the alternative 

uptick rule, it was not one of the 

proposed approaches. 

The Proposal sought comment on all 

aspects of the proposed approaches to 

restrictions on short selling. Among 

other things, the Proposal inquired 

whether the alternative uptick rule, 

which would permit short selling at a 

price above the current national best 

bid, would be preferable to the proposed 

modified uptick rule and the proposed 

uptick rule.4 We sought comment 

regarding the application of the 

alternative uptick rule as a market-wide 

permanent price test restriction or in 

conjunction with a circuit breaker.5 We 

have received almost 4,000 unique 

comment letters in response to the 

Proposal, as well as over 250 copies of 

4 different standard letter types, and a 

petition with 5,605 signatures.6 We have 

received one comment letter that 

favored adoption of the alternative 

uptick rule on a market-wide permanent 

basis.7 Six commenters who stated that 

there is not any need for the 

Commission to enact any further 

restrictions on short selling expressed 

support for applying the alternative 

uptick rule in combination with a 

circuit breaker if some form of a price 

test were to be instituted.8 One 


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42034 Federal Register / Vol. 74, No. 160 / Thursday, August 20, 2009 / Proposed Rules 

(‘‘SIFMA’’); letter from Paul M. Russo, Managing 

Director, Head of U.S. Equity Trading, Goldman, 

Sachs & Co., dated June 19, 2009 (‘‘Goldman 

Sachs’’); letter from Eric W. Hess, General Counsel, 

DirectEdge, dated June 23, 2009. In addition, we 

note that prior to the Commission issuing the 

Proposal, four exchanges, NYSE Euronext, The 

Nasdaq OMX Group, Inc., BATS Exchange, Inc., 

and National Stock Exchange (the ‘‘national 

securities exchanges’’), submitted a comment letter 

recommending a circuit breaker combined with a 

price test that would allow short selling only at an 

increment above the current national best bid, like 

the alternative uptick rule. NYSE Euronext, in its 

subsequent comments, stated that it supported the 

proposed modified uptick rule rather than the 

position expressed in the earlier March 24, 2009 

letter. See statement of Larry Leibowitz, Group 

Executive Vice President and Head of Global 

Technology and US Execution, NYSE Euronext, 

dated May 5, 2009 (‘‘statement of NYSE Euronext’’); 

letter from Janet M. Kissane, Senior Vice President, 

Legal and Corporate Secretary, NYSE Euronext, 

dated June 19, 2009 (‘‘NYSE Euronext’’). 

9See statement of NYSE Euronext; letter from 

NYSE Euronext. 

10See Unofficial Copy of Roundtable Transcript 

available at http://www.sec.gov/spotlight/ 

shortsales.htm. (the following individuals 

commented on the alternative uptick rule during 

the roundtable: Richard Ketchum, Chairman and 

CEO, FINRA; Dan Mathisson, Managing Director, 

Credit Suisse Securities (USA) LLC; Lawrence 

Leibowitz, Group Executive Vice President, Head of 

US Markets and Global Technology, NYSE 

Euronext; and Dr. Frank Hatheway, Chief 

Economist, Nasdaq OMX Group). 

11See Proposal, 74 FR at 18072, 18081, 18082. 

12See infra discussion in Section II.B., 

‘‘Exceptions.’’ 

13See, e.g., letter from SIFMA. 

14See, e.g., statement from NSYE Euronext; letter 

from Credit Suisse; letter from SIFMA; letter from 

Glen Shipway; letter from Goldman Sachs. 

15See, e.g., letter from BATS; letter from Glen 

Shipway. 

16See, e.g., letter from the national securities 

exchanges; letter from Glen Shipway; letter from 

Goldman Sachs. 

17See, e.g., Securities Exchange Act Release No. 

54891 (Dec. 7, 2006), 71 FR 75068, 75069 (Dec. 13, 

2006); Securities Exchange Act Release No. 48709 

(Oct. 28, 2003), 68 FR 62972, 62974 (Nov. 6, 2003); 

Securities Exchange Act Release No. 29278 (June 7, 

1991), 56 FR 27280 (June 13, 1991); Securities 

Exchange Act Release No. 50103 (July 28, 2004), 69 

FR 48009, n. 6 (Aug. 6, 2004); Boehmer, Ekkehart 

and Wu, Julie, Short Selling and the Informational 

Efficiency of Prices (Jan. 8, 2009). 

18A ‘‘trading center’’ means a national securities 

exchange or national securities association that 

operates a self-regulatory organization trading 

facility, an alternative trading system, an exchange 

market maker, an over-the-counter market maker, or 

any other broker or dealer that executes orders 

internally by trading as principal or crossing orders 

as agent. See 17 CFR 242.600(b)(78); see also 

Proposal, 74 FR at 18043, 18051. 

19See Proposal, 74 FR at 18051–18052. 

20See Proposal, 74 FR at 18052, 18062. 

21See Proposal, 74 FR at 18049. 

22See Proposal, 74 FR at 18072. For instance, the 

approaches could be combined so that persons are 

prohibited from selling short at or below the current 

national best bid and trading centers are also 

required to have reasonable policies and procedures 

to prevent the execution or display of a short sale 

at or below the current national best bid. 

23See Proposal, 74 FR at 18081, 18082. 

commenter who stated that a price test 

could contribute to the goal of restoring 

investor confidence expressed support 

for the alternative uptick rule, but 

expressed a preference for the proposed 

modified uptick rule.9 In addition, the 

Commission hosted a roundtable on 

May 5, 2009 to examine short sale price 

test and circuit breaker restrictions, at 

which several panelists expressed 

support for the alternative uptick rule.10

We want to further consider the 

alternative uptick rule and whether 

adopting it would achieve our 

objectives. Accordingly, we are 

publishing this supplemental request for 

comment and reopening the comment 

period to help ensure that the public has 

a full opportunity to provide comments 

on the Proposal, the alternative uptick 

rule, and any other matters that may 

have an effect on the Proposal and to 

assist the Commission in its 

consideration of the same. 

II. Discussion 

A. The Alternative Uptick Rule 

As noted in the Proposal, the 

alternative uptick rule would allow 

short selling only at a price above the 

current national best bid such that short 

selling would occur only at a higher 

price than the current national best 

bid.11 The alternative uptick rule would 

be similar to the proposed modified 

uptick rule in that both would use the 

current national best bid as a reference 

point for short sale orders. Unlike the 

proposed modified uptick rule (and the 

proposed uptick rule), the alternative 

uptick rule would not allow short 

selling at the current national best bid 

(or last sale price). Instead, in an 

advancing or declining market, the 

alternative uptick rule would only 

permit short selling at an increment 

above the current national best bid, 

unless an applicable exception 

applies.12

Because it would only permit short 

selling at an increment above the 

national best bid, the alternative uptick 

rule would not allow short sales to get 

immediate execution, even in an 

advancing market, and therefore the 

alternative uptick rule would restrict 

short selling to a greater extent than 

either the proposed modified uptick 

rule or the proposed uptick rule. We 

note, however, that because the 

alternative uptick rule would reference 

only the current national best bid in 

determining permissible short sales, it 

would not require monitoring of the 

sequence of bids or last sale prices (i.e., 

whether the current national best bid or 

last sale price is above or below the 

previous national best bid or last sale 

price). As a result, in the view of at least 

one commenter, the alternative uptick 

rule would likely be easier to monitor 13

and, in the view of several commenters, 

could likely be implemented more 

quickly than the proposed modified 

uptick rule or the proposed uptick 

rule.14 For the same reason, at least two 

commenters stated that the alternative 

uptick rule could potentially be less 

costly to implement than the proposed 

modified uptick rule or the proposed 

uptick rule.15 In addition, several 

commenters noted that the alternative 

uptick rule would be easier to program 

into trading and surveillance systems 

than the proposed modified uptick rule 

or the proposed uptick rule because it 

would not require bid sequencing.16

However, because the alternative 

uptick rule would restrict short selling 

to a greater extent than either the 

proposed modified uptick rule or the 

proposed uptick rule, it could also 

potentially lessen some of the benefits 

of legitimate short selling, including 

market liquidity and pricing 

efficiency 17 to a greater extent. Thus, 

there may be potential costs associated 

with the alternative uptick rule in terms 

of potential impact of such a price test 

on quote depths, spread widths, market 

liquidity, execution and pricing 

inefficiencies. 

In the Proposal, we proposed a 

policies and procedures approach with 

the proposed modified uptick rule, such 

that the rule would require trading 

centers18 to have policies and 

procedures reasonably designed to 

prevent the execution or display of short 

sales at impermissible prices.19 In 

contrast, we proposed a straight 

prohibition approach with the proposed 

uptick rule, such that the rule would 

prohibit any person from effecting short 

sales at impermissible prices.20 We also 

discussed in the Proposal that in 

adopting a final rule, we could take 

several different approaches, or a 

combination of approaches.21 Similarly, 

as discussed in the Proposal, the 

alternative uptick rule could ultimately 

be implemented through a policies and 

procedures approach or through a 

straight prohibition approach or some 

combination thereof.22

In addition, as was noted in the 

Proposal, the alternative uptick rule 

could be implemented in combination 

with a short selling circuit breaker.23

Specifically, in the Proposal, we 

requested comment regarding whether a 

circuit breaker that would temporarily 

impose the alternative uptick rule on 

short sales in a particular security when 

there is a severe decline in the price of 

that security would be preferable to a 

circuit breaker that would impose either 


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Federal Register / Vol. 74, No. 160 / Thursday, August 20, 2009 / Proposed Rules 42035 

24See id. 

25See Proposal 74 FR at 18069. 

26See infra discussion in Section II.B., 

‘‘Exceptions.’’ 

27See Proposal, 74 FR at 18066. 

28See Proposal, 74 FR at 18054–18059, 18062– 

18064. 

29See Proposal, 74 FR at 18054–18059. 

30See Proposal, 74 FR at 18062–18064. 

31We have received comments noting that a more 

restrictive form of price test or circuit breaker 

would require additional exemptions. See e.g., 

Unofficial Copy of Roundtable Transcript, available 

at http://www.sec.gov/spotlight/shortsales.htm 

(statement by Lawrence Leibowitz, Group Executive 

Vice President, Head of US Markets and Global 

Technology, NYSE Euronext). See also letter from 

the Investment Company Institute, dated June 19, 

2009. 

32 74 FR at 18055. 

33 Id. 

34 74 FR at 18056. 

35 Id. 

36 74 FR at 18057. 

37 74 FR at 18058. 

38 74 FR at 18057. We note that the proposed 

uptick rule included exceptions that paralleled the 

‘‘short exempt’’ marking provisions for the 

proposed modified uptick rule, as well as three 

exceptions specific to a price test based on last sale 

price. In addition, one exception (error in marking 

a short sale) was specific to a prohibition approach, 

rather than a policies and procedures approach, and 

would be applicable to the alternative uptick rule 

if it were adopted with a prohibition approach. See 

Proposal, 74 FR at 18063. 

39See Proposal, 74 FR at 18072, 18081. 

40See Proposal, 74 FR at 18072. 

41See id. 

42See id. 

43See id. 

the proposed modified uptick rule or 

the proposed uptick rule.24

Similar to a circuit breaker that would 

impose either the proposed modified 

uptick rule or the proposed uptick rule, 

as discussed in the Proposal, a circuit 

breaker that would impose the 

alternative uptick rule would be 

triggered by an intraday decline in the 

price of an individual equity security by 

a set percentage (for example 10, 15 or 

20 percent) from the prior day’s closing 

price.25 A circuit breaker that would 

impose the alternative uptick rule 

would include the same exceptions as 

discussed with respect to the marketwide permanent alternative uptick 

rule.26 In addition, like the market-wide 

permanent alternative uptick rule, 

discussed above, a circuit breaker that 

would impose the alternative uptick 

rule would restrict short selling to a 

greater extent and would likely be easier 

to implement than a circuit breaker that 

would impose either the proposed 

modified uptick rule or the proposed 

uptick rule. However, a circuit breaker 

that would impose the alternative 

uptick rule would be less restrictive 

than a circuit breaker halt rule, which 

would temporarily prohibit short selling 

in a particular security if there is a 

severe decline in price in that 

security.27

B. Exceptions 

In the Proposal, the proposed 

modified uptick rule and the proposed 

uptick rule included types of short sales 

that would not be subject to the 

requirements of the proposed rules.28

For example, the proposed modified 

uptick rule would require that a trading 

center’s policies and procedures be 

reasonably designed to permit the 

execution or display of a short sale 

order marked ‘‘short exempt’’ without 

regard to whether the order would 

otherwise be impermissible.29 The 

proposed uptick rule included a number 

of exceptions to its price test restrictions 

on short sales that, for the most part, 

paralleled the provisions in the 

proposed modified uptick rule relating 

to short sale orders that could be 

marked ‘‘short exempt.’’ 30

We believe that, because the 

alternative uptick rule would be most 

similar to the proposed modified uptick 

rule, in that both approaches would use 

the current national best bid as their 

reference point, the rationale discussed 

in the Proposal for the ‘‘short exempt’’ 

marking provisions under the proposed 

modified uptick rule would be similarly 

applicable to the alternative uptick 

rule.31 Whether requiring a policies and 

procedures approach, or a prohibition 

approach, the alternative uptick rule 

could also include ‘‘short exempt’’ 

provisions or exceptions for: (i) A 

seller’s delay in delivery as set forth in 

Section III.A.2.b of the Proposal; 32 (ii) 

odd lots, as set forth in Section III.A.2.c. 

of the Proposal; 33 (iii) domestic 

arbitrage, as set forth in Section 

III.A.2.d. of the Proposal; 34 (iv) 

international arbitrage, as set forth in 

Section III.A.2.e. of the Proposal; 35 (v) 

over-allotments and lay-off sales, as set 

forth in Section III.A.2.f. of the 

Proposal; 36 (vi) transactions on a VWAP 

basis, as set forth in Section III.A.2.h. of 

the Proposal; 37 and (vii) riskless 

principal transactions as set forth in 

Section III.A.2.g. of the Proposal.38 As 

we recognize that the alternative uptick 

rule would be more restrictive than the 

proposed modified uptick rule, we also 

renew our request for comment on the 

importance of a market maker 

exception. We ask for comment on the 

scope of any such exception and the 

conditions that should be imposed to 

ensure that it is used only for bona fide 

market making. 

III. Request for Comment 

A. General Request for Comment 

We renew our request for comment on 

all aspects of the alternative uptick rule. 

Commenters are requested to provide 

empirical data in support of any 

arguments and/or analyses. In addition 

to the questions posed above, 

commenters are welcome to offer their 

views on any other matter raised by the 

alternative uptick rule and the Proposal. 

With respect to any comments, we note 

that they are of the greatest assistance to 

our rulemaking initiative if 

accompanied by supporting data and 

analysis of the issues addressed in those 

comments and by alternatives to our 

proposals where appropriate. We note 

that while there were questions in the 

Proposal that were specific to the 

alternative uptick rule, the Proposal also 

included discussion and solicited 

comment throughout that may be 

relevant to consideration of the 

alternative uptick rule and we refer 

commenters to the Proposal. 

B. Specific Comment Request 

We renew our request for comment in 

response to the following specific 

questions that were originally published 

in the Proposal.39 We request comment 

on the questions set forth under the 

‘‘Supplemental Comment Request’’ 

below. 

Renewal of Comment Request 

1. Would the alternative uptick rule 

be more effective at preventing short 

selling, including potentially 

manipulative or abusive short selling, 

from being used as a tool to drive down 

the market or from being used to 

accelerate a declining market than the 

approach set forth in the proposed 

modified uptick rule or proposed uptick 

rule? If so, how? If not, why not? 40

2. What effect would the alternative 

uptick rule have on the benefits of short 

selling, such as providing price 

efficiency and liquidity? 41

3. Would the alternative uptick rule 

be easier to program into trading and 

surveillance systems than the approach 

in the proposed modified uptick rule or 

proposed uptick rule? If so, why? If not, 

why not? 42

4. If adopted, should the alternative 

uptick rule be combined with a policies 

and procedures approach similar to that 

discussed under the proposed modified 

uptick rule or a prohibition approach 

similar to that discussed under the 

proposed uptick rule? What would be 

the advantages and disadvantages, 

including costs and benefits of each of 

these approaches as combined with the 

alternative uptick rule? 43

5. If the Commission were to adopt a 

circuit breaker rule, should the circuit 

breaker, when triggered, result in the 


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42036 Federal Register / Vol. 74, No. 160 / Thursday, August 20, 2009 / Proposed Rules 

44See Proposal, 74 FR at 18081. 

45See id. 

46 74 FR at 18055. 

47 Id. 

48 74 FR at 18056. 

49 Id. 

50 74 FR at 18057. 

51 74 FR at 18058. 

52 74 FR at 18057. 

53 74 FR at 18063. 

54 44 U.S.C. 3501 et seq. See Proposal, 74 FR at 

18084–18090. 

55Persons submitting comments on the collection 

of information requirements should direct them to 

the Office of Management and Budget, Attention: 

Desk Officer for the Securities and Exchange 

Commission, Office of Information and Regulatory 

Affairs, Washington, DC 20503, and should also 

send a copy of their comments to Elizabeth M. 

Murphy, Secretary, Securities and Exchange 

Commission, 100 F Street, NE., Washington, DC 

20549–1090, with reference to File No. S7–08–09. 

Requests for materials submitted to OMB by the 

alternative uptick rule? If so, why? If 

not, why not? 44

Supplemental Comment Request 

1. How effective would the alternative 

uptick rule be at helping to prevent 

short selling, including potentially 

abusive or manipulative short selling, 

from being used as a tool for driving the 

market down or from being used to 

accelerate a declining market by 

exhausting all remaining bids at one 

price level? Please explain and provide 

empirical data in support of any 

arguments and/or analyses. Could the 

alternative uptick rule be modified to 

better meet these goals? If so, how? 

Please explain and provide empirical 

data in support of any arguments and/ 

or analyses. 

2. How would the alternative uptick 

rule affect short selling in an advancing 

market? How would the alternative 

uptick rule affect short selling in a 

declining market? Please explain and 

provide empirical data in support of any 

arguments and/or analyses. 

3. To the extent that there are 

concerns regarding investor confidence 

based on the numerous requests for 

reinstatement of short sale price test 

restrictions, would adopting the 

alternative uptick rule help restore 

investor confidence? If so, why? If not, 

why not? Please explain and provide 

empirical data or other specific 

information in support of any arguments 

and/or analyses. 

4. In addition to investor confidence 

and market volatility, we have stated 

that we are concerned about potentially 

abusive short selling. Would the 

alternative uptick rule help address 

potentially abusive short selling? If so, 

how? If not, why not? Please explain 

and provide empirical data in support of 

any arguments and/or analyses. 

5. In the Proposal, we also noted that 

short selling may be used to illegally 

manipulate stock prices.45 What impact, 

if any, would the alternative uptick rule 

have on short selling used to illegally 

manipulate stock prices? Please explain 

and provide empirical data in support of 

any arguments and/or analyses. 

6. What impact, if any, would the 

alternative uptick rule have on ‘‘bear 

raids’’? Please explain and provide 

empirical data in support of any 

arguments and/or analyses. 

7. Would the alternative uptick rule 

be an appropriate short sale price test in 

the current decimals environment? 

Would the alternative uptick rule be 

more suitable than the proposed 

modified uptick rule or the proposed 

uptick rule in a decimals environment 

with multiple trading centers? Please 

explain and provide empirical data in 

support of any arguments and/or 

analyses. 

8. How would trading systems and 

strategies used in today’s marketplace 

be affected by the alternative uptick 

rule? How might market participants 

alter their trading systems and strategies 

in response to the alternative uptick 

rule, if adopted? 

9. What impact, if any, would the 

trading requirements of Regulation NMS 

have on implementing the alternative 

uptick rule? 

10. The proposed modified uptick 

rule and the proposed uptick rule have 

as their reference point for a permissible 

short sale the current national best bid, 

and the last sale price, respectively, in 

relation to the last differently priced 

national best bid, and the last differently 

priced sale price, respectively. In 

contrast, the alternative uptick rule 

would have as its reference point the 

current national best bid. Accordingly, 

the sequence of bids would not play a 

role in determining when short sales are 

permissible. How would removing bid 

or sale price sequencing from the 

requirements of a short sale price test 

restriction, if adopted, affect 

implementation costs, ongoing costs, the 

effectiveness of the restriction in 

achieving the Commission’s goals, 

market liquidity, pricing efficiency, and 

investor confidence? 

11. If we were to adopt the alternative 

uptick rule, would a two month 

implementation period following the 

effective date of the alternative uptick 

rule be appropriate? Would a shorter or 

longer implementation period be more 

appropriate for the alternative uptick 

rule? Please explain. 

12. Because the alternative uptick rule 

would not require monitoring of the 

sequence of bids or last sale prices (i.e., 

whether the current national best bid or 

last sale price is above or below the 

previous national best bid or last sale 

price), could this type of rule be 

implemented more quickly than the 

proposed modified uptick rule or the 

proposed uptick rule? 

13. What would be the impact of the 

alternative uptick rule on off-exchange 

trading? Specifically, would there be 

any special concerns with respect to offexchange trading in connection with the 

alternative uptick rule, such as systems 

and/or implementation issues, or 

additional or alternative provisions that 

should be considered? 

14. As discussed above, if adopted 

with a policies and procedures 

approach, similar to the proposed 

modified uptick rule, the following 

short sale orders could be marked as 

‘‘short exempt’’ and could, therefore, be 

exempt from the requirements of the 

alternative uptick rule: (i) A seller’s 

delay in delivery as set forth in Section 

III.A.2.b of the Proposal; 46 (ii) odd lots, 

as set forth in Section III.A.2.c. of the 

Proposal; 47 (iii) domestic arbitrage, as 

set forth in Section III.A.2.d. of the 

Proposal; 48 (iv) international arbitrage, 

as set forth in Section III.A.2.e. of the 

Proposal; 49 (v) over-allotments and layoff sales, as set forth in Section III.A.2.f. 

of the Proposal; 50 (vi) transactions on a 

VWAP basis, as set forth in Section 

III.A.2.h. of the Proposal; 51 and (vii) 

riskless principal transactions as set 

forth in Section III.A.2.g. of the 

Proposal.52 In addition, if adopted with 

a prohibition approach, the exception 

specific to the proposed uptick rule for 

error in marking a short sale, as set forth 

in Section III.B.2.a. of the Proposal,53

would also apply to the alternative 

uptick rule. Are these ‘‘short exempt’’ 

provisions or exceptions necessary or 

appropriate? If so, why? If not, why not? 

15. Are there other ‘‘short exempt’’ 

provisions or exceptions that should 

apply to the alternative uptick rule? If 

so, please explain. Should a general 

market maker exception apply to the 

alternative uptick rule? Should an 

options market maker exception apply? 

What should be the scope of any such 

exceptions? Should additional 

conditions apply to a market maker 

exception under the alternative uptick 

rule to ensure that only bona fide 

market making is captured by the 

exception? 

16. The Proposal includes a 

discussion of estimated annual 

reporting and recordkeeping burdens 

with respect to provisions of the 

proposed rules that would require a new 

‘‘collection of information’’ under the 

Paperwork Reduction Act of 1995.54 We 

invite comment on these estimates with 

respect to the alternative uptick rule.55


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Federal Register / Vol. 74, No. 160 / Thursday, August 20, 2009 / Proposed Rules 42037 

Commission with regard to this collection of 

information should be in writing, with reference to 

File No. S7–08–09, and be submitted to the 

Securities and Exchange Commission, Office of 

Investor Education and Advocacy, 100 F Street, 

NE., Washington, DC 20549–0213. As OMB is 

required to make a decision concerning the 

collections of information between 30 and 60 days 

after publication, a comment to OMB is best assured 

of having its full effect if OMB receives it within 

30 days of publication. 

56See Proposal, 74 FR at 18090–18103. 

57See Proposal, 74 FR at 18103–18104. 

58 5 U.S.C. 603. 

59See Proposal, 74 FR at 18105–18107. 

17. The Proposal includes a 

discussion of estimated costs and 

benefits of the proposed rules.56 We are 

sensitive to the costs and benefits of the 

alternative uptick rule, and encourage 

commenters to discuss any additional 

costs or benefits specific to the 

alternative uptick rule and/or beyond 

those discussed discussed in the 

Proposal, as well as any reduction in 

costs. What would be the costs and 

benefits of the alternative uptick rule 

versus the proposed modified uptick 

rule, the proposed uptick rule, the 

circuit breaker halt rule or a circuit 

breaker triggering either the proposed 

modified uptick rule or the proposed 

uptick rule? What would be the general 

costs and benefits of short sales being 

subject to the alternative uptick rule? 

Commenters should provide analysis 

and data to support their views of the 

costs and benefits associated with the 

alternative uptick rule. 

18. The Proposal includes a 

discussion of whether the proposed 

rules would promote efficiency, 

competition, and capital formation.57

We request comment on whether the 

alternative uptick rule would likely 

promote efficiency, capital formation, 

and competition. 

19. The Proposal includes an Initial 

Regulatory Flexibility Analysis 

(‘‘IRFA’’), in accordance with the 

provisions of the Regulatory Flexibility 

Act,58 regarding the proposed rules.59

We solicit written comments regarding 

our IRFA analysis. In particular, the 

Commission seeks comment on the 

number of small entities that would be 

affected by the alternative uptick rule. 

We request that commenters provide 

empirical data to quantify the number of 

small entities that could be affected by 

the proposed amendments. We request 

comment on whether the proposed 

amendments would have any effects 

that we have not discussed. We also 

request that commenters describe the 

nature of any impact on small entities 

and provide empirical data to support 

the extent of the impact. 

20. A number of commenters stated 

that their first preference would be for 

the Commission not to adopt any of the 

short sale regulations set forth in the 

Proposal, and this option along with the 

alternative uptick rule and all other 

options discussed in the Proposal are 

under active consideration. We request 

comments on the position that the best 

result for investors and the markets 

would be for the Commission not to 

adopt any additional short selling 

regulations at this time. If the 

Commission determines that additional 

short selling regulations are necessary, 

what option, including the alternative 

uptick rule, would produce the best 

result for investors and the markets? 

Dated: August 17, 2009. 

By the Commission. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–19989 Filed 8–19–09; 8:45 am] 

BILLING CODE 8010–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2008–1158] 

RIN 1625–AA09 

Drawbridge Operation Regulation; Gulf 

Intracoastal Waterway (Algiers 

Alternate Route), Belle Chasse, LA 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking; 

withdrawal. 

SUMMARY: The Coast Guard is 

withdrawing its notice of proposed 

rulemaking concerning the operation of 

the SR 23 bridge across the Gulf 

Intracoastal Waterway (Algiers Alternate 

Route), mile 3.8, at Belle Chasse, 

Plaquemines Parish, Louisiana. The 

notice of proposed rulemaking proposed 

to allow the bridge to remain closed-tonavigation for an additional 90 minutes 

during weekday afternoons to facilitate 

the movement of vehicular traffic. 

DATES: The notice of proposed 

rulemaking published at 73 FR 13161, 

March 26, 2009, is withdrawn on 

August 20, 2009. 

ADDRESSES: The docket for this 

withdrawn rulemaking is available for 

inspection or copying at the Docket 

Management Facility (M–30), U.S. 

Department of Transportation, West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. You may also 

find this docket on the Internet by going 

to http://www.regulations.gov, inserting 

USCG–2008–1158 in the ‘‘Keyword’’ 

box and then clicking ‘‘Search.’’ 

FOR FURTHER INFORMATION CONTACT: If 

you have any questions about this 

notice, call or e-mail David Frank, 

Bridge Administration Branch, 

telephone (504) 671–2128, e-mail 

David.m.frank@uscg.mil. If you have 

questions on viewing material in the 

docket, call Renee V. Wright, Program 

Manager, Docket Operations, telephone 

202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Background 

On March 26, 2009, we published a 

notice of proposed rulemaking entitled 

‘‘Drawbridge Operation Regulations; 

Gulf Intracoastal Waterway (Algiers 

Alternate Route), Belle Chasse, LA’’ in 

the Federal Register (74 FR 13161). The 

rulemaking concerned a change to the 

regulation governing the operation of 

the SR 23 bridge across the Gulf 

Intracoastal Waterway (Algiers Alternate 

Route), mile 3.8, at Belle Chasse, 

Plaquemines Parish, Louisiana. 

Presently, the draw of the bridge need 

not open for the passage of vessels in 

the afternoon from 3:30 p.m. until 5:30 

p.m. Plaquemines Parish Government 

requested that an additional 90 minutes 

be added to the closure in the afternoon 

so that the draw need not open for the 

passage of vessels from 3:30 p.m. until 

7 p.m. 

Withdrawal 

On site analysis of the traffic patterns 

around the bridge and proposed 

modernization of the traffic lights on SR 

23 which will improve the traffic flow 

indicate that the change is not 

warranted at this time. It was also 

determined that due to the increased 

time that the bridge was not required to 

open, longer delays at the end of the 

closure period were experienced by 

vehicular traffic. Additionally, road 

construction on another arterial 

roadway has caused a spike in traffic 

that should adjust following completion 

of the roadwork. Following all repairs to 

the bridge, modernization of the traffic 

management scheme, and the roadway 

repairs, if the Plaquemines Parish 

Government wishes to reapply for a 

change in the operating schedule, the 

Coast Guard will conduct a new 

investigation to determine if changes to 

the operating schedule are warranted. 

Authority: This action is taken under the 

authority of 33 U.S.C. 499; 33 CFR 1.05–1; 

Department of Homeland Security Delegation 

No. 0170.1. 


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