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SEC`s amendment to Reg SHO will increase costs in securities lending market – Finadium, DLA Piper`s Perrie Weiner: hedge funds will help take us out of this recession

Monday, October 20, 2008

Opalesque Exclusive: SEC`s amendment to Reg SHO will increase costs in securities lending market - Finadium The Securities and Exchange Commission is adopting amendments to Regulation SHO under the Securities Exchange Act of 1934 (“Exchange Act”).

The amendments are intended to further reduce the number of persistent fails to deliver in certain equity securities by eliminating the options market maker exception to the close-out requirement of Regulation SHO. As a result of the amendments, fails to deliver in threshold securities that result from hedging activities by options market makers will no longer be excepted from Regulation SHO’s close-out requirement. The Commission is also providing guidance regarding bona fide market making activities for purposes of the market maker exception to Regulation SHO’s locate requirement. Effective date: October 17, 2008.

Finadium, a Concord, MA-based financial research house, has sent the following comments to Opalesque:

“Effective October 17, the SEC has repealed the options market maker exemption of Reg SHO. This means that when an options market maker shorts an equity, even in support of a bona fide options hedge, they will now be required to borrow a security to cover the short position like any other market participant. This closes out persistent fails. It does not entirely eliminate the options market maker exemption for Reg SHO securities.

- New demand from options market makers will substantially ......................

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