SEC Petition: Short Position Disclosure Rules
Nasdaq's View on Short Position Disclosure Rule
In early 2015, Nelson Griggs, Executive Vice President, Listing Services at Nasdaq testified before the Senate on ways to support our listed companies. His testimony included recommendations for tailored rules to prevent aggressive short selling and disclosure of short positions, similar to the disclosures already required for long positions. To formalize this advocacy, last week the company submitted a Petition to the SEC to request that they adopt rules to require investors to publicly disclose their short positions in exact parity with the mandatory disclosures applicable to long investors. Nasdaq believes that the inequality between the reporting of long and short positions is out of balance with today’s transparent markets, leaving public companies and their investors without important information necessary to ensure fair and efficient markets.
To be clear, Nasdaq is not suggesting limitations or restrictions on short sale activities. Indeed, there is ample evidence that legitimate short selling contributes to efficient price formation, enhances liquidity, and facilitates risk management. In addition, the pace and level of short sales in a stock can be a meaningful indicator for corporate management, because it may represent an expression of a view on the stock.
However, there is a significant gap in the regulation of short sellers related to their disclosure obligations – a gap that Congress instructed the SEC to close nearly four years ago in the Dodd-Frank Act. For decades, long investors have been subject to various disclosure obligations. But short sellers are not subject to these requirements. This lack of symmetry deprives companies of insights into trading activity and limits their ability to engage with investors. It also deprives investors of information with which to make meaningful investment decisions, to the detriment of market efficiency and fairness. There are no practical or policy reasons to maintain this disparate treatment. That’s why our Petition asks the SEC to level the playing field and mandate the same disclosure requirements for short investors as it currently does for long investors. A summary of the key points of the Nasdaq Petition can be found here.