SEC Chair Gary Gensler now takes an unexpected stance against hedge funds in his latest interview with CNBC.
The Chairman, who’s been heavily criticized by retail investors for failing to create real change in the market, is making it clear on just how important short selling transparency truly is.
For years now, the hedge fund industry has been fighting against the SEC’s new rules which would require more disclosure of short sale transactions, Citadel Securities included.
The SEC approved new rules in October related to short selling.
The first rule required certain fund managers to report their short sales to the SEC within 14 days at the end of the month.
The second rule requires that financial companies that facilitate securities loans disclose information about those transactions to FINRA on a daily basis.
“Remember the events around GameStop nearly three years ago?” Gensler said.
“We have a lot of transparency in the long side, let’s add transparency to the short side that Congress mandated.”
SEC Commissioner Jaime Lizarraga stated in October that securities lending facilitates illegal trading.
“As with securities lending, short sales, provided they are conducted in compliance with applicable rules, can play a valuable price discovery role in our capital markets.
That said, they can sometimes contribute to, or even cause, precipitous price declines, facilitate market manipulation, and generate market uncertainty and volatility”, the Commissioner said.
Now Gary Gensler is pushing short sale transparency.
“Congress weighed in after the financial crisis and mandated that the SEC address and have rules for transparency around short selling for investment managers,” he said in an interview with CNBC on Thursday.
“I got to the agency nine years later and the agency had not done a congressional mandate. I’m very proud we took it up.”
This is a developing story.
Other Market News Today
Investors now start a petition to ban illegal short selling, otherwise referred to as ‘naked short selling’.
The petition calls for a temporary ban on short selling itself, which would turn off the pipeline for naked short selling.
Several retail investors have already shared the petition on X, formerly known as Twitter, in an effort to raise awareness of market injustices and collectively support this strategy to get the markets back on track.
The news comes shortly after South Korea regulators announced their move to root out illegal short selling after several protests from investors.
Public perception of such trading practices in the Asian nation remains deeply negative.
Investors in the United States continue to make that strive in order to create change.
“In 2023 alone, over 30 publicly listed companies have taking matters into their own hands and are investigating their stock for abusive naked short selling, and many found a share imbalance during their investigation,” reads the petition.
“In June of 2023 the SEC admitted naked short selling is still occurring as they charged an Investment Adviser for “Abusive Naked Short Selling Scheme”.
South Korea has officially banned short selling in November of 2023 through June of 2024 after regulators found “routine” abuse of naked short selling from foreign and institutional investors.
Since Naked Short Selling is still occurring we demand a temporary halt of ALL short selling until there is a resolution.”
In the United States, naked short selling continues to be a big problem.
In September, Citadel Securities was charged for illegal short selling violations by the SEC.
According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa.
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