The Securities and Exchange Commission (SEC) has adopted amendments to Regulation SHO (Reg SHO). Under Rule 201, the SEC has established a short sale-related circuit breaker that, if triggered, will impose a restriction on when and/or at what price a security may be sold short.
The short sale-related circuit breaker will be triggered for a security when its price declines by 10% or more from the prior day’s closing value within normal market hours. The regulatory circuit breaker will then remain in effect for the remainder of the day, and at a minimum, throughout the next day’s trading session. The circuit breaker will be triggered during the regular session only. Once triggered, the price test will apply at all times when the national best bid is disseminated through the end of the next trading day.
Stocks that have triggered the short sell circuit breaker rule will be annotated with a “RCB” indicator in the Trading Window.
When the regulatory circuit breaker rule is in force, short sale orders will continue to be accepted. However, marketable limit orders and market orders to sell short may be delayed and executed at a significantly lower price than the bid at the time the order was placed.