New Rule 13f-2, related Form SHO, and an amendment to the national market system plan (NMS Plan) governing the consolidated audit trail (CAT) were adopted by the SEC. The goal of these changes is to enhance disclosure requirements for short sale-related data.
Section 13f-2 of the Securities Exchange Act of 1934 requires the SEC to prescribe rules to make certain short sale-related data publicly available. The information reported in Form SHO filings (along with the aggregated data from Form SHO filings that are published by the SEC under Rule 13f-2) informs market participants of the overall short sale activity by reporting managers while enhancing the SEC’s and other regulatory agencies’ oversight of short selling. Rule 13f-2, Form SHO, and the amendment to the NMS Plan governing CAT (CAT NMS Plan) will close an information gap for the SEC and other regulatory agencies by providing beneficial findings related to the lifecycle of a short sale previously unavailable from data sources.
Rule 13f-2 and Form SHO
Under Rule 13f-2, institutional investment managers that meet certain reporting thresholds are required to report on Form SHO certain short position and short activity data for equity securities. A manager would be required to submit Form SHO via the SEC’s EDGAR system in a structured, machine-readable data language. The SEC will subsequently aggregate and publish certain data collected from Form SHO. The rule requires a manager to file a Form SHO report within 14 calendar days following the end of each calendar month concerning the following:
equity securities of a class of securities registered under Section 12 of the Exchange Act or for which the issuer of that class of securities is required to file reports under Section 15(d) of the Exchange Act (Reporting Company Issuer) over which the manager and all accounts over which the manager (or any person under the manager’s control) has investment discretion regarding a monthly average gross short position that meets or exceeds a prescribed reporting threshold
equity securities of a class of securities of an issuer that is not a Reporting Company Issuer over which the manager and all accounts over which the manager (or any person under the manager’s control) has investment discretion with respect to a gross short position that meets or exceeds a prescribed reporting threshold
For each reported equity security, a manager must report on Form SHO certain information, including:
the manager’s end-of-month gross short position in the equity security at the close of regular trading hours on the last settlement date of the calendar month
for each settlement date during the calendar month, the manager’s net activity in the reported equity security. This includes activity in derivatives, such as options.
CAT NMS Plan
The amendment to the CAT NMS Plan requires CAT reporting firms to report to the CAT, for the original receipt or origination of an order to sell an equity security, whether the order is a short sale effected by a market maker associated with bona fide market making (BFMM) activities in the equity security for which the BFMM exception in Rule 203(b)(2)(iii) of Regulation SHO is claimed.
Rule 13f-2, Form SHO, and the amendment to the CAT NMS Plan will go into effect 60 days after publication of the adopting release in the Federal Register. The compliance date for Rule 13f-2 and Form SHO will be 12 months after the effective date of the adopting release, with public aggregated reporting to follow 3 months later. The compliance date for the amendment to the CAT NMS Plan will be 18 months after the effective date of the adopting release.