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Short Selling: The Impact of SEC Rule 201 of 2010Chinmay JainUniversity of Memphis - Fogelman College of Business and Economics; University of Memphis Pankaj K. JainUniversity of Memphis - Fogelman College of Business and Economics Thomas H. McInishUniversity of Memphis - Fogelman College of Business and Economics November 30, 2010 Abstract: Despite its sizable compliance costs, we are unable to document any clear benefits of SEC Rule 201 in ensuring fair valuations and price stability, promoting higher liquidity and execution quality, or preventing a sudden flash crash or prolonged market crises. Our daily and intraday analysis of data both before and after Rule 201 finds that short sellers are naturally more active before the occurrence of negative returns, not after significant price declines. Our simulation results show that Rule 201 further curtails short selling during normal periods, but is not binding on short sellers during the volatile period of the 2008 financial crisis.
Number of Pages in PDF File: 45 Keywords: Short Selling, Rule 201, Alternative Uptick Rule JEL Classification: G10 working papers seriesDate posted: December 2, 2010 ; Last revised: December 4, 2011Suggested CitationContact Information
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