New SEC rules would require investors to submit monthly updates for short sales.

• The proposed changes, as stated by Wall Street's top supervisor, would necessitate investors submitting specific short sale data to the SEC on a monthly basis.
• The SEC Chairman Gary Gensler announced that the new rules will apply to investors who hold a short position of at least $10 million or 2.5% or more of the total shares outstanding.
• The SEC's latest rules are an effort to increase its supervision of short selling, which has been linked to price fluctuations in stocks such as GameStop.

The Securities and Exchange Commission (SEC) announced on Friday that it is considering introducing a new rule and amending current regulations to require short sellers to disclose their bets more frequently.

The SEC will receive monthly short sale data from institutional investors, which will be used to compile aggregate data on large short positions, including daily short sale activity, for public release.

A trader who wants to bet against a company borrows shares of its stock and sells them on the market. The trader will then buy those shares back at a lower price later and return them to the brokerage or asset manager that lent them the equity.

Asset managers lend those shares to short sellers in exchange for regular fees.

Gary Gensler, SEC Chairman, expressed his support for the proposal, stating that if it is adopted, it will enhance transparency in a crucial market area, which will benefit from increased visibility and supervision.

The proposed changes to Regulation SHO would maintain the confidentiality of managers' identities and individual short positions.

Institutional managers holding a short position of at least $10 million or 2.5% or more of the total shares outstanding will be subject to the new rulemaking, as Gensler noted in his remarks.

The Commission needs to understand this market better, especially during stressful or volatile times, according to him. He suggested that the proposed rule would help the Commission manage future market events while balancing transparency and price discovery.

The SEC's latest rules are an effort to increase its control over a practice that has been criticized for causing volatile stock prices on Wall Street. This practice gained attention in early 2021 when a group of individual investors coordinated on social media to boost the price of GameStop, which had attracted significant short-selling interest.

The SEC recently proposed a rule that mandates brokerages and asset managers to report data on loans made to short sellers to an oversight body like the Financial Industry Regulatory Authority within 15 minutes of making the loan.

The SEC has announced an extension of the public comment period for the rule in question, in response to its recent rule change proposals.