SEC buy-backs eased to counter short-sellers
The Securities and Exchanges Commission (SEC) has had some tough choices to make in the aftermath of last Tuesday’s terrorist outrage. In addition to coping with the decimation of its New York offices at 7 World Trade Center, the SEC has had to grapple with whether or not to impose further short-selling restrictions when the NYSE reopens today.
By the day after the attack, it became clear that the regulator was not going to make any explicit rulings. “We don't want to artificially restrain the market,” said Harvey Pitt, chairman of the SEC. Apart from the immediate tumble in stock prices that kicked-in as the horrific images of Tuesday’s tragedy flashed across dealing room TV screens, it seems that a subsequent gentleman’s agreement between traders to refrain from aggressive activity has so far prevented equity markets from going into a full-on freefall.However, federal regulators are aware that short-sellers may send already bearish markets plummeting and are gambling that temporarily easing buyback restrictions will prove a supportive measure. Usually, corporations are prevented from trading more than a specified daily volume of their own stock. The SEC hopes that by relaxing usual limits, stock prices can be supported and cash pumped into the system – ensuring liquidity. Buybacks are critical to market stability, according to Michael Oxley, chairman of the House Financial Services Committee. Many corporates have already pledged to enter into large buybacks. For example, Cisco Systems said last Thursday that it plans to buyback up to $3 billion worth of stock.
These have been trying times for equity options traders as well. Many traders had hoped that because of the four-day options market closure last week, authorities would extend the September options expiration cycle. But hopes were to be quashed. Last Friday, the Options Clearing Corporation – the organisation responsible for processing and clearing options traded on the US’ options exchanges – confirmed that the expiration date for equity and index options will remain Friday September 22. The OCC’s statement simply said that it “has no authority to extend options expirations". So despite the cessation of trading, September options continued to lose time value. When the opening bell chimes this morning to signal that the NYSE is back in business, equity options will have four days’ time decay priced in.
Back in the equity markets, the sheer scale and ferocity of the terrorist attack seems to have galvanised market opinion. It is expected that hedge funds and other short-sellers will find resistance, irrespective of regulation. By last Friday, US pension funds were asserting their intention to support the markets. Representatives from the National Association of State Retirement Administrators – a coalition of some of the largest US pension funds – said that they would buy stocks, should the short-sellers strike. Whether such action can counter hedge fund activity remains to be seen. But the Nikkei’s 5.04% tumble to close at 9504.41 – a seventeen year low – does not instil much optimism.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Exchanges
Asia’s ETF assets on the rise – HKEX presents the results of Asia ETF survey 2019
Asia’s total ETF assets surged by 23.9% in the first half of 2019 thanks to an increasing adoption of ETFs into investment portfolios. According to a survey conducted by Hong Kong Exchanges and Clearing (HKEX), asset expansion in Asia’s ETF market is set…
NYSE Offers Exchange-Calculated Bitcoin Index, with More to Come
NYXBT will initially be based off data from Coinbase Exchange.
Deutsche Börse to set up Europe's first multi-asset RMB platform
German exchange group signs joint venture deal with CFFEX and Shanghai Stock Exchange
Exchange Revenue Figures Rise, Fall; Data Revenues Continue Steady Increase
A mostly positive mix of Q1 results also yield big increases in data revenues for some exchanges.
Lift-off for ASX Aussie dollar swap clearing business
Volumes jump following revamp of Sydney bourse's clearing incentive scheme
Exchange Data Revenues Make Positive Start to 2015
Acquisitions made up for some shortfalls in exchange revenues
CME looks to local banks for FX liquidity in emerging markets
Chicago-based exchange targets China, India and LatAm growth
Most read
- As FCMs dwindle, regulators fear systemic risk
- Options market still searching for cause of the Vix plunge
- Top 10 op risks: AI fears drive cyber risk to record high