Securities and Exchange Commission: Amendments to Regulation SHO
GAO-09-138R: Oct 31, 2008
- Full Report:
GAO reviewed the Securities and Exchange Commission's (SEC) new rule on amendments to Regulation SHO. GAO found that (1) the final rule makes amendments to Regulation SHO under the Securities Exchange Act of 1934 and eliminates the options market maker exception to the close-out requirement of Regulation SHO; and (2) SEC complied with the applicable requirements in promulgating the rule.
Securities and Exchange Commission: Amendments to Regulation SHO, GAO-09-138R, October 31, 2008
Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Securities and Exchange Commission (Commission), entitled Amendments to Regulation SHO (RIN: 3235-AJ57). We received the rule on
The final rule makes amendments to Regulation SHO under the Securities Exchange Act of 1934. The final rule eliminates the options market maker exception to the close-out requirement of Regulation SHO. The final rule became effective on
Enclosed is our assessment of the Commission's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. Our review indicates that the Commission complied with the applicable requirements.
If you have any questions about this report or wish to contact GAO officials responsible for the evaluation work relating to the subject matter of the rule, please contact Michael R. Volpe, Assistant General Counsel, at (202) 512-8236.
Robert J. Cramer
Associate General Counsel
(i) Cost-benefit analysis
The Securities and Exchange Commission (Commission) prepared a cost-benefit analysis in conjunction with the final rule. The Commission believes the final rule will benefit investors by facilitating the receipt of shares so that more investors receive the benefits associated with ownership, and enhance investor confidence by providing greater assurance that securities will be delivered as expected. The Commission believes the final rule will benefit issuers by decreasing the possibility of artificial market influences and contributing to price efficiency. The Commission notes that on a security-by-security basis the impact on options market maker costs, liquidity, quote depths, and spread widths may vary considerably and may in some cases be large. However, the Commission believes that overall market impact of the amendments will be minimal and that the benefits outweigh the costs.
(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. sections 603-605, 607, and 609
The Commission prepared a regulatory flexibility analysis as required under the Act. The Commission estimates that as of 2007 there were approximately 896 registered broker-dealers that qualified as small entities that might be affected by the final rule, and that no bank,
(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. sections 1532-1535
The Unfunded Mandates Reform Act of 1995 is inapplicable to the Commission, because it is not an agency for purposes of the Act. 2 U.S.C. sect. 658(1).
(iv) Other relevant information or requirements under acts and executive orders
Administrative Procedure Act, 5 U.S.C. sections 551 et seq.
The Commission published a proposed rule on
Paperwork Reduction Act, 44 U.S.C. sections 3501-3520
The final rule does not contain a collection of information requirement within the meaning of the Paperwork Reduction Act.
Statutory authorization for the rule
The final rule is authorized by various sections of the Securities Exchange Act of 1934.
Executive Order No. 12,866
The Commission is not subject to Executive Order 12,866, because it is an independent regulatory agency, as defined by 44 U.S.C. sect. 3502(5).
Executive Order No. 13,132 (Federalism)
The Commission is not subject to Executive Order 13,132, because it is an independent regulatory agency, as defined by 44 U.S.C. sect. 3502(5).