Short-Interest Reporting Requirements Revision For Exchange-Listed Securities;
Effective March 1995
Some of the self-regulatory organizations (SROs) comprising the Intermarket Surveillance Group (ISG) agreed to adopt policies to ensure uniform reporting of all short interest in traded securities. The NASD has amended Article III, Section 41 of the NASD Rules of Fair Practice that revises the requirements for reporting short interest.
The amendment will require NASD members to report to the NASD short interest in listed securities that has not been reported to another SRO. This information will be provided by the NASD to the appropriate SRO for publication and regulatory purposes.
NASD members will continue to report short interest in securities included in The Nasdaq Stock MarketSM (Nasdaq) directly to the NASD. Under the rule change, short interest in exchange-listed securities will be reported to the firm's designated examining authority (DEA).
The new reporting requirements will be piloted during March and April 1995. During this period, members will report their short interest under the new method outlined in this document and also continue with their current method of reporting short interest in listed securities. The new reporting requirements will become mandatory in May 1995, replacing the current method of reporting, and will be included in the publication of the appropriate SRO's total short interest.
Each member is required to maintain a record of short interest in all customer and proprietary firm accounts in all Nasdaq securities or those listed on a registered national securities exchange. The method of reporting the short interest is determined by the firm's NASD membership and its DEA.
All NASD members, regardless of their exchange affiliation, must report short interest in Nasdaq securities directly to the NASD. There is no change to the current requirement or methods for reporting Nasdaq short interest.
NASD members that are maintaining short interest in exchange-listed securities must report short interest in these securities to their DEA. Members will report their short interest in exchange-listed securities to the NASD when the NASD is their DEA. There are specific filing methods that must be followed for reporting listed short positions with the NASD using electronic filing software (see below).
Firms whose DEA is the Chicago Board Options Exchange (CBOE) will report to the NASD short interest in exchange-listed and Nasdaq securities. This is a special reporting arrangement made with the CBOE.
An introducing firm's obligation to report short interest in exchange-listed securities will be met by the clearing firm's short interest reporting to its DEA. NASD members that are clearing firms will report short interest in Nasdaq securities directly to the NASD for the introducing firms. Members that are introducing firms must verify that the clearing firm is submitting the introducing member's short-interest data in compliance with the proposed new rules, based on the clearing firm's NASD membership and DEA.
NASD Short-Interest Reporting
All short-interest reports must be made as of the close of the designated settlement date, currently the 15th of the month or preceding business day.
All NASD members will continue with their current method (computer tape, ARRS, or Form NS-1 hard copy) of filing short interest in Nasdaq securities. Reports for short interest in Nasdaq securities must be received at the NASD by the close of the second business day after the settlement date.
Members that are required to file exchange-listed short interest with the NASD will submit their short interest in listed securities via a separate filing using NASDnetSM software. Filings for short interest in exchange-listed securities must be received at the NASD by 1 p.m., Eastern Time, on the second business day after the settlement date.
ISG Pilot Program
In conjunction with the ISG, the NASD is participating in a pilot program for the new short-interest reporting requirements. During the months of March and April 1995, member firms are required to report their short interest under the current methods and under the new reporting requirements outlined in this document. In May 1995, the new reporting requirements will be mandatory and members must only file short-interest data using the new reporting requirements.
Notification Of Intent To File Exchange-Listed Short Positions
All members that are required to file short interest in exchange-listed securities with the NASD must contact NASD Regulatory Systems at (800) 321-6273. The required short-interest report must be filed separately, using electronic filing software (NASDnet). Members that must comply with these new NASD requirements will be given documentation and assistance with configuring the electronic filing software. If a service provider will be reporting the exchange-listed short interest for the member, the service provider should contact the NASD for assistance with installing and configuring the software.
Members that have questions about the new reporting methods for listed short interest can contact Regulatory Systems Customer Support at (800) 321-6273.
Members that have questions about the amendment to Article III, Section 41 of the NASD Rules of Fair Practice or changes to reporting requirements can contact Market Surveillance at (301) 590-6080.
Text Of Rule Amendment To Article III, Section 41 of the Rules of Fair Practice
Each member shall maintain a record of total "short" positions in all customer and proprietary firm accounts in securities included in The Nasdaq Stock Market and in each other security listed on a registered national securities exchange and not otherwise reported to another self-regulatory organization and shall regularly report such information to the Corporation in such a manner as may be prescribed by the Corporation. Reports shall be made as of the close on the settlement date designated by the Corporation. Reports shall be received by the Corporation no later than the second business day after the reporting settlement date designated by the Corporation.