(Recasts with Citi asking SEC)
By John Porier and Dan Wilchins
WASHINGTON/NEW YORK Nov 20 Citigroup Inc (C.N)
has asked the U.S. Securities and Exchange Commission to bring
back a ban on short-selling financial stocks, a source familiar
with the matter told Reuters on Thursday.
Citi, whose shares lost more than a quarter of their value
on Thursday and are now hovering around their lowest levels
since 1994, has also approached members of Congress to discuss
its concerns about short-selling, the source said, speaking on
condition of anonymity.
The Financial Services Roundtable, an industry group, is
also pressing for regulators to temporarily bring back the
emergency ban that ended on October 8.
The group, which represents most of the largest banks,
brokerages, asset managers, and insurance companies in the
United States, has been talking to securities regulators and
others about reinstating the ban since it was lifted, said
Scott Talbott, senior vice president in government affairs in
Those efforts have increased in recent days as financial
stocks have plummeted, Talbott said.
"When conditions warrant, you want to prevent a downward
spiral for shares. Investors are acting on panic now," he
If financial stocks were reaching irrationally high levels,
the group would seek measures to rein them in, Talbott said.
"We want markets to operate efficiently," he added.
Short-sellers borrow stock they expect will fall in price
in the hope of repaying the loans for less and pocketing the
difference. They have been blamed by some corporate executives
for driving down the price of their companies' stock.
John Nester, a spokesman for the SEC, declined to comment.
The agency separately announced on Thursday that it will
hold a teleconference of international securities regulators
next week to discuss short selling, among other topics.
The effectiveness of the SEC's last short-selling ban,
which started on Sept. 19, is up for debate.
U.S. financial stocks broadly performed worse than the
market from Sept 19 through Oct 8, the period of the
short-selling ban. S3 Matching Technologies, a market data
firm, said it found no statistically significant differences
between stocks covered under the ban and those that were not.
But financial stocks' performance could have been even
worse if short selling had been allowed, Talbott said.
The Financial Services Roundtable does not oppose short
selling, or profiting from expected declines in share prices by
selling borrowed shares and buying them back later.
"Short selling plays a role in the market. We need people
to go long as well as to go short," Talbott said, adding that
current circumstances are extraordinary.
The SEC took the emergency action in September amid
plunging share prices and a loss of investor confidence that
pushed Lehman Brothers into bankruptcy. The agency temporarily
banned the short sale of nearly 800 companies with business in
financial services, a list that eventually swelled to more than
950. Existing short positions were allowed to be maintained.
The temporary ban was opposed by the trillion-dollar hedge
(Editing by Bernard Orr)