INSTANT VIEW: SEC to consider restricting short sellers

NEW YORK (Reuters) - U.S. securities regulators are meeting to consider restrictions on short selling, a type of investing blamed by some lawmakers and executives for exacerbating the financial crisis and driving down share prices.

The Securities and Exchange Commission will consider reinstating the "uptick rule," which allowed short sales -- a bet that a stock's price will fall -- only when the last sale price was higher than the previous price.

SEC Chairman Mary Schapiro said the agency is starting a "thoughtful, deliberative process" on how to address short selling, adding the trading strategy is undermining investor confidence.

COMMENTS:

JAMES MCGLYNN, PORTFOLIO MANAGER, CALVERT GROUP, SOUTHLAKE, TEXAS:

"I can't believe they ever got rid of it, and I want to know why they got rid of it. It shows something seriously wrong with the regulation. Stocks won't go straight down, it will reduce some volatility on the downside and take away a tool of the short-sellers."

Regulators should next target credit default swaps "to make people have some basis in ownership of the debt before they can trade them," to curb speculation, he said.

ELLIOT SPAR, MARKET STRATEGIST, STIFEL NICOLAUS & CO

"I don't like that thing about the 10 percent collar. It's like changing the rules all the time...

"People did not want to be in a position where they can't get out. That's going to be the same thing, once a stock goes down 5 to 7 percent it's going to bring on the sellers again.

"I don't like to be a cynic, but this falls under the category of the government closing the door after the horse left the barn. Every financial has been accelerated and crushed on the downside. It certainly got there a lot faster without an uptick rule. Most of the damage there has been done. So if they can come back with a rule that people can live with, the next time that we go down, it will slow things down.

"I wish them luck. The bottom line is whatever they do, it will be better than what we have now."

JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK, CHICAGO

"This is probably good for the overall market. It's great for retail investors, bad for institutional investors.

"My worry is in effort to help stimulate stock prices we could actually lose some liquidity as market makers don't have the flexibility to hedge their positions readily.

"Overall it's a net positive for the short-term, longer-term we will need to reexamine because of the liquidity.

"The stock market can respond very quickly to changes in information and sometimes that's to the down side. Reinstating the uptick rule may impair our ability to respond.

BRADLEY GOLDING, MANAGING DIRECTOR AT CHRISTOFFERSON, ROBB AND COMPANY IN NEW YORK

"I think there's a big difference between people who have abused the system by selling shares with no intent of delivering, and people who have done their best to live within the rules and were trying to conduct the system and make money for their investors.

"In the end, I think the uptick rule is a placebo for politicians who don't understand the deeper issues and want to say they've done something without sorting out the underlying problems of corporate malfeasance and poor management."

HEDGE FUND MANAGER DOUG KASS, WHO HEADS SEABREEZE PARTNERS MANAGEMENT:

"My general view is that short selling is a legitimate technique for price discovery, provides liquidity and is used for hedging. The SEC must be aware of unintended consequences and vilification of short sellers - especially by financial company managements is stupid.

"The problem is that the managements of the banks and brokers screwed themselves up, short sellers did not. Short sellers just made people notice how many bank managements lied like ministers of finance on the eve of devaluation."

ERIC KUBY, CHIEF INVESTMENT OFFICER AT NORTH STAR INVESTMENT MANAGEMENT CORP, CHICAGO

"I think there's two issues. One is they (the proposals) have been pretty widely discussed ahead of time.

"Second is there does seem to be in the market conflicting opinions as to whether it's a good thing or a bad thing for the market to restore some semblance of the uptick rule.

"I don't think it's likely going to be a market mover in the short run.

"I actually believe that it is a positive because I think the absence of some semblance of the uptick rule does provide the ability for speculators to step on the neck of stocks and it creates an element of risk that, if taken out of the market, would be a positive."

(Reporting by Ryan Vlastelica, Ed Krudy, Leah Schnurr, Herb Lash, Al Yoon and Jennifer Ablan; compiled by Edward Tobin)