Short Position and Short Activity Reporting by Institutional Investment Managers

Conformed to Federal Register version 
SECURITIES AND EXCHANGE COMMISSION 
17 CFR Parts 240 and 249 
[Release No. 34-98738; File No. S7-08-22] 
RIN 3235-AM34 
Short Position and Short Activity Reporting by Institutional Investment Managers 
AGENCY: Securities and Exchange Commission. 
ACTION: Final rule. 
SUMMARY: The Securities and Exchange Commission (“Commission”) is adopting a new rule 
and new Form SHO pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) and the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (“DFA”). The new rule and 
related form are designed to provide greater transparency through the publication of short sale-
related data to investors and other market participants. Under the new rule, institutional 
investment managers that meet or exceed certain specified reporting thresholds are required to 
report, on a monthly basis using the related form, specified short position data and short activity 
data for equity securities. In addition, the Commission is adopting an amendment to the national 
market system (“NMS”) plan governing the consolidated audit trail (“CAT”) created pursuant to 
the Exchange Act to require the reporting of reliance on the bona fide market making exception 
in the Commission’s short sale rules. The Commission is publishing the text of the amendments 
to the NMS plan governing the CAT (“CAT NMS Plan”) in a separate notice. 
DATES: Effective date: January 2, 2024. 
Compliance date: The applicable compliance date is discussed in Part VI of this release.  

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FOR FURTHER INFORMATION CONTACT: Timothy M. Riley, Branch Chief; Patrice M. 
Pitts, Special Counsel; James R. Curley, Special Counsel; Jessica Kloss, Attorney Advisor; 
Brendan McLeod, Attorney Advisor; Roland Lindmayer, Attorney Advisor; Josephine J. Tao, 
Assistant Director, Office of Trading Practices; and Carol McGee, Associate Director, Office of 
Derivatives Policy and Trading Practices, Division of Trading and Markets, Securities and 
Exchange Commission, 100 F Street NE, Washington, D.C. 20549-8010, at (202) 551-5777. 
SUPPLEMENTARY INFORMATION: The Commission is adopting new 17 CFR 240.13f-2 
(“Rule 13f-2”) and related form 17 CFR 249.332 (“Form SHO”) under the Exchange Act to 
require certain institutional investment managers to report, on a monthly basis on new Form 
SHO, certain short position data and short activity data for certain equity securities as prescribed 
in Rule 13f-2. 
The Commission is also adopting, in a separate notice published elsewhere in this issue 
of the Federal Register, an amendment to the CAT NMS P lan (“CAT Amendment”), pursuant 
to 17 CFR 242.608(a)(2) (“Rule 608(a)(2)”) and (b)(2) (“Rule 608(b)(2)”), that enables the 
Commission to adopt a rule to amend any effective NMS plan. For the text of the amendment to 
the CAT NMS Plan, please see the Notice of the Text of the Amendment to the National Market 
System Plan Governing the Consolidated Audit Trail for Purposes of Short Sale-Related Data 
Collection.
1
  
  
 
1
  Notice of the Text of the Amendment to the National Market System Plan Governing the Consolidated Audit 
Trail for Purposes of Short Sale-Related Data Collection, Exchange Act Release No. 34-98739 (Oct. 13, 
2023). 

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Table of Contents 
I. Overview 
A. Background 
B. The Proposals 
C. Overview of Proposed Rule 13f-2, Proposed Form SHO, Proposed Rule 205 and 
Proposed CAT Amendments 
1. Overview of Comments Received 
2. Final Rule 13f-2, Form SHO and CAT Amendment 
II. Discussion of Final Rule 13f-2 and Form SHO 
A. Final Rule 13f-2 
1. Scope of persons Covered by Final Rule 13f-2 
2. Scope of Reported Securities 
3. Reporting Thresholds 
4. Form SHO 
B. Data Aggregation and Publication of Information by the Commission 
1. Proposal 
2. Comments 
3. Final Rule 
III. Proposed Amendment to Regulation SHO to Aid Short Sale Data Collection 
A. Proposed Rule 205 
B. Comments 
IV. Amendments to CAT 
A. Proposal to Require “Buy to Cover” Order Marking 
B. Proposal to Require Reporting of Reliance on Bona Fide Market Maker Exception 
V. Other Comments 
VI. Compliance Date 
VII. Paperwork Reduction Act Analysis 
A. Background 
B. Burdens for Managers under Rule 13f-2   and Form SHO 
1. Applicable Respondents 
2. Burdens and Cost 
C. Burdens and Costs Associated with the Amendment to CAT 
1. Summary of Collections of Information 
2. Use of Information 
3. Respondents 
4. Total Initial and Annual Reporting and Record Keeping Burdens 
D. Collection of Information is Mandatory 
E. Retention Period of Recordkeeping Requirement 
F. Confidentiality 
VIII. Economic Analysis 
A. Introduction 
B. Baseline 
1. Institutional Investment Managers 

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2. Short Selling 
3. Current Short Selling Regulations 
4. Existing Short Selling Data 
5. Competition 
C. Economic effects 
1. Investor Protection and Market Manipulation 
2. Effects on Stock Price Efficiency 
3. Effect on Market Liquidity 
4. Effect on Corporate Decision Making 
5. Effect on the Securities Lending Market 
6. Compliance Cost 
7. Effect of Certain Electronic Filing and Dissemination Requirements 
8. Potential Increased Use of Derivatives 
D. Efficiency, Competition and Capital Formation 
1. Efficiency 
2. Competition 
3. Capital Formation 
E. Reasonable Alternatives 
1. Alternative Approaches 
2. Data Modifications 
3. Threshold Modifications 
4. Other Alternatives 
IX. Regulatory Flexibility Act Certification 
X. Other Matters 
Statutory Authority  
  

5 
I. Overview 
A.  Background 
Short selling involves a sale of a security that the seller does not own, or a sale that is 
consummated by the delivery of a security borrowed by, or for the account of, the seller.
2
 In 
order to deliver the security to the purchaser, the short seller will generally borrow the security, 
usually from a broker-dealer or an institutional investor, and later close out the position by 
purchasing equivalent securities on the open market and returning the security to the lender. 
Short selling is generally used to profit from an expected downward price movement, to 
provide liquidity in response to unanticipated demand,
3
 or to hedge the risk of a long position in 
the same security or a related security.
4
 Short selling provides the market with important 
benefits, such as providing market liquidity and pricing efficiency.
5
 While short selling can serve 
useful market purposes, such as facilitating price discovery, there are concerns that it could be 
 
2
  See 17 CFR 242.200(a).  
3
  Market liquidity is generally provided through short selling by market professionals, such as market 
makers, who offset temporary imbalances in the buying and selling interest for securities. Short sales 
effected in the market add to the selling interest of stock available to purchasers and reduce the risk that the 
price paid by investors is artificially high because of a temporary contraction of selling interest. Short 
sellers covering their sales also may add to the buying interest of stock available to sellers. See 
Amendments to Regulation SHO, Exchange Act Release No. 61595 (Feb. 26, 2010), 75 FR 11232, 11235 
(Mar. 10, 2010) (“Rule 201 Adopting Release”). 
4
  See, Short Sales, Exchange Act Release No. 50103 (July 28, 2004), 69 FR 48008 (Aug. 6, 2004) 
(“Regulation SHO Adopting Release”). 
5
  See, e.g., Phil Mackintosh, How Short Selling Makes Markets More Efficient, NASDAQ (Oct. 1, 2020), 
available at https://www.nasdaq.com/articles/how-short-selling-makes-markets-more-efficient-2020-10-01. 
Efficient markets require that prices fully reflect all buy and sell interest. Market participants who believe a 
stock is overvalued may engage in short sales in an attempt to profit from a perceived divergence of prices 
from true economic values. Such short sellers add to stock pricing efficiency in part because their 
transactions inform the market of their evaluation of future stock price performance. This evaluation is 
reflected in the resulting market price of the security. See Rule 201 Adopting Release, 75 FR 11235 nn. 29 
& 30. Historically, short sellers have, at times, through doing research, uncovered fraudulent behavior. See 
also generally discussion in infra Parts VIII.C.2 and VIII.C.4. 

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used to drive down the price of a security, to accelerate a declining market in a security, or to 
manipulate stock prices.
6
  
The Commission has plenary authority under section 10(a) of the Exchange Act to 
regulate short sales of securities as necessary or appropriate in the public interest or for the 
protection of investors.
7
 Regulation SHO, which became effective on January 3, 2005,
8
 imposes 
four general requirements with respect to short sales of equity securities. Under 17 CFR 242.200 
(“Rule 200 of Regulation SHO”), broker-dealers must properly mark sale orders as “long,” 
“short,” or “short exempt.”
9
 Under 17 CFR 242.203 (“Rule 203 of Regulation SHO”), a broker-
dealer must locate a source of shares that the broker-dealer reasonably believes can be delivered 
in time for settlement (commonly referred to as the “locate requirement”) before effecting a short 
 
6
  See, e.g., DIV. ECON. RISK ANALYSIS, SHORT SALE POSITION AND TRANSACTION REPORTING (June 5, 
2014), at 6-7 (“DERA 417(a)(2) Study”), available at https://www.sec.gov/files/short-sale-position-and-
transaction-reporting0.pdf (This is a study of the Staff of the U.S. Securities and Exchange Commission, 
which represents the views of Commission staff, and is not a rule, regulation, or statement of the 
Commission. The Commission has neither approved nor disapproved the content of this study and, like all 
staff statements, it has no legal force or effect, does not alter or amend applicable law, and creates no new 
or additional obligations for any person.); Rule 201 Adopting Release, 75 FR 11235 (describing a “bear 
raid” where an equity security is sold short in an effort to drive down the price of the security by creating 
an imbalance of sell-side interest, as an example of unrestricted short selling that could “exacerbate a 
declining market in a security by increasing pressure from the sell-side, eliminating bids, and causing a 
further reduction in the price of a security by creating an appearance that the security’s price is falling for 
fundamental reasons, when the decline, or the speed of the decline, is being driven by other factors”). See 
generally discussion infra Part VIII.C.1. 
7
  15 U.S.C. 78j(a). 
8
  See Regulation SHO Adopting Release. 
9
  See 17 CFR 242.200(g). A broker or dealer must mark all sell orders of an equity security as “long,” 
“short,” or “short exempt.” A sell order may only be marked “long” if the seller is “deemed to own” the 
security being sold and either (i) the security to be delivered is in the physical possession or control of the 
broker or dealer; or (ii) it is reasonably expected that the security will be in the physical possession or 
control of the broker or dealer no later than the settlement of the transaction. See 17 CFR 242.200(g). A 
person is deemed to own a security only to the extent that he has a net long position in such security. See 17 
CFR 242.200(c). Once marked as long, short, or short-exempt, the order mark should not be changed 
regardless of any subsequent changes in the person’s net position. See In re OZ Mgmt., Exchange Act 
Release No. 75445 (July 14, 2015) (settled) (discussing where OZ Management submitted short sale orders 
to its executing broker, but identified such sales as long sales to its prime broker, causing books and records 
of the prime broker to be inaccurate), available at https://www.sec.gov/litigation/admin/2015/34-
75445.pdf. 

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sale.
10
 Under 17 CFR 242.204 (“Rule 204”), if the broker or dealer that is a member of a 
registered clearing agency fails to deliver the security to the registered clearing agency in time 
for settlement, the broker or dealer must take action to close out the failure to deliver if that 
failure results from a long or short sale.
11
 Separately, under 17 CFR 242.201 (“Rule 201”), 
trading centers
12
 must have policies and procedures in place to restrict short selling when a 
covered security has triggered a short sale price test circuit breaker.
13
 In addition, the 
Commission adopted an antifraud provision, 17 CFR 240.10b-21 (“Rule 10b-21”), to address 
failures to deliver in securities that have been associated with “naked” short selling.
14
 
Section 929X of the DFA added section 13(f)(2) of the Exchange Act, entitled “Reports 
by institutional investment managers,” requiring the Commission to prescribe rules to make 
certain short sale data publicly available no less frequently than monthly.
15
 Specifically, section 
13(f)(2) provides: “[t]he Commission shall prescribe rules providing for the public disclosure of 
 
10
  See 17 CFR 242.203(b)(1) and (2). The Regulation SHO locate requirement provides that broker-dealers 
may not accept a short sale order in an equity security from another person, or effect a short sale in an 
equity security for its own account, unless the broker-dealer has (i) borrowed the security, or entered into a 
bona-fide arrangement to borrow the security; or (ii) reasonable grounds to believe that the security can be 
borrowed so that it can be delivered on the date delivery is due; and (iii) documented compliance with this 
requirement (“locate requirement”).  
11
  See 17 CFR 242.204. “Failures to deliver,” or “fails,” occur when a broker-dealer fails to deliver securities 
to the party on the other side of the transaction on the settlement date.  
12
  Trading center in Regulation SHO means a national securities exchange or national securities association 
that operates an SRO trading facility, an alternative trading system, an exchange market maker, an OTC 
market maker, or any other broker or dealer that executes orders internally by trading as principal or 
crossing orders as agent. 17 CFR 242.200. 
13
  See 17 CFR 242.201. 
14
  See “Naked” Short Selling Antifraud Rule, Exchange Act Release No. 58774 (Oct. 14, 2008), 73 FR 61666, 
61674 (Oct. 17, 2008) (In a “naked” short sale, a seller does not borrow or arrange to borrow the necessary 
securities in time to deliver them to the buyer within the standard settlement period. Although abusive 
“naked” short selling is not defined in the federal securities laws, it refers generally to selling short without 
having stock available for delivery and intentionally failing to deliver stock within the standard settlement 
period. In addition, a seller misrepresenting its short sale locate source or ownership of shares may intend 
to fail to deliver securities in time for settlement and, therefore, engage in abusive ‘‘naked’’ short selling.). 
15
  Public Law 111-203, sec. 929X, 124 Stat. 1376, 1870 (July 21, 2010). 

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the name of the issuer and the title, class, CUSIP [Committee on Uniform Securities 
Identification Procedures] number, aggregate amount of the number of short sales of each 
security, and any additional information determined by the Commission following the end of the 
reporting period. At a minimum, such public disclosure shall occur every month.”
16
 In addition, 
the Commission has received multiple petitions to adopt reporting requirements for short sellers 
similar to those required for holders of long positions.
17
 
B.  The Proposals 
In February 2022, in an effort to increase transparency regarding short position and short 
activity data to both market participants and regulators, and to address the requirements of 
section 13(f)(2), the Commission proposed new rule 13f-2 (“Proposed Rule 13f-2”) and related 
 
16
  15 U.S.C. 78m(f)(2). 
17
  See, e.g., Letter from Elizabeth King, Corporate Secretary, NYSE Group, et al. (Oct. 7, 2015, Petition 4-
689) (stating that rulemaking under 929X “provides an opportunity to implement meaningful public 
disclosure standards for short-sale activity, consistent with that currently required for institutional 
investment managers under section 13(f) of the Exchange Act for long position reporting”), available at 
https://www.sec.gov/rules/petitions/2015/petn4-689.pdf; Letter from Edward S. Knight, Executive Vice 
President, General Counsel and Chief Regulatory Officer, NASDAQ (Dec. 7, 2015, Petition 4-691) 
(requesting that the Commission “take swift action to promulgate rules to require public disclosure by 
investors of short positions in parity with the disclosure regime applicable to long positions”), available at 
https://www.sec.gov/rules/petitions/2015/petn4-691.pdf (“NASDAQ Petition”); see also Letter from E. 
Carter Esham, Executive Vice President, Emerging Companies, Biotechnology Innovation Organization 
(BIO) (Mar. 11, 2016) (“BIO Letter”) (applauding reforms to the short disclosure framework proposed in 
the NASDAQ Petition and in the NYSE Petition and advocating for the promulgation of rules to ensure 
parity between public disclosures required of investors taking long and short positions), available at 
https://www.sec.gov/comments/4-691/4691-5.pdf; Letter from Andrew D. Demott, Jr., Chief Operating 
Officer, Superior Uniform Group (supporting NASDAQ Petition and advocating adoption of disclosure 
requirements for short sellers), available at https://www.sec.gov/ comments/4-691/4691-10.pdf. 
Developments in the market with regard to “meme” stocks in early 2021, some of which were widely 
reported as involving large short sellers, also highlighted a need for more consistent and consolidated short 
sale information. See, e.g., Robert Smith et al., “Short Squeeze” Spreads as Day Traders Hunt Next 
GameStop, F
IN. TIMES (Jan. 27, 2021), available at https://www.ft.com/content/acc1dbfe-80a4-4b63-90dd-
05f27f21ceb2; Are “Meme Stocks” Harmless Fun, or A Threat to the Financial Old Guard?, E
CONOMIST 
(July 6, 2021) (retrieved from Factiva database). See also Sharon Nunn & Adam Kulam, Short-Selling 
Restrictions During Covid-19, YALE SCH. OF MGMT., PROGRAM ON FIN. STABILITY (Jan. 12, 2021), 
available at https://som.yale.edu/story/2021/short-selling-restrictions-during-covid-19 (discussing global 
short selling regulatory responses to the Covid-19 pandemic). 

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form (“Proposed Form SHO”) under the Exchange Act.
18
 Proposed Rule 13f-2 would require 
certain institutional investment managers (“Managers”) with gross short positions that meet 
certain quantitative reporting thresholds to report, on a monthly basis on new Proposed Form 
SHO, certain short position data and short activity data for certain equity securities. Proposed 
Form SHO included two parts: Information Table 1–reports of information including, but not 
limited to, data elements explicitly referenced in section 13(f)(2), gross end-of-month short 
positions in equity securities that meet the reporting thresholds, and whether such positions are 
fully hedged, partially hedged, or not hedged; and Information Table 2–reports of information 
including, but not limited to, certain daily activity data (including options assignments and 
exercises) that affect a Manager’s gross short positions during the calendar month reporting 
period. Managers would file Proposed Form SHO with the Commission via the Commission’s 
Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) within 14 calendar days 
after the end of the calendar month. The Commission would then expect to publish on EDGAR 
aggregated information derived from the data reported on Proposed Form SHO within one month 
after the end of the reporting calendar month.  
In the Proposing Release, the Commission stated that the required short sale disclosures 
that would be collected under Proposed Form SHO and the aggregated data published pursuant 
to Proposed Rule 13f-2 would increase transparency and provide several important benefits to 
market participants and regulators. Such aggregated information would help inform market 
participants regarding the overall short sale activity by reporting Managers. More information 
about the short sale activity and gross short positions of reporting Managers may promote greater 
 
18
  Short Position and Short Activity Reporting by Institutional Investment Managers, Exchange Act Release 
No. 34-94313 (Feb. 25, 2022), 87 FR 14950 (Mar. 16, 2022) (“Proposing Release”). 

10 
risk management among market participants and may facilitate capital formation to the extent 
that greater transparency bolsters confidence in the markets. As discussed in the Proposing 
Release, the Commission’s regular access to Proposed Form SHO data would bolster the 
Commission’s oversight of short selling, as Proposed Rule 13f-2 and Proposed Form SHO would 
improve the utility of information available to the Commission and other regulators.
19
 
Additionally, to supplement the short sale data made available to the Commission in 
Proposed Form SHO filings, the Commission proposed a new rule at 17 CFR 242.205 
prescribing a “buy to cover” order marking requirement under Regulation SHO (“Proposed Rule 
205”) for certain purchase orders effected by a broker-dealer for its own account or for the 
account of another person at the broker-dealer, if, at the time of order entry, the purchaser had a 
gross short position in such security in the account for which the purchase is being made. The 
Commission also proposed amendments to the NMS plan governing the CAT (“Proposed CAT 
Amendments”) to require the reporting of “buy to cover” order marking information and of 
reliance on the bona fide market making exception in Rule 203(b)(2)(iii) of Regulation SHO 
(“BFMM locate exception”). Proposed Rule 205 and the Proposed CAT Amendments were 
designed to fill an information gap for the Commission and other regulators by providing 
insights into the lifecycle of a short sale that are not available under existing data sources.
20
 
 
19
  Proposing Release, at 14951. 
20
  Because data obtained through CAT are not made public, the “buy to cover” and “bona fide market 
making” data reported pursuant to the Proposed CAT Amendments would not be made publicly available 
as a result of such reporting. 

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C.  Overview of Proposed Rule 13f-2, Proposed Form SHO, Proposed Rule 205 
and Proposed CAT Amendments 
1. Overview of Comments Received 
The Commission received robust comment on Proposed Rule 13f-2, Proposed Form 
SHO, Proposed Rule 205, and the Proposed CAT Amendments (collectively, the “Proposals”). 
Comments were submitted by individual investors as well as other market participants, such as 
trade associations, institutional investment managers, investment advisers, broker-dealers, 
non-profit organizations, and academicians. These comments, which are discussed in context 
below, included a variety of different viewpoints on various aspects of the Proposals.
21
 Many 
commenters were supportive of the Proposals as a step toward increasing transparency into short 
sale activity.
22
 Many commenters stated that short selling is a particularly opaque area of the 
 
21
  The comment letters on the Proposing Release (File No. S7-08-22) are available at 
https://www.sec.gov/comments/s7-08-22/s70822.htm. Over 98% of the over 3,000 comments received 
were from individual investors, most of whom (over 1,900) submitted a variation of a template letter from 
“We The Investors,” an advocacy group for retail investors. The remaining comments were from trade 
associations, financial services firms—including institutional investment managers and investment 
management firms, broker-dealers—and their advisors, non-profit organizations, academicians, and entities 
other than individual investors. See Comment Letter from We the Investors, available at 
https://www.sec.gov/comments/s7-08-22/s70822-typea.pdf (“WTI Letter”). 
22
  See, e.g., Comment from Samuel Hudock (Mar. 2, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-20118373-271244.htm; Comment from Michelle R. Bracke (Mar. 4, 2022) available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118531-271417.htm; Comment from Joshua Barbee 
(Mar. 4, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20118530-271416.htm; 
Comment from Robert Ross (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20119365-272251.htm; Comment from David Arkules (Feb. 28, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118071-270876.htm; Comment from Gina Preziosi 
(Mar. 7, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20118726-271589.htm; 
Comment from Jessica Cooke (Mar. 9, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20118963-271791.htm; Comment from Mauricio Gonzalez (Oct. 12, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-310835.htm; Comment from Liam Sutton (Oct. 19, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-311965.htm; Comment from Nicholas 
Graham (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-312051.htm; 
Comment from Steffen Maier (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-312049.htm; Comment from Zachary D’Elia (Oct. 19, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-312047.htm; Comment from Stephen Leachman (Oct. 19, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-312046.htm; Comment from Sergio 
Herrera (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-312042.htm; 
 

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market and that increasing transparency regarding short selling would be beneficial to market 
participants.
23
 Some of these commenters stated that the increased information regarding short 
sales would allow investors to be better informed and make better investment decisions.
24
 A 
number of these commenters urged the Commission to strengthen the proposed reporting 
requirements further by, for example, lowering or eliminating the thresholds triggering reporting 
obligations under Proposed Rule 13f-2.
25
 
 
Comment from David P. Miller Jr. (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-312038.htm.  
23
  See, e.g., Comment from William Bloxham (Oct. 21, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-313372.htm; Comment from Ricardo Gomez (Oct. 29, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316604.htm; Comment from Victor 
Arriaza (Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316625.htm; 
Comment from Kyle Byrd (Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
316701.htm; Comment from Tarek Elseweifi (Oct. 29, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-316706.htm; Comment from Clay Wyant (Oct. 29, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-316708.htm; Comment from Yin Hung Lam 
(Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316601.htm; Comment from 
Evan Anderson (Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316580.htm; 
Comment from Connor Judson (Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-316599.htm; Comment from Nicky (Oct. 29, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-316638.htm.  
24
  See, e.g., Comment from Eric Mills (April 27, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20126810-287520.htm (“[T]he proposals will serve the mission of the SEC by increasing 
transparency regarding short selling activity. On-going efforts by the SEC to increase market transparency 
and relieve information asymmetries promote efficiency, order, fairness, capital formation, and public trust. 
The result is an enhancement of investor ability to assess the market and make more informed decisions.”); 
Comment from Stanley Little (Mar. 8, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20118870-271692.htm (“The proposed rule is a[n] important missing link for investors. The 
ordinary person wishing to make money in the stock market should have all available information at their 
disposal to make informed decisions . . . The transparency rule is such a tool needed to make well informed 
decisions.”); Comment from Brendon Withers (Feb, 27, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118078-270936.htm (supported “immediate 
implementation [of the proposals] to improve the US Stock Market and provide a more fair and free system 
in which market participants can have accurate information and make informed decisions based on 
CURRENT AND ACCURATE data.”). 
25
  See, e.g., Letter from Stephen W. Hall, Legal Director and Securities Specialist, Better Markets, et al. (Apr. 
26, 2022), at 12, available at https://www.sec.gov/comments/s7-08-22/s70822-20126822-287528.pdf 
(“[T]the SEC should eliminate the proposed thresholds so as to reduce or eliminate the risk that unknown, 
hidden short positions could pose to investors and the markets.”) (“Better Markets Letter”); Comment from 
Matthew Sinex (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-317106.htm; 
Comment from Noah Tewahade (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-317046.htm; Comment from Luke Dansie (Oct. 31, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-317081.htm; Comment from Mike Flowers (Oct. 30, 
 

13 
As discussed in further detail below, some commenters recommended changes to the 
Proposals in response to their concerns about: the scope of Proposed Rule 13f-2; the underlying 
approach and levels of the proposed thresholds that would trigger a reporting obligation under 
Proposed Rule 13f-2; the feasibility of operationalizing Proposed Rule 205 in a manner that 
would result in the gathering of meaningful short sale-related data; and the necessity for the 
Proposed CAT Amendments. 
Some commenters stated that the Commission did not sufficiently articulate the benefits 
of, or regulatory justification for, the Proposals and did not accurately estimate or adequately 
justify the costs and impacts of the new reporting requirements.
26
 Some of these commenters 
expressed concern that the Proposing Release’s Economic Analysis did not adequately estimate 
the costs and burdens of the Proposals.
27
 
 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-317245.htm; Comment Letter from 
Katherine Lander (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
317266.htm; Comment from Marco Alvarenga (Oct. 31, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-316992.htm; Comment Letter from Erikka Jehle (Oct. 31, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316930.htm. 
26
  E.g., Comment Letter from Robert Toomey, Managing Director and Associate General Counsel, Securities 
Industry and Financial Markets Association, et al. (Apr. 26, 2022), at 3, available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126803-287514.pdf (“SIFMA Letter”) (“SIFMA is 
concerned that such an expansive reporting regime would impose burdens and costs on reporting parties 
that would materially outweigh the benefit of the information they might yield, and that the SEC has not 
provided justification for why such information is necessary and/or cannot already be obtained through 
other means available to the SEC”); see also, Comment Letter from Thomas M. Merritt, Deputy General 
Counsel, Virtu Financial (Apr. 26, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
20126856-287588.pdf (“Virtu Letter”); Comment Letter from Thomas Deinet, Executive Director, 
Standards Board for Alternative Investments (Apr. 26, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126850-287575.pdf (“SBAI Letter”); Comment Letter 
from Matthew B. Siano, Managing Director and General Counsel, Two Sigma (Apr. 26, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126808-287518.pdf (“Two Sigma Letter”); Comment 
Letter from Richard F. Kerr, Partner, K&L Gates LLP (Apr. 26, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126848-287571.pdf (“K&L Gates Letter”).  
27
  See, e.g., SIFMA Letter, at 6 n. 15 (“SIFMA is concerned that the SEC’s economic analysis of the 
Proposed Rules does not adequately consider that the sum total of the proposed requirements may result in 
a burden that far exceeds the SEC’s estimates with respect to each individual component . . .”); Comment 
Letter from Jennifer Han, Executive Vice President, Chief Counsel and Head of Regulatory Affairs, 
Managed Funds Association (Apr. 26, 2022), at 7, 19, available at https://www.sec.gov/comments/s7-08-
22/s70822-20126815-287523.pdf (“MFA Letter”) (“[T]he SEC’s economic analysis and, specifically, the 
 

14 
2. Final Rule 13f-2, Form SHO and CAT Amendment 
For the reasons discussed more fully in Parts II-IV below, and to balance implementation 
and compliance costs and burdens with the Commission’s goal of enhancing transparency 
regarding short selling, the Commission is adopting Rule 13f-2 and related Form SHO with 
certain modifications in response to comments.
28
 T he new reporting regime of Rule 13f-2 
provides disclosures that supplement the short sale-related information that currently is publicly 
available or accessible for a fee from existing short sale reporting regimes provided by some 
registered national securities exchanges (“exchanges”) and registered national securities 
associations (“RNSAs”).
29
  
Final Rule 13f-2 will require Managers (defined in section 13(f)(6)(A) of the Exchange 
Act) to report to the Commission, on a monthly basis on related Form SHO, certain short 
position data and short activity data for certain equity securities. In particular: 
• On the Cover Page of Form SHO, Managers will be required to report certain basic 
information including its name, mailing address, business telephone number and business 
email, as well as the name, title, business telephone number and business email of the 
Manager’s contact employee for the Form SHO report; and the date the report is filed. 
The Manager will also provide its non-lapsed Legal Entity Identifier (“LEI”) if it has one. 
 
Proposal’s estimated costs are materially understated.”); Comment Letter from Mark A. Steffensen, Senior 
Executive Vice President and General Counsel, HSBC North American Holdings Inc. and HSBC Bank 
USA, N.A. (Jan. 24, 2023), at 15 n. 53, available at https://www.sec.gov/comments/s7-08-22/s70822-
20155771-324031.pdf (“HSBC Letter”) (“We [] do not believe that the Commission’s economic analysis 
adequately considers the costs of Proposed Rule 13f-2 to market makers.”). 
28
  Rule 13f-2 and Form SHO, as adopted, are responsive to the policy recommendations to increase 
transparency around short selling activities and improve short sale data of participants in the Government-
Business Forums on Small Business Capital Formation held by the Commission in recent years. See, e.g., 
Report on the Report on the 41
st
 Annual Small Business Forum, at 22, available at 2022 OASB Annual 
Forum Report (sec.gov); Report on the Report on the 40
th
 Annual Small Business Forum, at 25, available 
at https://www.sec.gov/files/2021_OASB_Annual_Forum_Report_FINAL_508.pdf 
29
  See infra Part II.A.4. See also Proposing Release, at 14964-65.   

15 
If other Managers are required to be listed in the “Other Manager(s) Reporting for this 
Manager” section of the Cover Page, the Manager will also be required to include the 
name and non-lapsed LEI of each such “Other Manager” listed, if the LEI of such “Other 
Manager(s)” is available to the Manager filing the Form SHO report. 
• With regard to each individual equity security reported on by Managers in the 
Information Tables of Form SHO, Managers will report: the issuer’s name and LEI if it 
has one, and the equity security’s title of class, CUSIP, and Financial Instrument Global 
Identifier (“FIGI”) (if any has been assigned).
30
  
• With regard to Information Table 1 of Form SHO, the Manager will also report the 
number of shares of the reported equity security that represent the Managers’ gross short 
position at the close of the last settlement date of the calendar month reporting period, as 
well as the corresponding U.S . dollar value of this reported gross short position.  
• With regard to Information Table 2 of Form SHO, for each reported equity security, for 
each individual settlement date during the calendar month reporting period, a Manager 
will report “net” activity in the reported equity security. The net activity reported by a 
Manager will be expressed by a single identified number of shares of the reported equity 
security, and will reflect offsetting purchase and sale activity by Managers. A positive 
number of shares identified will indicate net purchase activity in the equity security on 
the specified settlement date, while a negative number of shares identified will indicate 
net sale activity in the equity security on the specified settlement date. 
Managers will report such information regarding each equity security if the following 
thresholds are met: 
 
30
  See infra nn. 36 & 218. 

16 
• With respect to any equity security that is of a class of securities that is registered 
pursuant to Exchange Act section 12
31
 or for which the issuer of that class of securities is 
required to file reports pursuant to Exchange Act section 15(d)
32
 (a “reporting company 
issuer”) in which the Manager meets or exceeds either: (1) a monthly average of daily 
gross short positions at the close of regular trading hours in the equity security with a 
U.S . dollar value of $10 million or more, or (2) a monthly average of daily gross short 
positions at the close of regular trading hours as a percentage of shares outstanding in the 
equity security of 2.5 percent or more (“Threshold A”). 
• With respect to any equity security that is of a class of securities of an issuer that is not a 
reporting company issuer as described above (a “non-reporting company issuer”) in 
which the Manager meets or exceeds a gross short position in the equity security with a 
U.S . dollar value of $500,000 or more at the close of regular trading hours on any 
settlement date during the calendar month. (“Threshold B”).  
The Commission will then publish aggregate information as follows: 
• With regard to Information Table 1 of Form SHO, the Commission will publish, for each 
class of equity securities, as an aggregated number of shares across all reporting 
Managers, the number of shares of the reported equity security that represent the 
Managers’ gross short position at the close of the last settlement date of the calendar 
month, as well as the corresponding aggregated U.S . dollar value of this reported gross 
short position. 
 
31
  15 U.S.C. 78l. 
32
  15 U.S.C. 78o(d). 

17 
• With regard to Information Table 2 of Form SHO, for each reported equity security, for 
each individual settlement date during the calendar month, the Commission will publish 
the net activity in the reported equity security, as aggregated across all reporting 
Managers. 
The Commission is also adopting, substantially as proposed, the amendment to the CAT 
NMS Plan to require broker-dealers with a reporting obligation to CAT, to report whether an 
original receipt or origination of an order to sell an equity security is a short sale for which a 
market maker is claiming the BFMM locate exception. However, for the reasons discussed 
below, the Commission is not adopting Proposed Rule 205 or the CAT “buy to cover” reporting 
requirements. 
Changes Made to the Proposals: In response to comments, and as discussed in more 
detail below, the Commission is modifying the proposal generally by:  
• Streamlining Form SHO reports by not adopting as proposed the requirement to report 
hedging classifications on Information Table 1, and by requiring a lower level of 
granularity of reporting on Information Table 2
 
;
33
  
• Adjusting the calculation of the dollar value prong of the reporting threshold for equity 
securities of reporting company issuers (i.e., Threshold A) to be based on a monthly 
average of daily gross short positions rather than the proposed daily calculation;  
• Requiring in Rule 13f-2 and in the instructions to Form SHO that, for purposes of 
determining whether a Manager meets or exceeds a reporting threshold, a Manager shall 
determine its gross short position “at the close of regular trading hours” in the equity 
 
33
  Because the proposed rule and form called for publication of only “net” activity based on the information 
reported in Information Table 2, this change in information reported on Form SHO as adopted does not 
affect the information published by the Commission from information derived from the Form SHO reports. 

18 
security, rather than at the “end of day” as was provided for in the instructions to 
Proposed Form SHO; 
• Not adopting Proposed Rule 205 and, consequently, not adopting the Proposed CAT 
Amendment requiring a “buy to cover” order mark in order receipts and order origination 
reports submitted to the CAT; and 
• Making modifications to the text of Rule 13f-2 and the instructions to Form SHO to 
provide context and enhance comprehensibility, such as—adding a reference in the 
definition of “gross short position” to “short sales” as defined in Rule 200(a) of 
Regulation SHO and making minor adjustments to phrasing in the definition;
34
 adding 
language to the rule text to more precisely describe the equity securities for which 
information is reported in final Form SHO;
35 
deleting the superfluous word “collectively” 
from the rule text to enhance overall readability; replacing the term “active LEI” on 
Proposed Form SHO with “non-lapsed LEI”
36
 on final Form SHO; updating the contact 
 
34
  Specifically, we made a non-substantive revision to change the word “including” to “such as” and removed 
the amphibological comma. 
35
  To affirm that the Rule 13f-2 requirements apply to each class of an equity security about which 
information is being reported on Form SHO, and to more accurately indicate that classes of securities, not 
issuers, are registered pursuant to section 12 of the Exchange Act, Rules 13(a)(1) and Rule 13(a)(2) have 
been revised to refer to “each equity security that is of a class of securities” rather than “each equity 
security of an issuer . . . .” This distinction by class of security is also consistent with CUSIP procedures, 
under which, we understand, different classes of stock have distinct identifying codes. Rule 13f-2 requires 
that Managers provide CUSIP numbers for equity securities for which information is reported on Form 
SHO. 
36
  For greater precision in the terminology used in Form SHO as adopted, an LEI that is currently in effect is 
referred to as a “non-lapsed LEI,” rather than an “active LEI” (the terminology used in Proposed Form 
SHO), of a Manager. A non-lapsed LEI is an LEI for which the Manager is current on its periodic renewal 
fees needed to maintain the LEI. Further, to avoid any suggestion that a Manager filing a Form SHO report 
has an obligation to monitor the status of an issuer’s LEI, Instructions 8.c and 9.c of Form SHO—“Column 
3. Issuer LEI. If the issuer has an LEI, enter the issuer’s active LEI”—have been revised to remove the term 
“active.” 

19 
information to be provided on the final Form SHO cover page,
37
 a nd making 
corresponding modifications to conform the text of Rule 13f-2 and the instructions to 
Form SHO.   
• Making non-substantive, technical changes to correct inadvertent grammatical errors in 
the text of the adopted amendment to the CAT NMS Plan that requires a broker-dealer 
with a reporting obligation to CAT to indicate whether an order is a short sale effected by 
a market maker in connection with bona fide market making activities for which the 
BFMM locate exception is claimed.
38
  
II. Discussion of Final Rule 13f-2 and Form SHO 
A.  Final Rule 13f-2 
1. Scope of Persons Covered by Final Rule 13f-2 
a. Proposal 
Exchange Act section 13(f) pertains to “Reports by Institutional Investment Managers.”
39
 
Proposed Rule 13f-2 would have required Managers to collect and file with the Commission via 
EDGAR certain short sale-related data on proposed Form SHO, within fourteen (14) calendar 
days after the end of each calendar month, with regard to each equity security over which the 
Manager and all accounts over which the Manager (or any other person under the Manager’s 
 
37
  The required Form SHO Cover Page contact information for the reporting Manager and its “Contact 
Employee” has been updated to reflect the greater reliance on the communication technology of email 
rather than facsimile.   
38
  Specifically, the preposition “for” was added before “a short sale” to clarify that reporting is required for a 
short sale in which the bona fide market maker exception is claimed, the article “the” was added before 
“exception,” and the preposition “in” was added before “Rule 203(b)(2)(iii)” to clarify that the BFMM 
locate exception is found in Rule 203(b)(2)(iii). 
39
  15 U.S.C.78m(f). 

20 
control) has investment discretion
40
 that meet or exceed a quantitative reporting threshold 
(“Reporting Threshold”). 
As defined in section 13(f)(6)(A) of the Exchange Act and for purposes of Proposed Rule 
13f-2, ‘‘institutional investment manager’’ includes any person, other than a natural person, 
investing in or buying and selling securities for its own account, and any person exercising 
investment discretion with respect to the account of any other person.
41
 As such, the term 
‘‘institutional investment manager’’ typically can include brokers and dealers, investment 
advisers, banks, insurance companies, pension funds and corporations.
42
 
Proposed Rule 13f-2(b)(3) states that “investment discretion” has the same meaning as in 
17 CFR 240.13f-1(b) (“Rule 13f-1(b) under the Exchange Act”),
43
 and Rule 13f-1(b) states that 
“investment discretion” has the same meaning as in section 3(a)(35) of the Exchange Act. Rule 
13f-1(b)’s definition is comprehensive in that it covers all accounts over which the Manager, or 
any person under the Manager’s control, has investment discretion. This same definition of 
investment discretion was used by the Commission in adopting 17 CFR 240.10a-3T (“interim 
final temporary Rule 10a-3T”) in 2008, which required certain Managers to file weekly 
nonpublic reports with the Commission on Form SH regarding short sales and positions.
44
 In 
addition, the Rule 13f-1(b) definition of investment discretion is used for Form 13F “long” 
position reporting by certain Managers.
45
 
 
40
  See Proposed Rule 13f-2(b)(3). 
41
  See Proposed Rule 13f-2(b)(1). 
42
  See also Instructions to Form 13F. 
43
  See 17 CFR 240.13f-1(b). 
44
  See infra discussion in Part II.A.3.a. 
45
  See Form 13F (sec.gov), available at https://www.sec.gov/pdf/form13f.pdf.  

21 
b.   Comments and Final Rule 
One commenter encouraged the Commission to expand the scope of market participants 
subject to reporting under Proposed Rule 13f-2 “beyond just Managers.”
46
 This commenter 
believed the Commission’s determination “to omit a large group of market participants from 
Proposed Rule 13f-2’s scope will negatively affect the completeness and analytical sufficiency of 
the aggregated and disclosed short sale data, impeding the Commission’s ability to accurately 
reconstruct significant or unusual market events.”
47
 This commenter believed that omitting a 
large group of market participants would “not provide the Commission with full visibility into 
the short sale market that it could otherwise achieve pursuant to Proposed Rule 13f-2” and 
believed that an “artificially narrow scope will not further the Commission’s stated goals of 
providing greater transparency and filling the information gaps for market participants and 
regulators.”
48
 This commenter, however, did not identify what market participants were being 
omitted under the proposal and that should otherwise be included. 
As a potential alternative to Proposed Rule 13f-2, however, this commenter suggested, in 
part, that the current FINRA short interest reporting regime could be enhanced, and subsequently 
codified, to address potential limitations in the currently available short sale-related data. 
However, because FINRA’s short interest reporting is applicable only to broker-dealers that are 
FINRA member firms, Managers represent a more diverse group of market participants than is 
 
46
  See Comment Letter from the Alternative Investment Management Association Ltd (Apr. 26, 2022), at 10-
11, available at https://www.sec.gov/comments/s7-08-22/s70822-20126829-287533.pdf (“AIMA Letter”); 
see also SBAI Letter, at 3 (stating that the proposed reporting only includes Managers, which would not 
provide a complete perspective of shorting activity). In raising concerns about reporting and monitoring 
burdens imposed by the reporting regime of Proposed Rule 13f-2, other commenters, however, did not 
question the application of the proposed rule to institutional investment managers.  
47
  AIMA Letter, at 11. 
48
  Id. 

22 
required under FINRA reporting (as was suggested as a potential alternative by the commenter). 
As stated above, Managers typically can include various market participants, including brokers 
and dealers, as well as investment advisers, banks, insurance companies, pension funds and 
corporations. Accordingly, the Commission is adopting as proposed Rule 13f-2(b)(1) to define 
institutional investment managers as having the same meaning as in Exchange Act section 
13(f)(6)(A). Short sale-related data reported by Managers on Form SHO will provide additional 
context to, and otherwise supplement, currently available data by, for example, distinguishing 
directional short selling of Managers from short sale activity effected by market makers and 
liquidity providers.
 
This approach should reduce the reporting of non-directional, “transient” 
short sales activity and provide market participants with more focused information on substantial 
short positions held by Managers. 
Another commenter suggested that the Commission consider an exemption for certain 
types of Managers that do not regularly utilize short positions or that only utilize short positions 
for passive investing purposes.
49
 B y capturing short sale-related data from Managers who hold 
substantial gross short positions—regardless of the purpose for which they utilize short positions, 
the reporting regime of Rule 13f-2 will enhance transparency and provide useful information to 
market participants regarding overall short sale activity. Furthermore, having the reporting 
obligation under Rule 13f-2 triggered by a reporting threshold that is calculated based on a 
monthly average of daily gross short positions in certain equity securities, rather than the 
 
49
  See Comment Letter from Valerie Dahiya, Partner, Perkins Coie LLP (Apr. 26, 2022), at 3, available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126839-287549.pdf (“Perkins Coie Letter”) (stating 
that “for institutional investment managers that only selectively utilize short positions, or who only do so 
passively, these additional compliance costs in relation to the institutional investment manager’s usage of 
short positions could in turn impose untended risks to the manager’s underlying investors if the institutional 
investment manager must divert additional time and resources for compliance and oversight”). 

23 
proposed daily calculation,
50
 is designed in part to alleviate concerns for Managers who only 
occasionally meet or exceed the prescribed reporting thresholds. 
In addition, the Commission did not receive any comments regarding the definition of 
“investment discretion” as proposed. The Commission is adopting Rule 13f-2(b)(3) as proposed 
to define the term “investment discretion” as having the same meaning as in Rule 13f-1(b) 
(which, among other things, incorporates the definition in section 3(a)(35) of the Exchange Act). 
In addition, Managers that will file reports on adopted Form SHO likely have experience 
reporting on Form 13F, for which this same definition is used.
51
 
2. Scope of Reported Securities 
a. Proposal 
Under the proposed rule, a Manager would have had to file a Form SHO report with 
regard to: 
• Any equity security of an issuer that is registered pursuant to section 12 of the 
Exchange Act
52
 or for which the issuer is required to file reports pursuant to section 
15(d) of the Exchange Act
53
 in which the Manager meets or exceeds either (1) a gross 
short position in the equity security with a U.S . dollar value of $10 million or more at 
the close of regular trading hours on any settlement date during the calendar month; 
or (2) a monthly average gross short position as a percentage of shares outstanding in 
the equity security of 2.5 percent or more (Threshold A); and 
 
50
  See infra Part II.A.3 for more discussion of the reporting thresholds in Proposed Rule 13f-2 and Rule 13f-2 
as adopted. 
51
  See infra Part VIII.B.1. Registered investment advisers, particularly those managing hedge funds, are the 
primary Managers likely to be affected by Rule 13f-2.    
52
  15 U.S.C. 78l. 
53
  15 U.S.C. 78o(d). 

24 
• Any equity security of an issuer that is not a reporting company issuer as described 
above in which the Manager meets or exceeds a gross short position in the equity 
security with a U.S. dollar value of $500,000 or more at the close of regular trading 
hours on any settlement date during the calendar month (Threshold B). 
As proposed, the reporting thresholds in Rule 13f-2(a)(1) and (2) (each a “Proposed 
Reporting Threshold”) applied to equity securities, as the term “equity security” is defined in 
section 3(a)(11) of the Exchange Act
54
 and 17 CFR 240.3a11-1 (“Rule 3a11-1”).
55
 This scope, 
which included both exchange-listed and over-the-counter securities, is consistent with the 
securities to which Rules 200, 203, and 204 of Regulation SHO apply.
56
 The proposed scope 
would have included exchange-traded fund (“ETF”) securities, but would not have required 
Managers, in calculating a Proposed Reporting Threshold or Form SHO data, to consider short 
positions the ETF held in individual underlying equity securities.
57
 And because the Proposed 
Reporting Thresholds were based on a Manager’s gross short position in the underlying equity 
security itself, the proposed rule would not have required the Manager to account for derivative 
exposure as part of the threshold calculation for the underlying equity security, but would have 
required Managers to report certain changes in their gross equity short positions derived from 
 
54
  Section 3(a)(11) of the Exchange Act defines “ equity security” as any stock or similar security or any 
security future on any such security; or any security convertible, with or without consideration, into such a 
security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or 
right; or any other security which the Commission shall deem to be of similar nature and consider 
necessary or appropriate, by such rules and regulations as it may prescribe in the public interest or for the 
protection of investors, to treat as an equity security. 15 U.S.C. 78c(a)(11). 
55
  See Proposing Release, at 14956 n.59. 
56
  See Regulation SHO Adopting Release, at 48012. 
57
  Proposing Release, at 14958. 

25 
acquiring or selling the equity in connection with derivative activity, such as exercising an 
option.
58
  
b.   Comments and Final Rule 
The Commission received several comments on Proposed Rule 13f-2’s and Proposed 
Form SHO’s proposed scope of securities, with commenters expressing a variety of views. Most 
commenters took an expansive view, exemplified by one such commenter’s statement that “all 
different securities and ETFs should be required to report all short sale data. The more 
information that is available to every investor and the Commission the better.”
59
 As discussed 
below, other commenters, by contrast, recommended narrowing the universe of “in scope” 
securities by, for example, aligning with similar Commission reporting and public dissemination 
regimes, limiting the scope to securities of U.S. reporting companies, or excluding ETFs, options 
and warrants and other convertibles, and derivatives. Some commenters focused on the impact 
on implementation and compliance costs related to Proposed Rule 13f-2 reporting requirements 
and recommended that derivatives, options, warrants and other convertibles, and ETFs be 
excluded from the scope of equity securities subject to Proposed Rule 13f-2 reporting 
requirements.
60
 
 
58
  As stated in the Proposing Release, the Commission believed this proposed approach balances Managers’ 
reporting costs with the utility such data provides to regulators. See Proposing Release, at 14962. 
59
  Comment from Samuel Meadows (Mar. 26, 2022), at 1, available at https://www.sec.gov/comments/s7-08-
22/s70822-273456.htm (“Samuel Meadows Comment”).  
60
  See, e.g., MFA Letter, at 11-12 (recommending that, to simplify compliance, provide clarity, and reduce 
costs, Commission should limit the reporting requirements to stocks of U.S. reporting company issuers, and 
exclude derivatives and ETFs); SIFMA Letter, at 20 (recommending reduction of compliance costs by 
creating a list of equity securities that would be subject to Proposed Rule 13f-2 reporting requirements that 
would exclude “extraneous securities, such as options, warrants, convertibles, and ETFs”); Comment Letter 
from Frank Vivirito, Compliance Officer, XR Securities LLC (Apr. 25, 2022), at 2 (“XR Securities Letter”) 
(stating “I feel strongly that highly liquid, higher priced, active and efficient ETFs (and perhaps even some 
single name equities) with limited or no settlement issues” should be excluded from Proposed Rule 13f-2 
reporting requirements). 

26 
Comments on the Scope of Covered Securities  
Most commenters supported the applicability of Proposed Rule 13f-2 to short positions in 
ETFs, some expressing specific concerns about “improper” use of ETFs to leverage short 
positions.
61
 However, one commenter advocating for the exclusion of ETFs from the universe of 
“in-scope” securities stated that, in most circumstances, Managers short ETFs largely for 
hedging purposes and not for the same reasons that Managers short stocks of reporting company 
issuers; this commenter stated that such information “will provide the public, and the SEC, very 
little in terms of useful information.”
62
 
The Commission disagrees with the commenter that reporting about gross short positions 
in ETFs will not provide useful information to the public and the Commission. Establishing short 
positions in an ETF can provide short exposure to a diverse set of equity securities or create a 
directional short strategy such as leveraged shorting. Because of their multipurpose nature, ETFs 
are a substantial piece of the short-side market.
63
 ETFs are subject to the requirements of 
 
61
  See, e.g., Comment Letter from Nick Dougherty (Mar. 27, 2022), at 2, available at 
https://www.sec.gov/comments/s7-08-22/s70822-20121466-273451.pdf (“Nick Dougherty Letter”); 
Anonymously Submitted Comment (Mar. 21, 2022), at 1, available at https://www.sec.gov/comments/s7-
08-22/s70822-20120739-272894.pdf. See generally, Anonymously Submitted Comment (Mar. 21, 2022), at 
2, available at https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm (recommending 
that “[a]ll securities, including ETFs, OTC stocks, swaps etc. should have their positions data recorded and 
submitted to the SEC daily”); Samuel Meadows Comment, at 1 (“I strongly believe that all different 
securities and ETFs should be required to report all short sale data.”).  
62
  MFA Letter, at 12. 
63
  ETFs are a popular trading tool that can be used in various ways, including, for example, to hedge a long 
position, or to establish a directional short position. See Exchange-Traded Funds, Investment Company Act 
Release No. 33646 (Sept. 25, 2019), 84 FR 57162 (Oct. 24, 2019) (“[ETFs] have become a popular trading 
tool, making up a significant portion of secondary market equities trading.”). See also Giovanny Moriano 
& Brian Baker, Best inverse and short ETFs – here’s what to know before buying them, Bankrate (Feb. 16, 
2023), available at https://www.bankrate.com/investing/best-inverse-etfs/ (describing traders’ use of short 
ETFs to hedge against falling prices in other positions, to make directional bets on securities or indexes, or 
to magnify returns through leveraged short ETFs); The Renaissance of ETFs, Oliver Wyman (2023), 
available at https://www.oliverwyman.com/our-expertise/insights/2023/may/exchange-traded-funds-are-
fueling-market-opportunities.html (stating “As of the end of December 2022, total ETF assets under 
management (AUM) have reached $6.7 trillion across the US and Europe, growing at approximately 15% 
compound annual growth rate (CAGR) since 2010.... We expect a significant part of this growth to come 
 

27 
Regulation SHO, and there is a benefit to applying the Rule 13f-2 reporting requirements to the 
same universe of securities subject to the Commission’s short sale rules. Further, short 
sale-related data regarding ETFs will provide important transparency to a significant segment of 
market activity to both the marketplace and regulators alike.
64
 
Some commenters recommended that fixed-income securities be added to the proposed 
scope of securities.
65
 These commenters believed that all investment vehicles, including fixed 
income securities, should be included within the scope of securities subject to potential reporting. 
These commenters generally believed that short positions in fixed income securities would 
provide additional transparency to the marketplace. One of these commenters believed that fixed 
income securities should be included under the rule because “bonds play a large role in market 
activities, along with the repo market” and that “corporate bond borrowing data provides an 
unparalleled insight into short positioning at a security and issuer level.”
66
 
Fixed income securities are not subject to the Commission’s short sale rules. Market 
participants, including Managers, are currently accustomed to complying with the short sale rules 
with regard to equity securities that meet the definition of short sales in Rule 200(a) of 
 
from active ETFs.”). Active ETFs can include inverse and short ETFs that seek to use short strategies or 
leverage. 
64
  See Experiences of US Exchange-Traded Funds During the COVID-19 Crisis, INV. CO. INST. (Oct. 2020), 
available at https://www.sec.gov/comments/credit-market-interconnectedness/cll10-2.pdf (“Early in 2020, . 
. . ETF trading volume accounted for between 20 and 30 percent of total stock market trading on a daily 
basis . . . .”); see also Richard B. Evans et al., ETF Short Interest and Failures-to-Deliver: Naked Short-
Selling or Operational Shorting?, U.
 PA. WHARTON SCH. (Jan. 2018), available at 
https://jacobslevycenter.wharton.upenn.edu/wp-content/uploads/2018/08/ETF-Short-Interest-and-Failures-
to-Deliver.pdf (stating that ETFs constitute roughly 10% of U.S. equity market capitalization but over 20% 
of short interest, and that short interest for the ETF market has increased steadily over several years). 
65
  See, e.g., Nick Dougherty Letter (Mar. 27, 2022), at 3 (stating that “fixed income securities should be 
included under Proposed rule 13f-2”); Anonymously submitted Comment (Mar. 21, 2022), at 1, available 
at https://www.sec.gov/comments/s7-08-22/s70822-20120739-272894.pdf. 
66
  Anonymously submitted Comment (Mar. 21, 2022), at 1, available at https://www.sec.gov/comments/s7-
08-22/s70822-20120739-272894.pdf. 

28 
Regulation SHO.
67
 Further, the self-regulatory organizations (“SROs”) currently collect and 
provide data on short sales of equity securities as defined by Rule 200(a) of Regulation SHO. 
Consistent with the discussion in the Proposing Release, the aggregated short sale-related data 
that will be published by the Commission under Rule 13f-2 will provide additional context to 
market participants regarding equity securities that are subject to the requirements of Regulation 
SHO.
68
 For these reasons, the Commission is not including fixed income securities. 
Some commenters also recommended excluding options, warrants, and other convertibles 
from the rule.
69
 Other commenters recommended that derivatives be included within the scope of 
Proposed Rule 13f-2
70
–including those not within the definition of equity security in section 
3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder.
71
 
Certain derivatives, options, warrants, and convertibles are themselves equity securities 
for purposes of section 3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder, and therefore 
for purposes of final Rule 13f-1.
72
 Derivatives and other securities that are not equity securities 
within the definitions of section 3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder, are 
not within the scope of the rule. Managers are currently accustomed to complying with 
requirements for equity securities under Rule 200(a) of Regulation SHO. The Commission is not 
including derivatives and other securities that are not equity securities under the definitions of 
 
67
  See Proposing Release, at 14956 n.59. 
68
  See id. at 14956.  
69
  SIFMA Letter, at 20. 
70
  See, e.g., Better Markets Letter, at 9 (stating that “[i]n order for the final rule to actually serve its purpose, it 
must require that institutional investment managers include their short interest that arises from derivatives 
positions”); WTI Letter, at 4 (stating that not including derivatives contracts such as options and security-
based swaps is a “huge hole that must be remedied” and “will inevitably result in firms exploiting the 
loophole...”); Samuel Meadows Comment, at 1 (stating that “[a]ny and all Short positions resulting from 
derivatives should be included in whether they meet a Reporting Threshold”).  
71
  See supra nn. 54 & 55 and accompanying text; see generally Part II.A.2.a. 
72
  Id. 

29 
section 3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder. Many commenters who 
requested that derivatives be included expressed concern that derivatives could be used to create 
substantial economic short positions, while avoiding Proposed Rule 13f-2’s reporting 
requirements.
73
 T he Commission recognizes, as it did in the Proposing Release, that there is a 
risk that Rule 13f-2 could be a catalyst for growth in markets of economic equivalents of 
underlying equity securities as short sellers look for new avenues to take the economic 
equivalent of short positions while avoiding these proposed reporting requirements.
74
 Managers 
do not have to account for economic exposure to an underlying equity security created through 
the use of equity derivatives when calculating the reporting thresholds for reporting short sales of 
that underlying equity security. However, once a Manager meets or exceeds a reporting threshold 
for an underlying equity security, the Manager will then be required to report certain short 
activity for each settlement date during the reporting calendar month, and that disclosure will 
take into account activity in options, tendered conversions, secondary offering transactions,
75
 and 
other equity derivatives or activity that might affect the reported short positions on Form SHO, 
as discussed further below.
76
 Managers must also report gross short positions of each equity 
security resulting from short sales as defined in Rule 200(a) of Regulation SHO to the extent the 
 
73
  See, e.g., Comment Letter from Oliver Davies, Apr. 20, 2022, available at 
https://www.sec.gov/comments/s7-08-22/s70822-20124155-280554.htm (expressing concern that “funds 
are using complex derivative positions like options and swaps to hide their true short positions”); 
Anonymously submitted Comment, Mar. 14, 2022, available at https://www.sec.gov/comments/s7-08-
22/s70822-20119368-272254.htm (positing that excluding derivative positions can create opportunities to 
avoid triggering the reporting thresholds through other economically equivalent instruments). 
74
  See infra Part VIII.C.8; see also Proposing Release, at 15001. 
75
  See infra n. 285. 
76
  See infra Part II.A.4. 

30 
Manager’s positions meet the relevant thresholds.
77
 Finally, large positions in options are 
currently reportable under a separate requirement.
78
 In addition, there is a separate reporting 
regime for security-based swaps,
79
 which may also lessen the likelihood of Managers attempting 
to avoid the requirements of Rule 13f-2 by using these instruments. 
Comments on Creating a List 
Some commenters recommended narrowing the universe of “in-scope” securities to 
lessen the burden on Managers and to help to ensure compliance with Proposed Rule 13f-2. 
Certain commenters recommended that the Commission create and publish a list of securities 
subject to Form SHO reporting, much like the Commission’s Official List of Section 13(f) 
Securities (“13F List”) required by statute to be made available to the public pursuant to section 
13(f)(4) of the Exchange Act
80
 for use in the preparation of quarterly reports filed with the 
Commission for purposes of long position reporting under Rule 13f-1. One such commenter 
suggested that providing such a list would “promote greater efficiency in validating reported 
short positions and consistency in reporting of those positions among managers.”
81
 Another 
 
77
  Option exercises or assignments can result in a short sale. See, e.g., Rule 201 Adopting Release, at 11263 n. 
433 (explaining that short sales that result from option exercises or assignments are short sales but are not 
covered by the Rule 201 of Reg. SHO’s price test because there is no national best bid). 
78
  FINRA Rule 2360 requires FINRA member firms to report large options positions to the Large Options 
Positions Report (“LOPR”), which FINRA uses to surveil for potentially manipulative behavior, including 
attempts to corner the market in the underlying equity, leverage an option position to affect the price, or 
move the underlying equity to change the value of a large option position.   
79
  See Regulation SBSR,  17 CFR 242.900 through 242.909.  
80
  15 U.S.C. 78m(f)(4). 
81
  Comment Letter from Sarah A. Bessin, Associate General Counsel & Nhan Nguyen, Assistant General 
Counsel, Investment Company Institute (Apr. 26, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-20126820-287527.pdf (“ICI Letter”) at 9 n.28; see also MFA Letter, at 13 (positing that 
having an “official list” of securities subject to Form SHO reporting would reduce the burden on Managers 
to make judgments about whether a particular security is in-scope for Form SHO reporting and would 
reduce inconsistencies among reporting Managers in making such judgments in the absence of such a list); 
see also SIFMA Letter, at 20 (suggesting that the “Form SHO List” include securities that are included on 
the 13F List while excluding securities that should not be covered by Form SHO, as well as the total shares 
outstanding for each security). 

31 
commenter recommended aligning Proposed Rule 13f-2 with the scope of other similar reporting 
and public dissemination regimes (e.g., Rule 13f-1, and prior Rule 10a-3T
82
) that are focused on 
a narrower set of securities, namely certain section 13(f) securities that are included on the 13F 
List.
83
 
Narrowing the scope of securities to the 13F L ist would effectively exclude certain equity 
securities that are subject to the requirements of Regulation SHO, which the Commission 
continues to believe would be inconsistent with the Commission’s objective to publish short 
sale-related data under Rule 13f-2 that w ill provide additional context to market participants 
regarding securities that are subject to the Commission’s current short sale rules.
84
 As stated 
above, market participants, including Managers, are currently accustomed to complying with the 
short sale rules with regard to equity securities generally, so narrowing the scope to the 13F List  
that periodically changes, or to a list created for purposes of Rule 13f-2 that is similar in concept 
to the 13F List , could result in reduced Rule 13f-2 reporting and, consequently, less transparency 
of short sale-related data. Narrowing the scope to securities that are included on the 13F List 
could also result in additional administrative costs and burdens to Managers to the extent that 
Managers have to perform additional monitoring to ensure that their Form SHO reports cover, 
and the calculations required to determine whether a reporting obligation under Rule 13f-2 has 
been triggered because a Reporting Threshold has been met, apply to, only the narrower scope of 
securities (a subset of the equity securities currently subject to the Commission’s short sale 
 
82
  Rule 10a-3T and Form SH focused on certain section 13(f) securities and excluded options that are 
reportable on Form 13F. 
83
  HSBC Letter, at 13-14 (recommending that Commission align the reporting requirements of Proposed Rule 
13f-2 to a narrower set of securities—e.g., the securities prescribed in Rule 13f-1—rather than with 
securities that are “in-scope” with Regulation SHO). 
84
  See Proposing Release, at 14956.  

32 
rules). Such an outcome is inconsistent with the Commission’s objective of enhancing 
transparency, while balancing the interests of gathering and disclosing data that provides 
additional context to market participants regarding securities that are subject to the requirements 
of Regulation SHO against the potential costs to reporting Managers. 
Additionally, with respect to long position reporting, section 13(f)(1) expressly provides 
that the Commission shall make available to the public a list of all equity securities that are 
subject to such reporting.
85
 However, section 13(f)(2) does not require publication of such a list. 
Further, existing short sale-related reporting to exchanges and RNSAs does not rely on a 
published list of securities. For these reasons, it is not necessary to compile and periodically 
provide a list of securities covered by Rule 13f-2. 
Comments to Limit Scope to Equity Securities of U.S. Reporting Company Issuers 
Some commenters recommended tailoring the scope of securities subject to Rule 13f-2 
reporting to the equity securities of U.S. reporting company issuers.
86
 Many of these commenters 
raised concerns about the costs to Managers of developing new systems to capture trading of 
equity securities of non-reporting company issuers. Certain commenters focused on how a 
requirement to report short sales of equity securities of non-reporting company issuers would 
represent an expansion of reporting requirements beyond what is currently required under 
 
85
  Section 13(f)(1) of the Exchange Act (15 U.S.C. 78m(f)(1)) requires any institutional investment manager 
exercising investment discretion over accounts holding at least $100 million in fair market value of certain 
equity securities to file reports on Form 13F with the Commission at the times set forth in 17 CFR 
240.13f-1 (“Rule 13f-1”). The statute directs the Commission to make available to the public, for a 
reasonable fee, a list of all equity securities described in section 13(d)(1) of the Exchange Act and to 
disseminate to the public the information contained in the reports. 
86
  See, e.g., MFA Letter, at 11-12; Letter from Leigh R. Fraser, Partner, Ropes & Gray LLP (Apr. 26, 2022), 
at 9, available at https://www.sec.gov/comments/s7-08-22/s70822-20126853-287579.pdf (“Ropes & Gray 
Letter”). Cf. SIFMA Letter, at 5 (recommending, rather than separate reporting thresholds for reporting 
company issuers and non-reporting company issuers, a single threshold apply to U.S. equity securities 
included in a “Form SHO List” akin to the 13F List that “would include securities that are included on the 
13F List, while also excluding certain extraneous securities, such as options, warrants, convertibles, and 
ETFs that should not be covered by Proposed Form SHO reporting”). 

33 
existing reporting regimes under Exchange Act sections 13(d), 13(f)(1), 13(g), and 16.
87
 Other 
commenters believed that requiring Managers to report short position information in equity 
securities of non-reporting company issuers would be extremely costly and provide little public 
benefit.
88
 Another such commenter stated that because securities of non-reporting company 
issuers can be held by only a small number of U.S. investors, cannot be traded on U.S. securities 
exchanges, and can often be subject to contractual restrictions on transfer, short sales in such 
securities are rare due to the limitations on the number of shares available to borrow.
89
 Another 
commenter stated that trading (including short selling) in securities of non-reporting company 
issuers is limited, which potentially makes Managers that file Form SHO reports with respect to 
such securities more susceptible to retaliatory and manipulative trading strategies.
90
 As stated 
above, the Commission is adopting Rule 13f-2 and Form SHO to help enhance transparency 
regarding short selling in equity securities—including both exchange-listed and over-the-counter 
securities, and ETFs—that are already subject to Regulation SHO. Consistent with the discussion 
in the Proposing Release, through the publication of short sale-related data to investors and other 
market participants, the information published under Rule 13f-2 will provide additional context 
to market participants regarding equity securities that are subject to the requirements of 
 
87
  See, e.g., Ropes & Gray Letter, at 9 (stating that a requirement to report short sale-related data regarding 
equity securities of U.S. private companies would represent a “significant expansion” of reporting 
requirements imposed in investors beyond what currently is required under existing reporting regimes 
under Exchange Act sections 13(d), 13(f)(1), 13(g), 13(h), and 16). 
88
  See, e.g., MFA Letter, at 11-12 (stating that because non-reporting company issuer securities are not 
publicly traded, information about transactions in such securities would not likely have an effect on price 
efficiency or market liquidity, but could have negative consequences for Managers—e.g., increasing the 
risk of exposing Managers, their short positions, and trading strategies, which could facilitate retaliatory 
and manipulative trading strategies).  
89
  Ropes & Gray Letter, at 8-9. 
90
  MFA Letter, at 11-12.  

34 
Regulation SHO.
91
 To that end, the Commission continues to believe that transparency regarding 
short selling in over-the-counter (“OTC”) equity securities, many of which are non-reporting 
company issuers,
92
 is important to investors generally, including many retail investors. The 
Commission has previously stated that securities “that trade in the OTC market are primarily 
owned by retail investors.”
93
 Consistent with this view, it is important from a transparency 
perspective to include, as proposed, non-reporting issuers for purposes of reporting under Rule 
13f-2. While the Commission is cognizant that information on non-reporting company issuers 
will be more difficult to obtain and more costly to report than information on reporting company 
issuers, the Commission disagrees there would be little benefit to the public from such 
information, particularly given the extent of trading in OTC market securities by retail 
investors.
94
 Furthermore, OTC securities typically have lower prices, lower trading volume, and 
are by definition not traded on exchanges, making them potentially more prone to fraud.
95
 In 
addition, as discussed further below, publication of aggregated data approximately one month 
 
91
  See Proposing Release, at 14956.  
92
  See, e.g., Publication or Submission of Quotations Without Specified Information, Exchange Act Release 
No. 89891 (Sept. 16, 2020) (“Adopting Release for Amendments to Rule 15c2-11”), 85 FR 68124, 68125 
(Oct. 27, 2020) (“However, in other cases, there is no or limited current public information available about 
certain issuers of quoted OTC securities to allow investors or other market participants to make informed 
investment decisions.”). 
93
  See, e.g., Publication or Submission of Quotations Without Specified Information, Exchange Act Release 
No. 89891 (Sept. 16, 2020), 85 FR 68124, 68125 (Oct. 27, 2020) (citing to Andrew Ang, et al., Asset 
Pricing in the Dark: The Cross-Section of OTC Stocks, 26 R
EV. FIN. STUDS.  2985–3028 (2013) (“Securities 
that trade in the OTC market are primarily owned by retail investors[,]”); see also Unraveling the Mystery 
of Over-the-Counter Trading, FINRA
 INV’R INSIGHTS (Jan. 4, 2016), available at 
https://www.finra.org/investors/insights/unraveling-mystery-over-counter-trading (“OTC equities are 
largely owned by retail investors, according to a 2013 study from Columbia University, who may be 
attracted to the low price of many OTC equities, including so-called "penny stocks" that trade at under $5 a 
share. That activity is typically very speculative.”). 
94
  See id. See also infra Part VIII.C.6 for a discussion of costs related to tracking non-reporting companies, 
and infra Part II.A.3 for discussion of possible benefit. 
95
  See, e.g., Adopting Release for Amendments to Rule 15c2-11, 85 FR 68124, at 68185.  

35 
following the reporting calendar month will alleviate concerns regarding potential retaliation 
against reporting Managers.  
Other commenters raised questions as to whether the Commission’s jurisdiction extended 
to equity securities not traded in the U.S. One such commenter, highlighting the disparity 
between Proposed Rule 13f-2 reporting and reporting of long positions in the same securities, 
questioned why it would be in the public interest to require more expansive disclosure with 
respect to short positions than long positions, and stated that the “proposed scope of the rule 
would provide U.S. investors with information that is of limited value, particularly with respect 
to non-U.S. securities.”
96
  
Exchange Act section 13(f)(2)’s cross-border reach is based on the territorial approach 
that the Commission has applied when crafting rules to implement other provisions of the 
Exchange Act.
97
 Consistent with that territorial approach (which is based on Supreme Court 
precedent, including Morrison v. National Australia Bank, Ltd. and its progeny) the Commission 
examines the relevant statutory provision to determine the domestic conduct that is covered by 
the provision.
98
 The Commission understands section 13(f)(2), by its terms, to apply to any 
institutional investment manager already subject to U.S. reporting requirements. This indicates 
that the relevant domestic conduct under section 13(f)(2) is being an institutional investment 
 
96
  HSBC Letter, at 13-14 (recommending that the reporting requirements of Proposed Rule 13f-2 be limited to 
equity securities of reporting company issuers that are traded on a Commission-registered trading 
platform). 
97
  See, e.g., Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, Exchange 
Act Release No. 74244 (Feb. 11, 2015), 80 FR 14563, 14649 (Mar. 19, 2015) (“2015 Regulation SBSR 
Adopting Release”) (discussing the territorial approach to the cross-border application of Title VII 
requirements for regulatory reporting and public dissemination of security-based swap transactions). 
98
  561 U.S. 247. See, e.g., Abitron Austria GmbH v. Hetronix Int’l, Inc, 600 U.S. **, **, 2023 WL 4239255, 
at *4 (June 29, 2023) (stating that “[the Supreme Court has] repeatedly and explicitly held that courts must 
“identif[y] ‘the statute’s “focus”’ and as[k] whether the conduct relevant to that focus occurred in United 
States territory”). 

36 
manager operating in the U.S. securities markets such that the investment manager is subject to 
filing reports with the Commission. Thus, when that relevant domestic conduct is present here in 
the United States, section 13(f)(2)’s regulatory reporting obligation will generally apply. 
The Commission is adopting Rule 13f-2 and Form SHO to help enhance transparency 
regarding short selling in equity securities—including both exchange-listed and over-the-counter 
securities, and ETFs. The Commission continues to believe that, through the publication of short 
sale-related data to investors and other market participants, the information reported by 
Managers will provide important additional context to market participants regarding short sale 
activity in these equity securities by Managers. The Commission disagrees that the reported 
information would be of “limited value” as was suggested by a commenter. Transparency 
regarding short selling by Managers of securities of U.S. and non-U.S. issuers is important 
regardless of where those sales occur. 
Final Rule 
For the reasons discussed above, the Commission is adopting the scope of securities as 
originally proposed. Specifically, the final rule will cover equity securities as defined in section 
3(a)(11) of the Exchange Act and Rule 3a11–1 thereunder. This scope of securities includes both 
exchange-listed and OTC equity securities, including, inter alia, ETFs, certain derivatives, and 
options, warrants and other convertibles, which is consistent with the equity securities to which 
Rules 200, 203, and 204 of Regulation SHO apply.
99
 
 
99
  See Regulation SHO Adopting Release, at 48012.  

37 
3. Reporting Thresholds 
a. Proposal 
To balance the interests of gathering and disclosing data and the potential costs to 
reporting Managers, the Commission proposed separate thresholds for short positions in 
reporting company issuers, or Threshold A, and non-reporting company issuers, or Threshold 
B.
100
 Threshold A, in Proposed Rule 13f-2(a)(1), involved a two-pronged approach that would 
have required reporting by Managers that have, with regard to each equity security of a reporting 
company issuer, either (i) a gross short position with a U.S . dollar value of $10 million or more 
at the close of regular trading hours on any settlement date during the calendar month, or (ii) a 
2.5 percent or higher monthly average gross short position as a percentage of shares 
outstanding.
101
 Threshold B, in Proposed Rule 13f-2(a)(2), involved   a single-pronged approach 
that would have required   reporting by Managers that have, with regard to each equity security of 
a non-reporting company issuer, a U.S . dollar value of $500,000 or more at the close of regular 
trading hours on any settlement date during the calendar month.
102
 The Proposed Reporting 
Thresholds were based on comment letters and analysis of Form SH data collected under Rule 
10a-3T, an interim temporary rule adopted by the Commission in October 2008, which required 
certain institutional investment managers to file weekly nonpublic reports with the Commission 
on Form SH regarding their short sales and short positions in certain section 13(f) securities, 
 
100
  As discussed above, an issuer of a class of securities that is registered pursuant to Exchange Act section 12 
or for which the issuer is required to file reports pursuant to Exchange Act section 15(d) is referred to 
herein as a reporting company issuer; issuers not meeting those criteria are referred to herein as non-
reporting company issuers. 
101
  Proposed Rule 13f-2(a)(1). See Proposing Release, at 14962 (describing in detail the design of Threshold 
A). 
102
  Proposed Rule 13f-2(a)(2). See Proposing Release, at 14962 (describing in detail the design of Threshold 
B). 

38 
other than options.
103
 Rule 10a-3T required reporting of short positions that were either greater 
than 0.25 percent of shares outstanding or $10 million in fair market value.
104
 This temporary 
rule was adopted in the wake of the 2008 financial crisis in response to concerns about high 
levels of volatility associated with short selling.
105
 Proposed Threshold B was developed based 
on an analysis of OTC Markets data.
106
 The Proposed Reporting Thresholds were structured to 
make it more difficult for Managers with substantial gross short positions to avoid disclosure by 
trading below a Proposed Reporting Threshold, particularly with lower market capitalization 
securities. 
The approach to Threshold A, as described in the Proposing Release, was designed to 
ensure that a substantial short position in either a small capitalization security or a large 
 
103
  Disclosure of Short Sales and Short Positions by Institutional Investment Managers, Exchange Act Release 
No. 58785 (Oct. 15, 2008), 73 FR 61678 (Oct. 17, 2008). The rule extended the reporting requirements 
established by the Commission’s Emergency Orders dated Sept. 18, 2008, Sept. 21, 2008, and Oct. 2, 2008, 
with some modifications. See Emergency Order Pursuant to Section 12(k)(2) of the Securities and 
Exchange Act of 1934 Taking Temporary Action to Respond to Market Developments, Exchange Act 
Release No. 58591 (Sept. 18, 2008), 73 FR 55175 (Sept. 24, 2008); Amendment to Emergency Order 
Pursuant to Section 12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action to Respond 
to Market Developments, Exchange Act Release No. 58591A (Sept. 21, 2008), 73 FR 55557 (Sept. 25, 
2008) (amending the Sept. 18, 2008 Emergency Order (“Order”) to clarify certain technical issues and 
when the information filed by the institutional investment managers on a nonpublic basis would be made 
public by the Commission on a delayed basis); Amendment to Order and Order Extending Emergency 
Order Pursuant to Section 12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action to 
Respond to Market Developments, Exchange Act Release No. 58724 (Oct. 2, 2008), 73 FR 58987 (Oct. 8, 
2008) (extending effectiveness of the Order through Oct. 17, 2008, and stating that the Forms SH filed 
under the Order would remain nonpublic to the extent permitted by law). 
104
  See Proposing Release, at 14963-65 (discussing the analysis of Form SH data). 
105
  Rule 10a-3T remained in effect through July 2009, at which time the Commission stated that it and its staff 
would be working with several SROs to make certain short sale volume and transaction data publicly 
available through SRO websites. See Proposing Release, at 14954 (providing background on Rule 10a-3T 
and related Form SH).  
106
  See Proposing Release, at 14964 n.82 (“This analysis was performed using data from OTC Markets Group 
Inc. available through Wharton Research Data Services, https://wrds-
www.wharton.upenn.edu/pages/about/data-vendors/otc-markets-group/. The data were filtered to only 
include equities that had a closing price and short interest on September 30, 2020. Approximately 13% of 
the data did not have total shares outstanding available, representing approximately 14% of the dollar value 
of short interest. We use these data without shares outstanding as a proxy for non-reporting issuers. The 
Commission used September 2020 because that is the most recent date in which a dataset containing total 
shares outstanding for a broad set of OTC equities was available.”).  

39 
capitalization security could potentially trigger a reporting obligation under Threshold A.
107
 For 
example, it would be difficult for a Manager to trigger only a dollar threshold in a given security 
if the market capitalization of the reporting company issuer is small; likewise, it would be 
difficult for a Manager to trigger only a percentage threshold in a given security if the market 
capitalization of the reporting company issuer is large. The Commission believed that this would 
help to ensure transparency into short sale-related activity that would be beneficial to both 
market participants and regulators. As stated above, the Proposed Reporting Thresholds were 
structured to make it more difficult for Managers with substantial gross short positions to avoid 
disclosure by trading below a Reporting Threshold, particularly with lower market capitalization 
securities. The proposed U.S . dollar value-based prong was designed to capture Managers with a 
substantial short position, even if the position was relatively small compared to the market 
capitalization of the issuer.
108
 The prong based on percentage of shares outstanding was designed 
to capture Managers with gross short positions that are large relative to the size of the issuer and, 
therefore, could have a significant impact on the issuer.
109
 
Regarding Threshold B, as discussed in the Proposing Release, a $500,000 or more 
threshold for non-reporting company issuer securities is similar to the median dollar value of a 
position of 2.5 percent of the market capitalization of OTC stocks for which the Commission was 
able to obtain information on total shares outstanding.
110
 The Commission believed that this 
approach with regard to non-reporting company issuers would help to ensure added transparency 
into short sale-related activity that would be beneficial to both market participants and regulators, 
 
107
  Id. at 14962. 
108
  Id. 
109
  Id. 
110
  Id. at 14962-63. 

40 
because, as discussed in the Proposing Release, it would capture Managers with substantial short 
positions in an equity security of a non-reporting company issuer, even if such positions are 
relatively small compared to the market capitalization of the issuer.
111
 Rather than a two-pronged 
reporting threshold for equity securities of non-reporting company issuers, however, the 
Commission proposed a single-pronged, dollar value-based, reporting threshold for 
non-reporting company issuer securities given its understanding that the number of total shares 
outstanding for non-reporting company issuers may not be readily and consistently accessible to 
Managers.
112
 
As discussed in the Proposing Release, to determine whether the proposed dollar value 
prong of Threshold A (Proposed Rule 13f-2(a)(1)(i)) or Threshold B (Proposed Rule 13f-2(a)(2)) 
is met, a Manager would be required to determine its end of day gross short position on each 
settlement date during the calendar month and multiply that figure by the closing price at the 
close of regular trading hours on the relevant settlement date.
113
 In circumstances where such 
closing price was not available in calculating Threshold B, a Manager would be required to use 
the price at which it last purchased or sold any share of that security, which would be readily 
available to the Manager.
114
 
As discussed in the Proposing Release, to determine whether the second prong of 
Threshold A (Proposed Rule 13f-2(a)(1)(ii))—2.5 percent or higher monthly average gross short 
position as a percentage of shares outstanding in the equity security—is met, the Manager would 
be required to (a) identify its gross short position in the equity security at the close of each 
 
111
  Proposing Release, at 14962-63. 
112
  Id. at 14962. 
113
  Id. at 14957. 
114
  Id. 

41 
settlement date during the calendar month of the reporting period, and divide that figure by the 
number of shares outstanding in such security at the close of that settlement date, then (b) add 
together the daily percentages during the calendar month as determined in (a) and divide the 
resulting total by the number of settlement dates during the calendar month reporting period. The 
number of shares outstanding of the security for which information was being reported would 
have been determined by reference to an issuer’s most recent annual or quarterly report, and any 
subsequent update thereto, filed with the Commission.
115
 
b.    Comments and Final Rule 
As discussed below, the Commission received numerous comments regarding various 
aspects related to the Proposed Reporting Thresholds. Generally, these comments varied, with 
some commenters recommending, for example, that the Commission raise the thresholds (which 
would trigger less gross short position reporting) and others recommending the Commission 
lower or eliminate the thresholds (which would trigger additional gross short position 
 
115
  Id.  

42 
reporting).
116
 Some commenters expressed general support for the Proposed Reporting 
Thresholds, or expressed support for certain aspects of those thresholds.
117
 
Comments to Raise Threshold A 
Some commenters recommended increasing the proposed Reporting Threshold A by, for 
example, doubling the percent of shares outstanding threshold from 2.5 percent to 5 percent so as 
to be consistent with the existing reporting requirements of 17 CFR 240.13d-1 (“Exchange Act 
Rule 13d-1”)
118
 and the proposed reporting requirements of 17 CFR 240.10B-1 (“Exchange Act 
Rule 10B-1”)
119
 related to large positions in security-based swaps.
120
 Other commenters also 
 
116
  See, e.g., ICI Letter, at 9-10 (supporting a higher threshold, stating that “a higher threshold would still 
provide the Commission with information on such large positions, while reducing the burdens on managers 
of reporting smaller positions that likely would have a lesser market impact”); K&L Gates Letter, at 4-5 
(supporting a higher threshold, and stating that “[u]nless the Reporting Thresholds are modified, we 
anticipate that the Commission will be inundated with reports providing significant detail about positions 
that, in many cases, are not sufficiently sizable to impact the larger markets or raise the type of concerns 
that the Proposal was intended to address”); but see WTI Letter (stating that “it is important to set the 
threshold as low as possible to mitigate any effects and impacts from firms attempting to game the 
threshold”). 
117
  See, e.g., SIFMA Letter, at 20 (stating that “while certain SIFMA members believe that the threshold 
should be higher, other SIFMA members did not object to the proposed threshold of 2.5 percent of the 
issuer’s TSO or $10 million fair market value”); Schulte Roth & Zabel LLP Letter (Apr. 26, 2022), at 3, 
available at https://www.sec.gov/comments/s7-08-22/s70822-20126845-287561.pdf (“Schulte Roth & 
Zabel Letter”) (stating that “[w]e believe that the 2.5 percent threshold identifies those situations where a 
short position could lead to market manipulation”).  
118
  Rule 13d-1 (requiring long-side equity securities holders to file a Schedule 13D or Schedule 13G if the 
security holder owns over 5% of an issuer’s equity securities). 
119
  See Prohibition Against Fraud, Manipulation, or Deception in Connection With Security-Based Swaps; 
Prohibition Against Undue Influence Over Chief Compliance Officers; Position Reporting of Large 
Security-Based Swap Positions, Exchange Act Release No. 93784 (Dec. 15, 2021), 87 FR 6652, 6678 (Feb. 
4, 2022) (“Rule 10B-1 Proposal”). See also Reopening of Comment Period for Position Reporting of Large 
Security-Based Swap Positions, Exchange Act Release No. 97762 (June 20, 2023), 88 FR 41338 (June 26, 
2023) (proposing to require any person holding security-based swap positions to file a proposed Schedule 
10B if they hold in excess of $300 million in equity security-based swap positions or if the notional value 
of those security-based swap positions is 5% of the outstanding number of shares of a class of equity 
securities, whichever is less). 
120
  See, e.g., Ropes & Gray Letter, at 6 (recommending increasing the threshold to 5% in order to “mitigate 
costs to investors and provide consistency with other reporting regimes”); K&L Gates Letter, at 5 (stating 
that 2.5% does not “represent a significant portion of an issuer’s outstanding equity securities,” and 
recommending increasing the threshold to more than 5% of an issuer’s voting equity securities in order to 
be consistent with the existing reporting requirements of Rule 13d-1); Perkins Coie Letter, at 6 
(recommending alignment with requirements of Rule 13d-1(a) that require filing of Schedule 13D or 13G 
 

43 
recommended doubling that same percentage of shares outstanding threshold from 2.5 percent to 
5 percent, because the commenters believed that the proposed 2.5 percent threshold was not 
sufficiently sizable to have a market impact.
121
 Additionally, one commenter believed that the 
lack of any reported instances of “short-side” manipulation did not justify a lower percentage 
threshold compared to Rule 13d-1 and proposed Rule 10B-1.
122
 
Other commenters proposed that the U.S . dollar value-based threshold of Threshold A be 
raised.
123
 O ne commenter suggested t hat it be increased from the proposed $10 million to $100 
million because a $100 million threshold would capture more substantial short positions and be 
consistent with the adjustment to the proposed percentage of shares outstanding threshold as 
compared to former Form SH (i.e., a tenfold increase from 0.25 percent under Form SH to 2.5 
percent under Proposed Form SHO).
124
 
For reasons set forth below and discussed more fully in Part VIII, increasing the proposed 
Threshold A percentage-based threshold from 2.5 percent or more of total shares outstanding to 
 
upon crossing a 5% threshold of ownership of any class of an equity security); ICI Letter, at 10 (stating that 
Commission identified 5% as a threshold over which a position could have a meaningful market impact in 
“recent” Rule 10B-1 proposal). 
121
  K&L Gates Letter, at 5; see also ICI Letter, at 9-10 (“However, we believe that a higher threshold would 
still provide the Commission with information on such large positions, while reducing the burdens on 
managers of reporting smaller positions that likely would have a lesser market impact.”). 
122
  One commenter believed that the proposed Rule 13f-2 reporting regime was overly expansive and 
“asymmetric” to existing or other proposed reporting regimes in multiples ways, such as the proposed 
percentage reporting threshold of 2.5% being lower than the 5% threshold in Rules 13d-1 and 10B-1. See 
SIFMA Letter, at 3-4 (stating that there is “no empirical evidence” that short selling requires an 
“asymmetric” reporting regime and that “[t]his conclusion is consistent with the SEC’s own reported 
enforcement actions, i.e., any reported instances of ‘short-side’ manipulation (e.g., ‘short and distort’ 
campaigns) are dwarfed by the instances of ‘long-side’ manipulation (e.g., ‘pump and dumps’). There thus 
is simply no basis for such asymmetric regulation.”). 
123
  See, e.g., Virtu Letter, at 2 (positing that dollar value thresholds “are significantly lower than is 
necessary”); Perkins Coie Letter, at 2 (finding the $10 million (USD) gross short position threshold of 
Threshold A too low); XR Securities Letter, at 2 (citing circumstance illustrating that $10M prong of 
Threshold A may be too low). 
124
  Schulte Roth & Zabel Letter, at 3. 

44 
5 percent (e.g., to be consistent with the existing 5 percent reporting threshold of Exchange Act 
Rule 13d-1 and the proposed reporting requirements of Exchange Act Rule 10B-1)  , as suggested 
by some commenters,
125
 is not warranted or appropriate. In this regard, because the rules are 
designed for different purposes and utilize different reporting thresholds to meet their respective 
objectives, the Commission does not believe, as one commenter states, that comparing Rule 
13f-2 with long-side Rule 13d-1, as well as comparing perceived instances of “short-side” and 
“long-side” manipulation, is an accurate assessment by which to determine Rule 13f-2’s 
Reporting Thresholds. Reporting under Exchange Act section 13(d)   is intended to provide 
information to the public and the affected issuer about rapid accumulations of its equity 
securities in the hands of persons who have the potential to change or influence control of the 
issuer.
126
 R eporting under Rule 13f-2, in contrast, is intended to capture Managers with gross 
short positions that are large relative to the size of the issuer and could therefore have a 
significant impact on the issuer, especially for issuers with a small market capitalization where 
the dollar-based threshold is less likely to be breached.
127
 An increase in the percentage-based 
prong of Threshold A, from 2.5 percent to 5 percent, would reduce transparency into short 
positions in smaller stocks. Specifically, increasing the percentage from 2.5 percent to 5 percent 
would reduce transparency into stocks with less than a $400 million market capitalization. This 
reduction could be meaningful given that, short and distort campaigns and other market 
manipulations are more likely to occur in stocks with lower market capitalizations and less 
 
125
  See supra nn. 121 & 122.  
126
  See, e.g., Filing and Disclosure Requirements Relating to Beneficial Ownership, Release No. 34-14693 
(Apr. 21, 1978), 43 FR 18501, 18484 (Apr. 28, 1978) (stating that the “legislative history [of Exchange Act 
section 13(d)] reveals that it was intended to provide information to the public and the affected issuer about 
rapid accumulations of its equity securities in the hands of persons who would then have the potential to 
change or influence control of the issuer”). 
127
  See Proposing Release, at 14961-64.  

45 
public information.
128
 As a result, the appropriate threshold for Rule 13d-1 is not necessarily the 
appropriate threshold for Rule 13f-2. Instead, the Commission continues to believe that a broader 
coverage of short position reporting (i.e., using a 2.5 percent reporting threshold) is more 
appropriate for Rule 13f-2, especially given that the reported data are aggregated and 
anonymized before public dissemination with a delay. Here, the Commission is designing a 
reporting threshold that is appropriate for the purposes of section 13(f)(2). Based on analysis of 
Form SH, a 2.5 percent or higher monthly average gross short position is an appropriate 
threshold.
129
 For example, one exchange estimates that median short interest for small-cap 
issuers is only about 3 percent,
130
 indicating that a single Manager breaching the 2.5 percent 
threshold would be significant for many issuers. Thus, a percentage-based Threshold A is 
appropriate to adopt as proposed.  
Nor does the Commission believe that raising the dollar-based threshold of Threshold A 
from $10 million to $100 million to be consistent with the tenfold increase in percentage 
threshold is warranted or appropriate. Based on its analysis of Form SH data as discussed in the 
Proposing Release,
131
 as well as the need to balance costs with the rule’s ultimate goal of 
transparency, $10 million strikes an appropriate balance of limiting costs of reporting to 
 
128
  See infra Part VIII.C.1 (discussing market manipulations) and Part VIII.E.3 (discussing how thresholds are 
triggered at various dollar amounts).  
129
  See infra Part VIII.E for discussion of different threshold options. 
130
  See Short Interest in Decline, NASDAQ (Mar. 3, 2022), available at https://www.nasdaq.com/articles/short-
interest-in-decline. 
131
  As discussed in the Proposing Release, the Proposed Reporting Thresholds were based on comment letters 
and analysis of Form SH data collected under Rule 10a-3T. Proposing Release, at 14963-64. Rule 10a-3T 
required reporting of short positions that were either greater than 0.25% of shares outstanding or $10 
million in fair market value. Comment letters to Rule 10a-3T itself generally concurred with the dollar 
reporting obligation but expressed concerns that the percentage obligation was too low. Suggestions for a 
percentage reporting obligation ranged from 1% to 5% of shares outstanding. See, e.g., Seward Kissel LLP, 
available at https://www.sec.gov/comments/s7-31-08/s73108-43.pdf; Investment Adviser Association, 
available at https://www.sec.gov/comments/s7-31-08/s73108-38.pdf; and Securities Industry and Financial 
Markets Association, available at https://www.sec.gov/comments/s7-31-08/s73108-52.pdf. 

46 
Managers, while increasing transparency into short positions, especially for equity securities of 
issuers with mid or large market capitalizations that may not be captured under the percentage 
threshold. While issuers with small market capitalizations may have only one or a few large short 
sellers, issuers with mid or large market capitalizations may have tens or even hundreds of large 
short sellers, which diffuses the percentage of short interest for each short seller. The 
Commission considered this when setting a dollar-based threshold of Threshold A such that large 
short sellers are captured for all equity issuers. 
Comments to Lower or Eliminate Reporting Thresholds 
Other commenters recommended that the Proposed Reporting Thresholds be reduced or 
eliminated. Some of these commenters were concerned that the Proposed Reporting Thresholds 
could be too lenient and under-inclusive,
132
 and some of those commenters supported removing 
the thresholds entirely because of the possibility of Managers intentionally maintaining short 
positions just below the thresholds to avoid reporting.
133
 One commenter stated that the final rule 
should “eliminate the proposed thresholds so as to reduce or eliminate the risk that unknown, 
hidden short positions could pose to investors and the markets.”
134
 However, eliminating 
thresholds to capture all short sale data may result in the inclusion of “transient” short sales,
135
 
such as short sales due to market making or customer facilitation activity rather than directional 
 
132
  See, e.g., Comment from Peter Stauduhar (Mar. 6, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-20118728-271591.htm (stating that “[t]he thresholds are a critical part of the success of this 
rule, and I urge the Commission to worry less about the burden the reporting will have on short sellers”). 
133
  See, e.g., Comment from Travis Donovan (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-272287.htm; Comment from Steve B. (Mar. 14, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20119335-272221.htm (“Steve B. Comment”); 
Anonymously Submitted Letter (Apr. 2, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20122297-278355.htm (“I believe that all short sales should be recorded and reported. The 
minimum threshold should be a single short sale.”).  
134
  Better Markets Letter, at 12.  
135
  See Virtu Letter, at 2-3. 

47 
short sales. By providing a properly calibrated threshold this type of “noise” should be reduced 
and allow market participants to instead focus on substantial short sales that are more likely to be 
directional. The reduction of “noisy” short position information also sets Rule 13f-2 apart from 
existing short sale data regimes, such as those provided by FINRA and the exchanges, which do 
not have thresholds. On the other hand, the threshold cannot be set so high that substantial short 
sales by Managers are out of scope. The Reporting Thresholds, as adopted, will help ensure 
added transparency into short sale-related activity that would be beneficial to both market 
participants and regulators, and will result in reporting by Managers with a substantial gross 
short position in both reporting and non-reporting company issuers. 
Recommendations to Base Reporting Thresholds on a Single Metric 
Some commenters, often in conjunction with recommendations to increase the Proposed 
Reporting Thresholds, suggested applying a single threshold metric. One commenter proposed 
the Commission adopt a single U.S. dollar value-based threshold for all issuers in order to limit 
the impact of any potential ambiguity around identifying the number of shares outstanding for 
non-reporting company issuers.
136
 Another commenter, however, recommended that the 
Commission adopt a single threshold based on percentage of shares outstanding, stating that it 
would “mitigate unnecessary operational and cost burdens on Managers,” as the commenter 
believed that a U.S. dollar value-based threshold would require more difficult system 
buildouts.
137 
 
136
  See MFA Letter, at 4 (stating that “[a] dollar-based approach would be more simple and less costly for 
managers to employ”).  
137
  See, e.g., ICI Letter, at 8-9 (stating “we recommend that the Commission adopt a single reporting threshold 
level that is an average short position in an equity security based on a percentage of shares outstanding 
rather than on a dollar value”); see also K&L Gates Letter, at 5 (recommending a threshold triggered only 
by “a position representing more than 5 percent of an issuer’s voting equity”). 

48 
The Reporting Thresholds are designed to require the filing of Form SHO by Managers 
with substantial gross short positions. The two-pronged approach of Threshold A measures the 
size of a Manager’s short position relative to both dollar amount and number of shares. The 
dollar value-based prong (Rule 13f-2(a)(1)(i)) captures Managers with substantial short 
positions, even if such positions are relatively small compared to the market cap of the issuer. 
The percentage of total shares outstanding-based prong (Rule 13f-2(a)(1)(ii)) captures Managers 
with gross short positions that are large relative to the size of the issuer and, therefore, could 
have a significant impact on the issuer. With respect to securities of non-reporting company 
issuers, however, the Commission understands that the number of total shares outstanding may 
not be readily and consistently accessible.
138
 For this reason, a single-pronged, dollar value-
based Reporting Threshold is an efficient way for Managers to determine whether they trigger 
Threshold B (Rule 13f-2(a)(2)) that avoids the additional cost and complexity of locating the 
number of total shares outstanding for the securities of a non-reporting company issuer that may 
be difficult or impossible to locate.
139
 
Comments Recommending the Use of the Same Threshold for Reporting Company and Non-
Reporting Company Issuers 
Another commenter recommended not having differing thresholds for reporting company 
issuers and non-reporting company issuers.
140
 This commenter believed having two different 
reporting thresholds “would be unnecessarily complicated and burdensome.”
141
 Furthermore, the 
 
138
  Proposing Release, at 14962. 
139
  Id. 
140
  See SIFMA Letter, at 19-20 (stating that “the proposed distinction between the thresholds that would apply 
to Reporting Company securities and Non-Reporting Company securities would be unnecessarily 
complicated and burdensome”). 
141
  Id. 

49 
commenter stated as an alternative the creation of a “Form SHO List” akin to the 13F List that 
would include total shares outstanding of each security to assist in threshold calculations.
142
 As a 
result of the potential difficulties in accessing the total shares outstanding for non-reporting 
company issuers discussed above, using a percent of total shares outstanding-based approach 
would not be appropriate for non-reporting company issuers. Requiring total shares outstanding 
for both thresholds would be operationally difficult, potentially inaccurate and therefore costly 
for Managers to determine for some non-reporting companies. Requiring a dollar-based metric 
for both thresholds could be both under-inclusive and over-inclusive, as the markets for reporting 
and non-reporting companies differ. For example, a high dollar threshold (e.g., $10 million) for 
both thresholds would under-include many non-reporting companies while a low dollar threshold 
(e.g., $500,000) would over-include reporting companies. For these reasons, the Commission is 
adopting Threshold B as proposed. 
For similar reasons, and as discussed in the “Scope of Reported Securities” section 
above, the Commission will not be publishing a “Form SHO List” with total shares outstanding 
to assist in Manager calculations, as one commenter suggested. The thresholds as adopted are 
designed to reduce operational burdens while capturing substantial short positions in both 
reporting and non-reporting company issuers. Adopting a much lower dollar threshold for non-
reporting company issuers than that for reporting company issuers results in Managers not being 
required to determine percentages of total shares outstanding and, due to sparse data in non-
reporting company issuer markets, Managers would avoid the difficulty of having to do so. A 
“Form SHO List” with total shares outstanding would not be necessary for Managers reporting 
 
142
  SIFMA suggested that the “Form SHO List” include securities that are included on the 13F List, while 
excluding securities that should not be covered by Form SHO. Id. at 20. SIFMA further suggested that the 
“Form SHO List” include, for each security, the total shares outstanding. 

50 
positions in reporting company issuers because, unlike Rule 13f-1 securities, Rule 13f-2 covers 
equity securities as discussed above,
143
 rendering additional guidance on what securities qualify 
unnecessary. Additionally, as discussed above in the Scope of Reported Securities section, 
section 13(f)(1) expressly provides that the Commission shall make available to the public a list 
of all equity securities that are subject to such reporting,
144
 while section 13(f)(2) does not 
require publication of such a list. 
Comments regarding Other Concerns Related to Thresholds 
Implementation and Compliance Costs 
Some commenters stated that the Proposing Release did not adequately account for the 
burdens associated with monitoring for whether a Reporting Threshold is met, i.e., whether a 
Manager has a Form SHO reporting obligation.
145
 Specifically, these commenters stated that the 
Proposing Release did not address the costs of those Managers who would need to develop and 
implement reporting systems to monitor for whether a Reporting Threshold is met or exceeded, 
 
143
  See supra Part II.A.2. 
144
  Section 13(f)(1) of the Exchange Act (15 U.S.C. 78m(f)(1)) requires any institutional investment manager 
exercising investment discretion over accounts holding at least $100 million in fair market value of certain 
equity securities to file reports on Form 13F with the Commission at the times set forth in Rule 13f-1. The 
statute directs the Commission to make available to the public, for a reasonable fee, a list of all equity 
securities described in section 13(d)(1) of the Exchange Act and to disseminate to the public the 
information contained in the reports. 
145
  See, e.g., Virtu Letter, at 2 (“the dollar value thresholds referenced in the Proposal are significantly lower 
than is necessary”); MFA Letter, at 4 (recommending a single, dollar-based threshold only); SIFMA Letter, 
at 5 (recommending elimination of different thresholds for reporting and non-reporting companies in favor 
of one uniform threshold for U.S. equity securities); ICI Letter, at 9 (recommending a single, percentage-
based threshold for both reporting and non-reporting company issuers); Ropes & Gray Letter, at 2 
(recommending that all thresholds “be determined using average positions over a month rather than daily 
positions.”).  

51 
that may or may not ultimately result in a reportable gross short position.
146
 The comments are 
addressed in the Economic Analysis, in Part VIII below. 
“Gross” Short Position versus “Net” Short Position 
Some commenters requested that the Reporting Thresholds be calculated based on “net” 
short position rather than “gross” short position as proposed. Multiple commenters expressed 
concern that using a gross short position calculation would not accurately reflect risk in the 
markets.
147
 However, other commenters supported the use of the proposed gross short position 
data either instead of or in conjunction with net short position data.
148
 One commenter proposed 
requiring net short position reporting by Managers that are solely reporting on Form SHO with 
regard to one issuer while requiring gross short position reporting for Managers with short 
 
146
  See, e .g., MFA Letter, at 10-11; see also ICI Letter, at 5 (stating that Proposed Rule 13f-2 would require a 
Manager to continuously monitor and record any activity that could potentially be subject to future 
reporting on Form SHO). While the costs would likely be higher if Managers choose to monitor daily, Rule 
13f-2 does not require daily monitoring, either for reporting or non-reporting company issuers. Managers 
may choose to do this threshold calculation on a rolling basis, or to do the calculation after the month has 
ended. While some Managers may choose to incur the higher costs of daily tracking and calculation for 
purposes of compliance with Rule 13f-2, the final rule’s Reporting Threshold for reporting company issuers 
is not based on a Manager’s gross short position on a single trading date, reducing the need for daily 
tracking. See infra Part VIII.C.6.b. 
147
  See, e.g., Virtu Letter, at 3 (stating that “the requirement to report such positions on a gross rather than net 
basis would likely distort the actual degree of short positions as it will capture circumstances where a firm 
is net long but may have short positions among its accounts.”); Perkins Coie Letter, at 3-4, 6. 
(recommending that “[r]ather than set a low threshold and over capture short position information, the SEC 
should revise the requirement to $10 million net short position as opposed to gross.”); Schulte Roth & 
Zabel Letter, at 2 (stating that “net short position data would more accurately reflect actual positions taken 
by institutional investment managers and provide useful transparency to the Commission and to the 
marketplace.”); ICI Letter, at 10 (recommending that “the Commission streamline and simplify how 
managers account reflect hedging positions by adopting a net short position threshold and eliminating the 
required indication of whether a position is hedged or not in Form SHO.”); Comment Letter from 
Anonymous Fund Manager at 1-2, available at https://www.sec.gov/comments/s7-08-22/s70822-
20126773-287490.pdf (“Anonymous Fund Manager Letter”) (recommending that the Commission “modify 
the proposed threshold requirements to reference short positions on a net ‘delta-adjusted’ basis as opposed 
to a gross basis or, in the alternative, exclude from the reporting obligations under the Proposed Rules 
‘bona fide hedging activity’ as such term would be defined in the final rules.”). 
148
  See, e.g., Comment from Josh Allen (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-  272295.htm; Comment from An Investor (Apr. 4., 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm (supported including both net and 
gross short positions in reporting). 

52 
positions in more than one issuer.
149
 One commenter proposed that, if a gross short position 
calculation is used, market makers should not be subject to adopted Rule 13f-2’s reporting 
requirements.
150
 However, another commenter supported applying the rule’s requirements to 
market makers.
151
 One commenter stated that, even though market makers do not typically carry 
overnight positions and would likely not trigger the Proposed Reporting Thresholds, market 
makers would still incur the costs of end-of-day calculations to determine whether they meet or 
exceed the Proposed Reporting Thresholds.
152
 
As discussed in the Proposing Release, under the proposal, a Manager would report its 
“gross” short position in an equity security without offsetting such gross short position with 
“long” shares of the equity security or economically equivalent long positions obtained through 
derivatives of the equity security.
153
 For example, if a Manager has investment discretion over 
multiple accounts, some of which have long positions in an equity security and some have short 
positions in the same equity security, only the total gross short position in the “short accounts” is 
 
149
  Perkins Coie Letter, at 4 (stating that “the SEC should consider amending its proposal to require net 
position reporting by certain types of managers that do not regularly utilize short positions. For instance, 
the SEC could require net short position reporting by filers that are solely reporting on Form SHO with 
regards to one issuer. For any filer reporting more than one issuer, the SEC could require gross short 
position reporting.”). 
150
  HSBC Letter, at 16 (stating that “[b]ecause Proposed Rule 13f-2 requires disclosure of gross positions, 
market makers could be required to report large positions, even if a market makers’ [sic] net position is 
close to zero (i.e., because such short positions are typically hedged via options or swaps). Subjecting 
market makers to Proposed Rule 13f-2 may, therefore, result in market participants receiving unhelpful and 
misleading information about the short sale market.”). 
151
  See Samuel Meadows Comment, at 2 (stating that “Market Makers should NOT be except [sic] from 
reporting for any reason. Market Makers should report short sales the same as everyone else should they 
pass the Reporting Threshold.”). 
152
  See SIFMA Letter, at 11-12 (stating that “[h]owever, as the Proposing Release notes, requiring Institutional 
Investment Managers to consider intraday short sale activity, which would not be captured in the ‘gross 
short position’ as reflected on their trade date stock records, in determining whether the threshold has been 
exceeded, would be incredibly onerous—particularly, for example, for market makers that generally may 
not carry large overnight short positions.”). 
153
  Proposing Release, at 14956.  

53 
reported, without being offset by the long positions in the “long accounts.” Requiring a Manager 
to report its daily gross short position in a security will provide a more complete view of short 
positions held by Managers in a security, particularly once the data is aggregated for 
publication.
154
 Permitting Managers to “net” positions would dilute the usefulness of the data in 
providing market participants with a sense of substantial short positions. For example, requiring 
net short position reporting by Managers that are solely reporting on Form SHO with regard to 
one issuer, or for other types of Managers infrequently using short positions, as one commenter 
suggested, would provide minimal cost savings and create misleading data that could be difficult 
to aggregate and confusing to market participants. Further, the data collected and provided by 
FINRA
155
 and the exchanges is not netted.
156
 By providing aggregate gross positions reported by 
Manager in a security, the final rule will supplement such existing short sale information with 
additional context on substantial gross short sale positions. 
In addition, the Commission is making additional modifications, discussed further below, 
that should alleviate burdens on market makers that may otherwise need to undertake the 
 
154
  In addition, commenters stated they would be uncertain how to “offset” positions when discussing the 
hedging indicator. See infra Part II.A.4.d.iii.(B). Netting would raise similar concerns.  
155
  See, e.g., Short Interest – What It Is, What It Is Not, FINRA INV’R INSIGHTS (Jan. 25, 2023), available at 
https://www.finra.org/investors/insights/short-interest (“The short interest data is just a snapshot that 
reflects short positions held by brokerage firms at a specific moment in time on two discrete days each 
month. The Short Sale Volume Daily File reflects the aggregate volume of trades within certain parameters 
executed as short sales on individual trade dates.”). 
156
  See, e.g., Frequently Asked Questions (FAQ) about Short Interest Reporting, FINRA, available at 
https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest/faq (“Q1: Rule 4560 applies 
to short interest positions resulting from: (1) a “short sale,” as defined by Regulation SHO Rule 200(a); or 
(2) where the transaction that caused the short position was marked “long,” consistent with Regulation 
SHO Rule 200(g), due to the firm’s or the customer’s net long position at the time of the transaction. For 
example, a sale may be marked as “long” because the overall net position in the security within an 
aggregation unit is long at the time of the sale. If the execution results in a short position in a specific 
account (or subaccount) held within the aggregation unit, this position is reportable pursuant to Rule 
4560.”; Q11: “Where, as part of a strategy, an account holds both a short and long position in the same 
security simultaneously, the short position is reportable as short interest pursuant to Rule 4560 and must be 
reported in full, i.e., not netted against the long position.”). 

54 
obligation of calculating reporting thresholds despite generally holding positions below such 
thresholds. Specifically, the Commission is modifying the threshold calculations to a monthly 
average of daily gross short positions rather than a single daily position, as discussed under the 
subheading “When the Reporting Obligation is Triggered” below. Further, as discussed in Part 
III below, the Commission is not adopting the proposed requirement to report “buy to cover” 
activity, which a commenter
157
 stated would be more difficult if gross positions are required to 
be reported. The Commission, in adopting Rule 13f-2, will require a Manager to report its 
“gross” monthly short position as proposed under Proposed Rule 13f-2(b)(4). 
When the Reporting Obligation is Triggered 
To ease reporting burdens and reduce costs, some commenters proposed decreasing the 
frequency of certain aspects of the U.S. dollar value-based aspects of the Reporting Thresholds 
by instead using monthly average positions, instead of the proposed “close of regular trading 
hours on any settlement date” frequency.
158
 Alternatively, one commenter suggested that the 
proposed monthly reporting requirement should only be triggered if a Manager holds a short 
position in excess of the Proposed Reporting Thresholds as of the last settlement day of the 
month.
159
 Commenters stated that by using average monthly positions rather than the proposed 
rule’s use of any settlement date within the reporting period, the reporting burden required of 
Managers would be substantially lessened, since Managers may transiently cross the reporting 
 
157
  SIFMA Letter, at 24. 
158
  See, e.g., Virtu Letter, at 3 (stating that “[w]e also object to the reporting requirement being triggered by the 
existence of a short position on any settlement date within a reporting period.”); Ropes & Gray Letter, at 2 
(stating that “[a]ll filing thresholds should be determined using average positions over a month rather than 
daily positions.”). 
159
  SIFMA Letter, at 15 (advocating “that the proposed monthly reporting under Information Table 1 of 
Proposed Form SHO should be triggered only if the Institutional Investment Manager holds a gross short 
position in an equity security, as of the last day of such month, in excess of the threshold(s) for reporting.”). 

55 
thresholds through activities such as market making, hedging, and customer facilitation 
activity.
160
 Requiring reporting for Managers who temporarily cross these thresholds on an 
intraday basis through such activity, one commenter stated, would not adhere to the legislative 
intent of DFA section 929X.
161
 Commenters stated that transiently crossing these thresholds 
would not produce reported data that would be valuable to the Commission; for example, short-
term market disruptions may trigger reporting under the proposed frequency for Managers that 
do not hold substantial short positions.
162
 For reasons discussed below, the Commission is 
modifying Proposed Rule 13f-2(a)(1)(i) (the U.S. dollar value-based prong of Threshold A) to 
trigger reporting requirements when a Manager has a monthly average of daily gross short 
positions (“monthly average”) with a U.S . dollar value of $10 million or more at the end of the 
calendar month, rather than, as proposed, a $10 million or more gross short position at the close 
of regular trading hours on any settlement date during the calendar month.
163
 
Threshold A, as adopted, will require reporting by Managers that have, for each equity 
security of a reporting company issuer, either (1) a monthly average gross short position at the 
close of regular trading hours in the equity security with a U.S . dollar value of $10 million or 
more,
164
 or (2) a monthly average gross short position at the close of regular trading hours as a 
 
160
  See Virtu Letter, at 2. 
161
  See SIFMA Letter, at 4. 
162
  See Ropes & Gray Letter, at 6-7. 
163
  This change to “monthly average” is responsive, in part, to commenters’ concerns about certain aspects of 
the U.S. dollar value-based Reporting Thresholds. For reasons discussed below, however, the Commission 
is adopting Threshold B as proposed (Proposed Rule 13f-2(a)(2)), which employs an “at the close of 
regular trading hours on any settlement during the calendar month” approach. The Form SHO "Instructions 
For Calculating Reporting Threshold,” discussed below, explain in detail the method for determining 
whether the modified threshold is met. 
164
  To determine whether this Reporting Threshold has been met, a Manager shall determine its gross short 
position at the close of regular trading hours in the equity security (as defined in Rule 13f-2) on each 
settlement date during the calendar month and multiply that figure by the closing price at the close of 
regular trading hours on the settlement date (“end of day dollar value”). The Manager shall then add all end 
 

56 
percentage of shares outstanding in the equity security of 2.5 percent or more.
165
 Using a 
“monthly average” dollar value for reporting company issuers will result in Form SHO reporting 
by Managers that consistently carry large gross short positions during the reporting month. This 
approach should reduce the reporting of non-directional, “transient” short sales activity
166
 and 
provide market participants with more focused information on substantial short positions held by 
Managers. The modification should also reduce the burdens of certain Managers, specifically 
those Managers, including market makers, that periodically meet or exceed the $10 million or 
more threshold on a given settlement date during a calendar month, but that do not typically 
carry a large gross short position throughout the month that will meet or exceed the monthly 
average reporting threshold, by eliminating the need to calculate (and potentially trigger) the 
threshold on a daily basis. This will help the Commission to distinguish directional short selling 
of Managers from short sale activity effected by market makers and liquidity providers.
167
 
 
of day dollar values during the calendar month and divide that sum by the number of settlement dates in the 
month to arrive at a “monthly average” for each equity security the Manager traded during that calendar 
month reporting period. 
165
  The methods of calculation of the Reporting Thresholds are prescribed in “Instructions for Calculating 
Reporting Threshold” in Form SHO. Rule 13f-2 and the instructions in Form SHO, require that for 
purposes of determining whether a Manager meets or exceeds a Reporting Threshold, a Manager shall 
determine its gross short position “at the close of regular trading hours” in the equity security, rather than at 
the “end of day” as was provided for in the instructions to Proposed Form SHO. Accordingly, the 
Commission is making a modification to the instructions for calculating Threshold A and replacing “end of 
day gross short position” with “gross short position at the close of regular trading hours.” Addressing any 
potential ambiguity in terminology should facilitate more consistency in reporting by Managers and more 
comparability of the data reported on Form SHO. With this change, the calculation instructions for 
Threshold A provide that to determine whether the percentage threshold of Threshold A has been met, a 
Manager shall (a) determine its gross short position at the close of regular trading hours in the equity 
security (as defined in Rule 13f-2) on each settlement date during the calendar month, and divide that 
figure by the number of shares outstanding in such security at the close of regular trading hours on the 
settlement date, and (b) add up the daily percentages during the calendar month as determined in (a) and 
divide that sum by the number of settlement dates in the month to arrive at a “monthly average” for each 
equity security the Manager traded during that calendar month reporting period. The number of shares 
outstanding of the security for which information is being reported shall be determined by reference to an 
issuer’s most recent annual or quarterly report, and any subsequent update thereto, filed with the 
Commission. 
166
  See supra n. 135 and accompanying text. 
167
  See Proposing Release, at 14953. 

57 
In addition, similar to the discussion in the Proposing Release regarding the use of a 
monthly average gross short position of 2.5 percent or more of total shares outstanding,
168
 the 
Commission continues to believe that using a monthly average gross short position at the close 
of regular trading hours of $10 million or more, rather than an end of each settlement date 
calculation as was originally proposed, will reduce the risk that a Manager may time its short 
sales to avoid triggering the adopted reporting threshold.
169
 
Threshold B, as proposed, and as adopted, will require reporting by Managers that have, 
for each equity security of a non-reporting company issuer, a gross short position in the equity 
security with a U.S . dollar value of $500,000 or more at the close of regular trading hours on any 
settlement date during the calendar month.
170
 A  single, dollar-based prong approach (using the 
$500,000 or more on any settlement date metric) for securities of non-reporting company issuers 
(Rule 13f-2(a)(2)) will capture Managers with large gross short positions, even if such positions 
are relatively small compared to the market capitalization of the issuer. As discussed above, the 
markets for non-reporting company issuers are more opaque and could benefit more from 
 
168
  Proposing Release, at 14962 (“In addition, the Commission believes that requiring the reporting of short 
positions with a 2.5% or higher monthly average gross short position would capture Managers with gross 
short positions that are large relative to the size of the issuer, and could therefore have a significant impact 
on the issuer. Using a monthly average gross short position, rather than an end of month gross short 
position, is also designed to prevent the scenario where a Manager engages in trading activity on the last 
day of the month in order to avoid reporting.”). 
169
  In addition, the Commission is making a modification to specify in Rule 13f-2 and in the instructions in 
Form SHO that, for purposes of determining whether a Manager meets or exceeds Threshold A, a Manager 
shall determine its gross short position “at the close of regular trading hours” in the equity security, rather 
than at the “end of day” as was provided for in the instructions to Proposed Form SHO. Reducing any 
potential ambiguity in terminology should facilitate more consistency in reporting by Managers and more 
comparability of the data reported on Form SHO. 
170
  The methods of calculation of the Reporting Thresholds are prescribed in “Instructions for Calculating 
Reporting Threshold” in Form SHO. To determine the dollar value-based Reporting Threshold described in 
Threshold B has been met, a Manager shall determine its gross short position at the close of regular trading 
hours in the equity security (as defined in Rule 13f-2) on each settlement date during the calendar month 
and multiply that figure by the closing price at the close of regular trading hours on the settlement date. If 
such closing price is not available, a Manager shall use the price at which it last purchased or sold any share 
of that security. 

58 
transparency. Additionally, due to their lower liquidity, equity securities of non-reporting 
companies can be more sensitive to strategic trading than those of reporting companies.
171
 As a 
result, for those securities, a single dollar threshold that can be triggered on any day of a month is 
more appropriate than the two-prong threshold calculated as monthly averages for equity 
securities issued by reporting companies. 
Basing Reporting Thresholds on Form SH Data 
Some commenters maintained that the Commission should not have based the Proposed 
Reporting Thresholds on Form SH data, as the Form SH data was collected during “a period of 
abnormal market conditions that does not reflect recent changes in the markets,” and urged the 
Commission to more robustly support its rationale for selecting the Reporting Thresholds.
172
 
These commenters essentially suggested that the use of Form SH data was unrealistic, and 
suggested that the Commission consider whether the Reporting Thresholds are appropriate based 
on more recent data and analysis.
173
 In the Proposing Release, the Commission stated that to 
perform the underlying Reporting Thresholds analysis, Form SH data on daily short positions for 
November 2008 through February 2009 were filtered and matched to Center for Research in 
Security Prices, LLC for daily closing prices and Compustat for daily shares outstanding. The 
 
171
  See infra Part VIII.E.3 (discussing difficulty in obtaining information on non-reporting company issuers, 
and that data is often stale and inaccurate). 
172
  Comment Letter from Barbara Bliss, Associate Professor of Finance, et al. (Apr. 25, 2022), at 3, available 
at https://www.sec.gov/comments/s7-08-22/s70822-20126591-287247.pdf (“Law and Finance Professors 
Letter”) (“we believe the Commission could and should more robustly support its rationale for these 
thresholds before adopting any final rule.”); see also AIMA Letter, at 11-12 (commenter was critical of 
Reporting Thresholds based on “stale and limited” data). For a discussion of Form SH applicability to the 
current period, see infra Part VIII.C.6.a. 
173
  See, e.g., AIMA Letter, at 12 (stating that the Commission should “review and analyze current short 
interest market data for reporting issuers to ensure that any final threshold based on a gross position’s dollar 
value accounts for the latest and most complete data”); Law and Finance Professors Letter, at 3 (stating that 
the Commission should “consider more carefully whether the stated disclosure thresholds are appropriate, 
based on more recent data and analysis, and whether there should be a mechanism that would permit these 
thresholds to change over time”); Two Sigma Letter, at 7 (stating that Form SH burden estimates are an 
“unrealistic benchmark”). 

59 
Commission recognized that the results of an analysis of Form SH data may not fully reflect the 
status quo but that the analysis used appropriate data because it involved the same type of entities 
(Managers) and the same activity (short positions).
174
 As discussed in the Proposing Release, the 
Commission believed that it struck a reasonable balance in proposing the Reporting Thresholds 
with regard to the fundamental economic tradeoff of the value of the data versus the cost of 
collecting the data.
175
 
The Commission disagrees with one commenter that stated that Form SH data was “stale 
and limited.”
176 
The Commission continues to believe that Form SH data is highly relevant for 
determining the Reporting Thresholds. Form SH is the only existing data source of individual 
Manager-level short sale positions.
177
 Form SH data was collected from October 17, 2008, until 
August 1, 2009, and the Commission analyzed daily data submitted from November 2008 until 
February 2009 as representative of short positions held by Managers. By the time Form SH was 
in effect, the global financial crisis was winding down, and is considered by some to have 
calmed by approximately June 2009.
178
 Thus, data was analyzed for several months during 
which the economy was returning to normalcy. Although the commenter suggested such data 
does not address “recent changes in the financial markets,” the commenter did not elaborate on 
what “recent changes” would have impacted an analysis of the Form SH data or the time period 
 
174
  Proposing Release, at 14963 n.80. 
175
  Proposing Release, at 14963-64, 15007. 
176
  See AIMA Letter, at 11-12. 
177
  While there are various limitations to be considered when using Form SH data, Form SH data are the most 
relevant and applicable source of data available for the purposes of estimating the costs of the design and 
analysis of Rule 13f-2. There are no other data sources, public or regulatory, which specifically track 
Managers’ short position activities in the U.S. See infra Part VIII.C.6.a. 
178
  The National Bureau of Economic Research considers the global financial crisis as having officially started 
Dec. 2007 and ended June 2009. See, e.g., N
AT’L BUREAU OF ECON. RESEARCH, BUSINESS CYCLE DATING, 
available at https://www.nber.org/research/business-cycle-dating.  

60 
in which the data was analyzed. Markets undergo periods of volatility and stability and are 
constantly evolving over time. The data from Form SH involves the same type of entities 
(Managers) and the same activity (short positions) as Form SHO. The time period for which the 
Form SH data was studied is sufficiently informative to provide a reasonable assessment of 
appropriate reporting thresholds for purposes of Form SHO.
179
 
4. Form SHO 
a.   Reporting via EDGAR 
i.    Proposal 
To enhance transparency of short sale-related data reported and published pursuant to 
Proposed Rule 13f-2, Proposed Rule 13f-2(a)(3) provided that Managers would file Form SHO 
(and any amendments thereto) with the Commission on EDGAR.
180
 The Commission believed 
that most Managers should be familiar with filing forms on EDGAR—for example, Form 
13F
181
—and relying on EDGAR to access registration statements, periodic reports, and other 
filings with the Commission that are made publicly available.
182
 The Commission believed that 
requiring Proposed Form SHO to be reported via EDGAR would enhance the accessibility, 
 
179
  See discussion of Form SH in Part VIII.C.6.a. 
180
  See Proposed Rule 13f-2(a)(3) (providing that “Form SHO and any amendments thereto must be filed with 
the Commission via the Commission’s Electronic Data Gathering, Analysis, and Retrieval System 
(“EDGAR”), in accordance with Regulation S-T. Certain information regarding each such equity security 
reported by institutional investment managers on Form SHO and filed with the Commission via EDGAR 
will be published by the Commission on an aggregated basis.”). 
181
  EDGAR filing is mandatory for all public Form 13F submissions. See Rulemaking for EDGAR System, 
Exchange Act Release No. 34-40934 (Jan. 12, 1999), 64 FR 2843 (Jan. 19, 1999); see also Electronic 
Submission of Applications for Orders under the Advisers Act and the Investment Company Act, 
Confidential Treatment Requests for Filings on Form 13F, and Form ADV-NR; Amendments to Form 13F, 
Exchange Act Release No. 34-  95148 (June 23, 2022), 87 FR 38943 (June 30, 2022). 
182
  See, e.g., About EDGAR, available at https://www.sec.gov/edgar/about; see also Important Information 
about EDGAR, available at 
https://www.sec.gov/edgar/searchedgar/aboutedgar.htm#:~:text=EDGAR%2C%20the%20Electronic%20D
ata%20Gathering,and%20Exchange%20Commission%20(SEC) (“The [EDGAR] system processes about 
3,000 filings per day, serves up 3,000 terabytes of data to the public annually, and accommodates 40,000 
new filers per year on average.”).  

61 
usability, and quality of the Proposed Form SHO disclosures for the Commission, and would 
allow the Commission to download disclosures from Form SHO directly, facilitating efficient 
access, organization, and evaluation of the reported information.
183
 The Commission further 
believed that the improved quality and scope of information available for the Commission’s use 
in examining market behavior and recreating market events would bolster the Commission’s 
oversight of short selling activity and enhance investor protections.
184
 
ii. Comments and Final Rule 
Several commenters raised concerns about how the confidentiality of the data reported on 
Form SHO via EDGAR would be preserved.
185
 Most of these commenters spoke of a need to 
establish robust data security protocols for the “valuable and proprietary” information that would 
be reported on Proposed Form SHO via EDGAR. Several such commenters expressed concerns 
about cyberattacks or other breaches of account information.
186
 
While no technology system or infrastructure is impervious to cyberattack, the 
Commission employs an array of actions to safeguard and protect the confidentiality and security 
 
183
  Proposing Release, at 14957.  
184
  Id. 
185
  See, e.g., K&L Gates Letter, at 5-6 (any final rule or final Form SHO should ensure “indefinitely” the 
confidentiality of information that could reveal the identity of the reporting Manager). 
186
  See, e.g., AIMA Letter, at 14 (stating that the Commission has not explained how it will protect the 
commercially sensitive data that will be reported on Proposed Form SHO or acknowledged that its systems 
are susceptible to data breaches); MFA Letter, at 8 (positing that “the risk of increased cyberattacks or 
other breaches of confidential account information far outweigh any incremental benefit associated with 
requiring [Managers] to individually report short position information”); Two Sigma Letter, at 3-5 
(cautioning that information on Proposed Form SHO reports “will be private only so long as the 
Commission does not have its systems breached, its personnel do not misappropriate the information, the 
information is not unintentionally released, or policies do not change retroactively”); SIFMA Letter, at 22 
n.60 (citing cyber security, theft, and inadvertent data breach concerns as chief among the risks of 
providing sensitive and confidential information regarding short positions and short activity). 

62 
of all information reported to EDGAR, which will include data reported on Form SHO.
187
 The 
Commission has stated that it has “engaged in a multi-year, multi-phase effort to modernize the 
EDGAR system, including both internal and public-facing components. Security and 
modernization enhancements were deployed in June 2020, focusing on technology upgrades 
internal to the system.”
188
 Moreover, as discussed in Part I.A.4.f.ii below, the Commission is 
adopting an approach to the confidential treatment of information provided on Form SHO reports 
that all such information will be deemed subject to a confidential treatment request under 17 
CFR 200.83 (“Rule 83”). Accordingly, the Commission is a dopting Rule 13f-2(a)(3) as 
proposed. 
b.    Filing Form SHO Reports 
i.    Proposal 
As described in the Proposing Release, Managers would use Proposed Form SHO for 
reports to the Commission required by Proposed Rule 13f–2. The Commission proposed that 
Managers would file a report on Proposed Form SHO with the Commission within 14 calendar 
days after the end of each calendar month with regard to each equity security in which the 
Manager meets or exceeds a Reporting Threshold.
189
 The Commission proposed that Managers 
would file the Form SHO with the Commission via the Commission’s EDGAR system in an 
eXtensible Markup Language (“XML”) specific to Form SHO (“custom XML” or “Form 
SHO-specific XML”),
190
 a structured machine-readable data language. The Commission also 
 
187
  See Annual Report on SEC Website Modernization Pursuant to Section 3(d) of the 21st Century Integrated 
Digital Experience Act (Dec. 2022), available at https://www.sec.gov/files/21st-century-idea-act-report-
2022-12.pdf. 
188
  Id.  
189
  Proposing Release, at 14956. 
190
  Id. at 14955. 

63 
proposed that Managers would either be able to file Form SHO using a fillable web form the 
Commission would provide on EDGAR to input Form SHO disclosures, or a Manager could use 
its own software tool to file Form SHO to EDGAR directly in Form SHO-specific XML.
191
 
Reporting via EDGAR, as described in the Proposing Release, would facilitate efficient access, 
organization, and evaluation of reported information by the Commission. 
The Commission stated in the Proposing Release that requiring Form SHO to be filed in 
custom XML format, since it is a structured, machine-readable data language, would facilitate 
more thorough review and analysis of the reported short sale disclosures by the Commission, 
which would increase the efficiency and effectiveness with which the Commission could identify 
manipulative short selling strategies.
192
 Furthermore, the Commission stated most Managers 
have experience filing EDGAR forms that use similar EDGAR Form-specific XML-based data 
languages, such as Form 13F and Form ATS-N.
193
 
As proposed, if a Manager uses the web-fillable Proposed Form SHO on EDGAR and 
encounters a technical error when filling out the form, such Manager would be required to 
correct the identified technical error before being permitted to file the Proposed Form SHO 
through EDGAR. If a Manager uses its own software tool to file a Proposed Form SHO filing to 
 
191
  See id. at 14955. The filing options described for Proposed Form SHO are consistent with other EDGAR 
filings that are filed in form-specific XML-based languages. See, e.g., Regulation of NMS Stock Alternative 
Trading Systems, Exchange Act Release No. 83663 (July 18, 2018), 83 FR 38768 (Dec. 9, 2021) (requiring 
new EDGAR Form ATS-N to be filed in an XML-based language specific to that Form). 
192
  See Proposing Release, at 14997 (“By requiring a structured machine-readable data language and a 
centralized filing location (EDGAR) for the disclosures on Proposed Form SHO, the Commission would be 
able to access and download large volumes of Proposed Form SHO disclosures in an efficient manner.”). 
193
  See, e.g., Proposing Release at 14960, 14999 (first citing Form 13F, available at 
https://www.sec.gov/pdf/form13f.pdf) (then citing Regulation of NMS Stock Alternative Trading Systems, 
Exchange Act Release No. 83663 (July 18, 2018), 83 FR 38768 (Aug. 7, 2018)) (requiring new EDGAR 
Form ATS-N to be filed in an XML-based language specific to that Form); see also Money Market Fund 
Reforms, Investment Company Act Release No. 34441 (Dec. 15, 2021), 87 FR 7248 (Feb. 8, 2022) (Form 
N-CR); Securities Offering Reform for Closed-End Investment Companies, Exchange Act Release No. 
88606 (Apr. 8, 2020), 85 FR 33290 (June 1, 2020) (Form 24F-2). 

64 
EDGAR directly in Proposed Form SHO-specific XML, and a technical error is identified by 
EDGAR after the filing is sent, such Manager would receive an error message that the filing has 
been suspended, and would be required to correct the identified technical error and re-file the 
Proposed Form SHO through EDGAR.
194
 
As an alternative, the Commission also discussed whether Proposed Form SHO should be 
required to be filed in Inline eXtensible Business Reporting Language (“Inline XBRL”).
195
 The 
Commission stated that, compared to the proposal, the Inline XBRL alternative, which is both 
machine-readable and human-readable, would provide more sophisticated validation, 
presentation, and reference features for filers and data users.
196
 However, the Commission stated 
that given the fixed and constrained nature of the disclosures to be reported on Proposed Form 
SHO, the benefits of the Inline XBRL alternative would be muted, and therefore Managers 
would not be able to take advantage of customization and presentation features.
197
 Furthermore, 
the Commission stated in the Proposing Release that the alternative Inline XBRL approach 
would create greater initial implementation costs, such as licensing XBRL filing preparation 
software, because many Managers may not have prior experience structuring data in Inline 
XBRL.
198
 
 
194
  The Commission stated in the proposing release that the XML schema (i.e., the set of technical rules 
associated with Proposed Form SHO-specific XML) for Proposed Form SHO would incorporate 
validations of each data field on Proposed Form SHO to help ensure consistent formatting and 
completeness. For example, letters instead of numbers in a field requiring only numbers, would be flagged 
by EDGAR as a “technical” error that would require correction by the reporting Manager in order to 
complete its Proposed Form SHO filing. Field validations act as an automated form completeness check 
when a Manager files Proposed Form SHO through EDGAR; they do not verify the accuracy of the 
information filed in Proposed Form SHO filings. Proposing Release, at 14960 n.72. 
195
  See Proposing Release, at 15010-11. 
196
  See id. 
197
  See id. 
198
  See id. 

65 
ii. Comments and Final Rule 
The Commission received some comments about the use of Form SHO-specific XML in 
filing Form SHO. In response to Q39 in the Proposing Release,
199
 which asked whether the use 
of Form SHO-specific XML would make the reported data more useful to users, one commenter 
stated that data prepared in consistent, structured format would be “significantly more functional 
and useful.”
200
 Regarding the costs and benefits of an Inline XBRL requirement as compared to 
Proposed Form SHO-specific XML, this commenter supported using XBRL in a comma-
separated value (“CSV”) format, which is a text file that uses delimiters such as commas to 
separate data fields.
201
 The commenter stated that this would be the most appropriate standard 
“for capturing high volume, granular data in a compact format,” and urged the Commission to 
adopt XBRL rather than custom XML.
202
 The commenter stated that XBRL-CSV has several 
advantages over the Commission’s proposed use of a custom XML format, such as reducing 
preparation costs and processing costs, as well as improving validation.
203
 In addition, the 
commenter disagreed with the Commission’s view in the Proposing Release that the benefits of 
the additional features of XBRL would be muted if used for Form SHO due to the fixed and 
constrained nature of the disclosures to be reported. The commenter stated that several other 
agencies, such as the FDIC and FERC, have recently adopted XBRL format over custom XML 
format. However, the commenter acknowledges that initial implementation costs will be higher 
and familiarization with the format will take longer for reporting entities. Alternatively, another 
 
199
  Proposing Release, at 15012. 
200
  Comment Letter from Campbell Pryde, President and CEO, XBRL US (Apr. 26, 2022), at 1 (“XBRL 
Letter”), available at https://www.sec.gov/comments/s7-08-22/s70822-20126860-287597.pdf. 
201
  See id. at 2. 
202
  See id. at 2-5. 
203
  See id.  

66 
commenter supported the use of Form SHO-specific XML, stating that “XML is a widely used 
language and therefore implementation and maintenance would keep costs low and efficiency 
high,” and thought it would allow for efficient review of the reported data.
204
 
The Commission is adopting the custom XML data reporting requirement as proposed. 
As explained in the Proposing Release, the filing options for Form SHO are consistent with other 
EDGAR filings that are filed in Form-specific XML-based languages.
205
 The Commission also 
continues to believe that because many Managers have been using custom XML-based languages 
through other releases, they are more familiar with this language than other languages, such as 
XBRL, so the use of XML will promote efficiency in filing and review of Form SHO reports. 
Familiarity with custom XML formats will reduce implementation and ongoing compliance costs 
when compared to introducing XBRL-based formats that may be unfamiliar to Managers. 
Managers’ greater familiarity with custom XML formats should also reduce the possibility of 
data input errors when compared to XBRL formats. The above noted commenter likewise stated 
that XBRL formats would entail higher initial implementation costs and that familiarization with 
the XBRL formats would take longer for reporting entities. The costs of using XBRL formats in 
implementation and user retraining, along with the inconsistencies relative to other filings that 
use Form-specific XML-based languages, do not justify the potential data formatting benefits of 
XBRL. Further, the commenter stated a preference for using XBRL specifically in CSV format. 
In addition to the above concerns about XBRL-based languages generally, the Commission 
believes that custom XML format is more appropriate than an XBRL-CSV format for the 
 
204
  Comment from An Investor (Apr. 4, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
20122297-278355.htm. 
205
  See, e.g., Regulation of NMS Stock Alternative Trading Systems, Exchange Act Release No. 83663 (July 
18, 2018), 83 FR 38768 (Dec. 9, 2021) (requiring EDGAR Form ATS-N to be filed in an XML-based 
language specific to that Form). 

67 
purposes of Form SHO because XML format is more human-readable than CSV format, and 
XML is more flexible when using more complex data. 
Finally, the Commission’s XML schema is designed to include validations for each data 
field on Form SHO to help ensure consistent formatting and completeness. The Commission 
continues to believe that requiring Form SHO to be filed via Form-SHO specific XML, a 
structured machine-readable data language, will facilitate more thorough review and analysis of 
the reported short sale disclosures by the Commission, increasing the efficiency and 
effectiveness of the Commission’s understanding of short selling and systemic risk. Additionally, 
most Managers have experience filing EDGAR forms that use similar EDGAR Form-specific 
XML-based data languages, such as Form 13F.
206
 
c. Timing of Reporting by Managers and Publication by 
Commission 
i. Proposal 
Under Proposed Rule 13f-2(a), a Manager would have been required to file the required 
information on Form SHO with the Commission within 14 calendar days after the end of each 
calendar month. Proposed Rule 13f-2(a)(3) provides that certain information reported on 
Proposed Form SHO would be published by the Commission on an aggregated basis. No time 
frame for publication by the Commission was provided in Proposed Rule 13f-2. In the Proposing 
Release, however, the Commission estimated that it would publish the aggregated information 
within one month after the end of the calendar month. 
 
206
  See Form 13F, available at https://www.sec.gov/pdf/form13f.pdf. 

68 
ii. Comments and Final Rule 
Comments on the frequency of reporting and publication varied. Some commenters 
called for more frequent reporting by Managers and, by implication, more frequent publishing by 
the Commission of information from Form SHO reports. Several of these commenters suggested 
that technology permits more frequent—i.e., daily, if not monthly—reporting.
207
 Several of these 
comments also expressed concern that the Commission’s estimated month-long delay in 
publishing the aggregated information would produce stale data that would undermine the goal 
of greater transparency in the markets.
208
 The Commission acknowledges that the technology 
exists for frequent reporting of transactions and faster data processing. The Commission is 
concerned, however, about the accuracy of the data reported by Managers and the aggregated 
data published by the Commission pursuant to Rule 13f-2 reporting requirements. The 
Commission believes that the data reported by Managers on Form SHO is more likely to be 
complete and accurate if Managers are afforded sufficient time to gather, assemble, and review 
the reported data.
209
 The Commission continues to believe that 14 calendar days after the end of 
each month provides a reasonable period of time for Managers to meet their Rule 13f-2 reporting 
requirements. The Commission is also concerned that increasing the frequency of Commission 
 
207
  See, e.g., Comment from Regina Murrell (Mar. 25, 2023) available at https://www.sec.gov/comments/s7-
08-22/s70822-20121170-273336.htm (suggesting that technology be used to report short positions daily); 
Anonymously Submitted Comment (Mar. 14, 2022) (calling for reporting to regulators within twenty-four 
hours); Anonymously Submitted Comment (Apr. 26, 2022) (calling for daily, if not intraday, Form SHO 
reporting rather than monthly reporting, as proposed); Anonymously Submitted Comment (Mar. 17, 2022) 
(stating that technology permits more frequent reporting and release of short sale-related data to the public 
in shorter timeframes); see also Better Markets Letter, at 13 (predicting that the Commission’s “fairly 
significant delay” in publishing the aggregated information derived from Form SHO reports will lead to 
published information that is “less timely and less informative”). 
208
  See, e.g., Comment of Estaban Oliveras (Mar. 14, 2022) available at https://www.sec.gov/comments/s7-08-
22/s70822-20119372-272258.htm (commenting “If data is neither accurate nor timely, then what is the 
point of collecting data?”). 
209
  See Proposing Release, at 14956. 

69 
publication of aggregated data may increase the risk of short squeezes or other manipulative 
activities that could interfere with the price discovery function of equity markets. The timeframes 
as proposed and as adopted balance such concerns with some commenters’ desire for faster 
transparency. 
Commenters taking the opposite view recommended that additional time be given for 
Manager reporting and Commission publication. One such commenter recommended that the 
Commission align the proposed timelines for preparing and filing Form SHO reports with 
existing filing requirements for other Commission reports and forms, to allow for better 
coordination of the process of including short sale-related data in multiple reporting 
frameworks.
210
 Another such commenter suggested an initial filing period be extended to within 
28 calendar days upon crossing the threshold and then 14 calendar days for any subsequent 
filing.
211
 Another commenter suggested that a minimum of 45 days before publication of 
aggregated data by the Commission was necessary to protect Managers from the risk that their 
positions and strategies would be used in a “short squeeze or other market-driven reaction” or as 
part of a copycat strategy.
212
 
While adopting the proposed timeframes will delay the public dissemination of aggregate 
short positions by about a month, the Commission believes a longer delay such as 28 days for 
initial filings or 45 days for all filings is unnecessary. FINRA’s current short interest reporting, 
 
210
  ICI Letter, at 12 (stating that aligning Form SHO reporting requirements with those of Form N-Port, for 
example, would give Managers 30 days, rather than the proposed 14 days, after the end of a calendar to file 
a Form SHO). 
211
  See Perkins Coie Letter, at 3 (stating a request to extend the initial filing period to within 28 calendar days 
upon crossing the threshold in order “to reduce the monitoring and compliance burdens for infrequent short 
position users”). 
212
  MFA Letter, at 18. 

70 
for example, is published twice a month, resulting in a delay of about two weeks.
213
 The final 
rule here requires slightly more time than FINRA’s current reporting regimes because Managers 
need additional time following determination of whether they meet a Reporting Threshold at the 
end of each calendar month to prepare and file the data on Form SHO through EDGAR. 
Additionally, the Commission believes that providing Managers with a reasonable period of time 
to file complete and accurate short sale-related information in the first instance will reduce the 
need for Managers to file amendments to Form SHO. However, having an asymmetric filing 
deadline of 28 days for initial filing and 14 days thereafter, as one commenter suggested, would 
create negligible cost savings for Managers. Meanwhile, it may have detrimental effects on the 
timing of data aggregation and publication, which could unnecessarily affect the timing and 
quality of aggregated published data. 
Final Rule 
After considering comments, the Commission is adopting Rule 13f-2(a) as proposed, and 
continues to estimate that it will publish aggregated data derived from Form SHO reports within 
one calendar month after the end of the reporting calendar month.
214
 For example, for data 
reported by Managers on Form SHO for the month of October, the Commission expects to 
publish aggregated information derived from such data no later than the last day of November. 
The Commission continues to believe that 14 calendar days after the end of each calendar month 
 
213
  See, e.g., FINRA, SHORT INTEREST REPORTING, available at https://www.finra.org/filing-
reporting/regulatory-filing-systems/short-interest (presenting “due dates” for reporting short interest to 
FINRA and publication of short interest data by FINRA). FINRA Rule 4560 requires FINRA member 
firms to report their short positions in exchange-listed and over-the-counter equity securities to FINRA 
twice each month. FINRA publishes the short interest reports it collects from member firms for all such 
equity securities. 
214
  Publication of the aggregated information may be delayed for an initial period following effectiveness of 
Rule 13f-2 and Form SHO. 

71 
provides Managers with sufficient time for Managers that meet the Reporting Threshold to 
prepare and file Form SHO data. 
d.   Contents of Form SHO 
Form SHO, as proposed, consists of two parts: Cover Page and Information Tables. As 
discussed more fully below: 
• The Cover Page presents certain identifying information about the Manager(s) filing the 
Form SHO report, the calendar month for which the Manager is reporting, the type of 
Form SHO report being made, and whether the Manager is filing the Form SHO report as 
an amendment;
215
 
• Information Table 1 presents a Manager’s monthly gross short position in the equity 
security on which information is being reported, as well as certain identifying 
information about that security and about the issuer of that security;
216
 and 
• Information Table 2 presents daily activity affecting a Manager’s gross short position 
during a calendar month reporting period, as well as certain identifying information about 
that security and about the issuer of that security.
217
 
i.    Financial Identifiers 
(A)  Proposal 
The Commission proposed that a Manager provide the active LEI, if any, of each 
Manager listed on the Cover Page. The Commission also proposed that a Manager report on each 
of the Proposed Form SHO Information Tables the FIGI and CUSIP number of each security on 
 
215
  See infra Part II.A.4.d.ii. 
216
  See infra Part II.A.4.d.iii. 
217
  See infra Part II.A.4.d.iv. 

72 
which information is being reported, and the active LEI, if any, of the issuer of those securities. 
These items are discussed in Special Instructions 8.c, 8.e, and 8.f regarding Columns 3, 5, and 6 
of Information Table 1, and in Special Instructions 9.c, 9.e, and 9.f regarding Columns 3, 5, and 
6 of Information Table 2. 
(B) Comments and Final Rule 
The Commission received only a few comments regarding the proposed requirement to 
report certain financial identifiers, including CUSIP and FIGI (which identify specific 
securities), and LEI (which identifies specific entities) on Form SHO.
218
 Two commenters stated 
that the Commission should only require that CUSIP be reported on Form SHO, and that the 
inclusion of additional financial identifiers could cause confusion.
219
 Another commenter stated 
that the LEI and the FIGI of issuers is “not commonly provided” in other holding reports and 
would therefore cause Managers to incur additional costs.
220
 A nother commenter, citing 
“substantial CUSIP licensing costs,”  expressed concern that requiring the reporting of CUSIP 
could create an “unnecessary financial burden” on Managers.
221
 However, another commenter 
stated that the inclusion of multiple financial identifiers in addition to CUSIP, such as FIGI and 
LEI, could help foster competition that ultimately reduces costs and improves data quality.
222
 
 
218
  FIGI and LEI each serve different functions. FIGIs identify securities, whereas LEIs identify entities. Thus, 
a single issuer’s LEI could be associated with multiple FIGIs. Conversely, multiple FIGIs could be 
associated with the same issuer’s LEI. Furthermore, identifying reporting Managers on Form SHO would 
require an entity identifier (LEI) rather than a security identifier (FIGI). 
219
  See, e.g., Comment Letter from CUSIP Global Services (Apr. 25, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126577-287237.pdf (“CUSIP Letter”); Comment 
Letter from American Bankers Association (Apr. 26, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126641-287311.pdf (“ABA Letter”).  
220
  Jennifer Han, Executive Vice President, Chief Counsel and Head of Regulatory Affairs, Managed Funds 
Association (June 15, 2023), at 9, available at https://www.sec.gov/comments/s7-08-22/s70822-206120-
414822.pdf (“MFA Letter 2”). 
221
  See Letter from Anonymous Fund Manager, at 9. 
222
  See Comment Letter from Gregory Babyak, Glob. Head Regul. Affs., BLOOMBERG L.P., at 5 (May 2, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20127745-288932.pdf. 

73 
In DFA section 929X, Congress specifically directed the Commission to include CUSIP 
in short sale disclosure rules.
223
 CUSIP is a universally recognized identifier that has been used 
for a wide array of financial instruments since 1964, allowing securities transactions t o be easily 
identified, cleared, and settled, including short sales. Furthermore, market participants and 
investors are familiar with CUSIPs, which are widely and publicly available and used to identify 
most U.S. stocks.
224
 Many companies display their CUSIPs on their websites, and brokers and 
dealers often provide investors with search engines to look up stocks by CUSIPs.
225
 
Accordingly, while the Commission recognizes that there are licensing costs associated with the 
CUSIP, the Commission is adopting, as proposed, the requirement that Managers report in 
Column 5 of each of the Form SHO Information Tables the CUSIP for the equity security for 
which information is reported to help facilitate market participants’ understanding of the reported 
data. 
The Commission will also adopt, as proposed, the requirement that Managers report in 
Column 6 of each of the Form SHO Information Tables the FIGI of the equity security for which 
information is being reported, if a FIGI has been assigned. Like CUSIP, FIGI provides a 
methodology for identifying securities, and reporting a FIGI, if assigned, will provide additional 
 
223
  Public Law 111-203, sec. 929X, 124 Stat. 1376, 1870 (July 21, 2010). 
224
  See, e.g., FAST ANSWERS: CUSIP NUMBER, available at https://www.sec.gov/answers/cusip (referencing 
CUSIP Global Services).   
225
  See, e.g., Chad Langager, How to Locate the CUSIP Number for a Stock, INVESTOPEDIA (Apr. 6, 2022), 
available at https://www.investopedia.com/ask/answers/06/cusipforspecificstock.asp. 

74 
identifying information that will provide additional clarity, not confusion, to market participants 
and the public. Unlike CUSIPs,
226
 however, FIGIs are provided for free.
227
 
To aid in the identification of the issuers referenced in Form SHO reports, the 
Commission is also adopting a requirement that Managers report in Column 3 of each Form 
SHO Information Table, the LEI, if any, of the issuer of the security about which information is 
reported on Form SHO.
228
 
With respect to the proposed requirement that a Manager provide its own LEI, if it had 
one, and, if available to the Manager making the Proposed Form SHO filing, the active LEI of 
each Manager listed on the Form SHO Cover Page as an “Other Manager Reporting for” the 
Manager making the Proposed Form SHO filing, the Commission sought comment on whether it 
should require every Manager filing a Proposed Form SHO to obtain an LEI.
229
 One commenter 
supporting the requirement to report financial identifiers on Form SHO stated that all Managers 
should be required to obtain and maintain a non-lapsed LEI, as opposed to the proposal, which 
stated that Managers would be required to report their LEI, if any.
230
 Another commenter, 
 
226
  See, e.g., Fees for CUSIP Assignment, CUSIP GLOB. SERVS., available at 
https://www.cusip.com/pdf/FeesforCUSIPAssignment.pdf (“For an offering requiring a single CUSIP 
identifier, the assignment fee is $200.”).  
227
  See, e.g., Unlock the Power of Efficiency with Open Symbology, OPENFIGI, available at 
https://www.openfigi.com/. 
228
  This practice is in keeping with current requirements of other Commission forms. For example, the 
registrant filing Form N-PORT need not report LEIs for counterparties that do not have one. In addition, as 
noted above, to avoid any suggestion that a Manager filing a Form SHO report has an obligation to monitor 
the status of an issuer’s LEI, Instructions 8.c and 9.c of Form SHO—“Column 3. Issuer LEI. If the issuer 
has an LEI, enter the issuer’s active LEI—have been revised to remove the term “active.” See supra n. 36. 
229
  See Proposing Release, at 14965. Because the Cover Page, as proposed, would also present the name and, if 
available to the Manager making the Proposed Form SHO filing, the active LEI of each Manager listed on 
the Form SHO Cover Page as an “Other Manager Reporting for” the Manager making the Proposed Form 
SHO filing, the query covered those Managers as well.  
230
  Anonymously Submitted Comment (Apr. 4, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20122297-278355.htm (“Every manager that has a part of trading any form of security or 
derivative on any market should be forced to have a Legal Entity Identifier (LEI). That way, specific bad 
actors can be easily identified.”). 

75 
however, expressed uncertainty regarding such a requirement, stating that registration or renewal 
of an LEI is “not monetarily costless.”
231
 
The Commission acknowledges that LEIs do provide a precise and consistent means of 
identification of legal entities. However, after considering the comments received, and because 
LEIs would supplement existing identifying information provided for Managers and issuers 
listed in Form SHO filings, the Commission is not requiring Managers subject to Rule 13f-2 to 
obtain (and maintain non-lapsed) LEIs to provide on the Cover Page of Form SHO reports and, 
when appropriate for the “Other Manager(s) Reporting for this Manager” section of the Form 
SHO Cover Page to be completed, to provide a non-lapsed LEI for each Manager listed in the 
“Other Manager(s) Reporting for this Manager” of the Form SHO Cover Page. However, the 
Commission may consider this issue in the future. 
ii. Cover Page 
(A)  Proposal 
As proposed, and pursuant to Special Instructions 2-5 of Proposed Form SHO, a Manager 
would report on the Cover Page: (i) certain basic information, including its name, mailing 
address, business telephone and facsimile numbers, and active LEI, if any, as well as the name, 
title, business telephone and facsimile numbers of the Manager’s contact employee for the Form 
SHO report, and the date the report is filed; (ii) the period end date—i.e., the last settlement date 
of the calendar month for which the Manager is reporting; (iii) the type of Form SHO report 
 
231
  See Comment Letter from Aaron Franz, available at https://www.sec.gov/comments/s7-18-21/s71821-
20120685-272855.pdf (“I’m uncertain that Managers should be required to obtain an LEI. Registration or 
renewal of an LEI is not monetarily costless. The same information can be submitted by Managers without 
a tracking number with a cost.”). 

76 
being filed;
232
 and (iv) whether the Form SHO is being filed as an amendment.
233
 The Manager 
filing the report will include the representation that “all information contained herein is true, 
correct and complete, and that it is understood that all required items, statements, schedules, lists, 
and tables, are considered integral parts of this form.”
234
 
(B)  Comments and Final Rule 
Other than with respect to financial identifiers as discussed above, the Commission did 
not receive any comments on the contents of the Cover Page. As a result, the Commission is 
adopting Special Instructions 2-5 of Form SHO as proposed, with minor t echnical modifications. 
For greater precision (but no change in the meaning) in the terminology used in Form SHO as 
adopted, an LEI that is currently in effect is referred to as a “non-lapsed LEI” rather than an 
“active LEI” (the terminology used in Proposed Form SHO). Also, the Cover Page contact 
information for the reporting Manager and its “Contact Employee” has been updated to require 
the use of email rather than facsimile.
235
 
 
232
  The Commission proposed that the reporting Manager designate the report type for the Form SHO by 
checking the appropriate box in the “Report Type” section of the Cover Page and include, where 
applicable, the name and active LEI of each other Manager reporting for this Manager. If all of the 
information that a Manager is required by proposed Rule 13f-2 to report on related Form SHO is reported 
by another Manager (or Managers), the Manager shall check the box for Report Type “FORM SHO 
NOTICE,” include on the Cover Page the name and active LEI (if available) of each of the other Managers 
reporting for this Manager, and omit the Information Tables. If all of the information that a Manager is 
required by proposed Rule 13f-2 to file on Form SHO is included in the report, the Manager shall check the 
box for Report Type “FORM SHO ENTRIES REPORT,” omit from the Cover Page the name and active 
LEI of each other Manager reporting for this Manager, and include the Information Tables. If only a part of 
the information that a Manager is required by proposed Rule 13f-2 to file on Form SHO is included in the 
report filed by the Manager, the Manager shall check the box for Report Type “FORM SHO 
COMBINATION REPORT,” include on the Cover Page the name and active LEI of each of the other 
Managers reporting for this Manager, if available, and include the Information Tables. See Proposing 
Release, at 14958. 
233
  If the Manager is filing the Form SHO report as an amendment, then the Manager must check the 
“Amendment and Restatement” box on the Cover Page and enter the Amendment and Restatement number. 
Each amendment must include a complete Cover Page and Information Tables. Amendments must be filed 
sequentially. See Proposing Release, at 14960-61. 
234
  See Proposing Release, at 14958. 
235
  See supra n. 37 and accompanying text. 

77 
iii.  Information Table 1: “Manager’s Monthly Gross Short 
Position” 
(A)  Proposal 
Under Proposed Rule 13f-2, Managers meeting a Reporting Threshold would report 
certain information, including end of month gross short position information regarding 
transactions that have settled during the calendar month being reported, and certain hedging 
information that would help to indicate whether the reported gross short position is directional or 
non-directional in nature.
236 
 
Specifically, as proposed, the Manager would report the following information on 
Information Table 1: 
• In Column 1, a Manager would enter the last day of the calendar month being reported by 
the Manager on which a trade settles. This information would identify the month being 
reported by the Manager.  
• In Column 2, a Manager would enter the name of the issuer to identify the issuer of the 
equity security for which information is being reported. 
• In Column 3, a Manager would enter the issuer’s active LEI, if any. The LEI provides 
standardized information that would enable the Commission and market participants to 
more precisely identify the issuer of each equity security for which information is being 
reported.  
• In Column 4, consistent with section 13(f)(2), a Manager would enter the title of the class 
of the equity security for which information is being reported.  
 
236
  Id. at 14959.  

78 
• In Column 5, consistent with section 13(f)(2), a Manager would enter the nine (9) digit 
CUSIP number of the equity security for which information is being reported, if 
applicable. 
• In Column 6, a Manager would enter the twelve (12) character, alphanumeric FIGI of the 
equity security for which information is being reported, if a FIGI has been assigned. Like 
CUSIP, FIGI provides a methodology for identifying securities.  
• In Column 7, a Manager would enter the number of shares that represent the Manager’s 
gross short position in the equity security for which information is being reported at the 
close of regular trading hours on the last settlement date of the calendar month of the 
reporting period. The term “gross short position” means the number of shares of the 
security for which information is being reported that are held short, without inclusion of 
any offsetting economic positions (including shares of the equity security for which 
information is being reported or derivatives of such security). 
• In Column 8, a Manager would enter the U.S . dollar value of the shares reported in 
Column 7, rounded to the nearest dollar. A Manager would report the corresponding 
dollar value of the reported gross short position by multiplying the number of shares of 
the security for which information is being reported by the closing price at the close of 
regular trading hours on the last settlement date of the calendar month. In circumstances 
where such closing price is not available, the Manager would use the price at which it last 
purchased or sold any share of that security. This additional information regarding the 
dollar value of the reported short position would provide additional transparency and 
context to market participants and regulators.  

79 
• In Column 9, a Manager would indicate whether the identified gross short position in 
Column 7 is fully hedged (“F”), partially hedged (“P”), or not hedged (“0”) at the close of 
the last settlement date of the calendar month of the reporting period.
237
 
(B) Comments and Final Rule 
Comments regarding the contents of Information Table 1 raised concerns about the 
proposal to require hedging information in Column 9. As discussed below, the Commission is 
adopting Information Table 1, as proposed, except that the Commission will not require 
Managers to report hedging information as originally proposed in Column 9 of the table. 
Comments Regarding Hedging Indicators 
Implementation Challenges 
The proposal would have required Managers to report on Information Table 1 whether 
they were “fully hedged” or “partially hedged” based on whether a Manager held an offsetting 
position that completely or partially reduced the risk of price fluctuations for its position in that 
equity security, respectively.
238
 Further, the proposal required Managers to report on Information 
 
237
  As stated in the proposal, a Manager would indicate that a reported gross short position in an equity 
security is “fully hedged” if the Manager also holds an offsetting position that reduces the risk of price 
fluctuations for its entire position in that equity security, for example, through “delta” hedging (in which 
the Manager’s reported gross short position is offset 1-for-1), or similar hedging strategies used by market 
participants. A Manager would report that it is “partially hedged” if the Manager holds an offsetting 
position that is less than the identified price risk associated with the reported gross short position in that 
equity security. This additional hedging information would help to indicate whether the reported gross short 
position is directional or non-directional in nature. More specifically, a short position that is not hedged 
could be an indicator that the short seller has a negative view of the security, believes that the price of the 
equity security will decrease, and accepts the market risk related to its short position. A short position that 
is fully hedged could be an indicator that the short seller has a neutral or positive view of the security and is 
engaged in hedging activity to protect against potential market risk. A short position that is partially hedged 
could be an indicator that the short seller has a negative, neutral, or positive view of the security. Whether 
the hedge itself is full, partial, or non-existent might provide further context to market participants 
regarding the short seller’s view of the equity security. Hedging information also can assist with 
distinguishing position trading, which typically has corresponding hedging activity, from other strategies 
such as arbitrage. 
238
  Proposing Release, at 14959.  

80 
Table 1 that their short position was “not hedged” if the Manager did not hold any offsetting 
positions.
239
 A number of commenters raised concerns about the costs to implement this 
proposed requirement.
240
 One such commenter expressed concerns that the requirement to report 
hedging status would be “operationally difficult to implement,” as the reporting would be 
produced by back-office systems that “generally do not have any linkage information to allow 
them to match a hedge to a short position,” necessitating the development of costly new 
systems.
241
 One industry group commenter expressed a concern about “complications that can 
arise from the hedging classification,” particularly for large portfolios for which it will not 
always be clear when a position is intended to be a hedge for another position, or clear or 
obvious whether a position acts as “one-to-one offset” of price risk for another position.
242
 
Non-Universal Terminology 
Some commenters expressed concerns about the meaning of “fully hedged” and 
“partially hedged” under the proposed rule. These commenters expressed the view that because 
there is no universal definition of hedging in the marketplace, or clear guidance on this matter 
from the Commission, Managers can reasonably come to different conclusions regarding the 
extent to which similar positions are hedged.
243
 Because the meanings of “fully” and “partially” 
 
239
  Id. 
240
  See, e.g., MFA Letter, at 4 (stating that inclusion of hedging classification on Form SHO would be costly 
and time consuming for reporting Managers to produce); Virtu Letter, at 3 (advocating that requirement to 
report short positions as fully, partially, or not hedged would be “operationally difficult to implement” and 
should be eliminated).  
241
  Virtu Letter, at 3.  
242
  AIMA Letter, at 13. 
243
  See, e.g., ICI Letter, at 10; see also Comment Letter from Mehmet Kinak, Head of Equity Trading, T. 
Rowe Price, et al. (Apr. 26, 2022), at 4, available at https://www.sec.gov/comments/s7-08-22/s70822-
20126777-287493.pdf (“T. Rowe Price Letter”) (stating that hedging data may be “especially vulnerable to 
lack of consistency in terms of how various managers apply the classification.”); AIMA Letter, at 13 
(predicting that hedging classification will involve “level of subjectivity that is unlikely to be applied 
uniformly across Managers” and that determining such classification will “prove even more complicated 
for a large quantitative portfolio”). 

81 
hedged are subject to interpretation, these commenters believed that the reporting of hedging 
data would be inconsistent, imprecise, potentially misleading, and subject to misinterpretation. 
Several such commenters posited that due to what they described as the ambiguity of the hedging 
definitions, the proposed hedging reporting could result in inaccurate or misleading data—such 
as misleading market signals of Managers’ sentiments—as Managers may interpret the hedging 
indicators differently.
244
 Similarly, a commenter stated that due to the lack of detail surrounding 
the “partially hedged” designation in particular, the data may be misleading as to the level of 
price risk associated with certain positions.
245
 A commenter stated that there is no universal 
definition of what constitutes a “hedge” and that the Commission’s guidance in the Proposing 
Release and the instructions in Proposed Form SHO as to how a Manager determines whether or 
when a position is fully or partially hedged, or not hedged, are insufficient to create a universal 
understanding and consistent reporting.
246
 That commenter further stated that the Commission 
provided only one example (the use of delta hedging in a one-to-one offset between short and 
long positions), even though Managers use a variety of other hedging techniques, such as 
portfolio hedging, ETFs, baskets of securities, and securities that have historic trading 
correlations, among others.
247
 Under these circumstances, several commenters predicted, 
Managers would likely default to a “partially hedged” designation,
248
 resulting in data of limited 
 
244
  See, e.g., AIMA Letter, at 13; MFA Letter, at 16. 
245
  See ICI Letter, at 10. 
246
  See MFA Letter, at 16-17. 
247
  See id. 
248
  See, e.g., MFA Letter, at 17. The MFA Letter suggested that “almost all short positions held by a large 
manager will be partially hedged—for example, if a manager has discretion over one fund with a short 
position, and another unrelated fund with a long position, the manager would be required to report the short 
position as “partially hedged” when in fact, the short position is not hedged at all.” Depending on the facts 
and circumstances, the commenter is correct that the positions in the two funds managed by the same 
Manager may have to be aggregated under Rule 200(c) of Regulation SHO for marking purposes. 

82 
utility.
249
 These commenters stated that due to what they viewed as the ambiguous and 
non-universal nature of the terms, many Managers may simply default to marking transactions as 
“partially hedged” when it is unclear to what extent the positions are hedged, due to the wide 
range of positions encompassed by the proposed partially hedged indicator.
250
 To mitigate this 
concern and to improve transparency, some commenters critical of the hedging indicators 
suggested reducing the qualitative nature of the proposed terms by dividing the “partially 
hedged” term into smaller, well-defined units or even percentage increments.
251
 More 
specifically, these commenters expressed concern that the proposed hedging classifications could 
prove challenging to apply consistently across Managers and could result in significant costs for 
data of limited value.
  252
 One commenter stated that the act of market participants reporting the 
proposed hedging classification would create a chilling effect.
253
 
 
249
  See, e.g., Ropes & Gray Letter, at 5 (stating that difficulty in defining “fully,” “partially,” or “not,” hedged 
would likely lead to inconsistent reporting that, in turn would limit the “meaningfulness” of the reported 
information to investors and the Commission); T. Rowe Price Letter, at 4 (raising concern that lack of 
consistency in how reporting Managers would apply the hedging classification could lead to “weaknesses” 
in the hedging data reported that would make the Commission’s publication of aggregated hedging 
classifications across reporting Managers of little value to, and potentially misinterpreted by, the public); 
MFA Letter, at 4 (stating “[b]ecause (i) there is no universal definition of “hedging” in the industry, and (ii) 
the reported gross short position must encompass short positions aggregated across funds, clients and 
affiliated managers, any hedging-related designation would be meaningless. Inclusion of this data would 
result in inconsistent reporting and would be costly and time consuming for managers to produce.”); 
SIFMA Letter at 21 (stating information reported in Column 9 of Proposed Form SHO would be 
“inherently inconsistent and precise and, therefore, of very little value to regulators in that it could be 
highly misleading”); see also AIMA Letter, at 13 (stating hedging classification will involve “level of 
subjectivity that is unlikely to be applied uniformly across Managers”). 
250
  See, e.g., Ropes & Gray Letter (arguing that the possible exaggerated use of the partially hedged indicator 
is “unlikely to elicit comparable reporting across managers”). 
251
  See Comment from Peyton Bailey (Mar. 14, 2022) (“Peyton Bailey Comment”), available at 
https://www.sec.gov/comments/s7-08-22/s70822-272291.htm (proposing to use percentage points or 
“majority” (>50%) and “minority” (≤50%) hedging indicators instead of partially hedged); Nick Dougherty 
Letter (proposing to use percentage points); WTI Letter (proposing to use percentage points); Comment 
from Alex Fleming (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
317348.htm (proposing to use numerical or percentage scale). 
252
  See MFA Letter, at 4, 16-17. 
253
  See Comment Letter from Joshua Russell (Oct. 26, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-20147825-314190.pdf. 

83 
Another commenter stated that although a change in hedging status may correspond with 
a change in manager sentiment, it is also possible that such a change may simply be the result of 
other unrelated objectives, such as rebalancing a portfolio.
254
 Similarly, another commenter 
agreed that the purpose of defensive tactics that hedging strategies often entail, such as hedging a 
long position, contrasts with the purpose of unhedged short strategies.
255
 That commenter 
expressed the view that such “defensive” hedging should not be included in the reporting as it 
would provide limited utility to the public. Some commenters took the position that reporting on 
“bona fide” hedging activity would not align with the goals in the Proposing Release and that 
such activity is unlikely to be abusive or manipulative.
256
 
Some commenters that supported requiring hedging indicators generally rejected 
complaints about the costs and burdens related to the proposed reporting of hedging status as part 
of Information Table 1, stating that with modern technology, the requirements are “easily 
automated and with minimal cost incurrence.”
257
 Support for the collection of hedging 
information generally came from commenters favoring steps to enhance the transparency of short 
sale-related data to facilitate a better understanding of short selling dynamics.
258
 One commenter 
stated that the hedging classification, if made public, would illustrate market sentiment, and that 
it would help to uncover “short and distort” campaigns, particularly in sectors that have higher 
 
254
  See T. Rowe Price Letter, at 4. 
255
  See K&L Gates Letter, at 2. 
256
  See K&L Gates Letter, at 2-3, T. Rowe Price Letter, at 2-4, Anonymous Fund Manager Letter, at 1. 
257
  Letter from Andrew Patrick White, CEO & Founder, FundApps (Mar. 2, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118368-271239.pdf.  
258
  See, e.g., Comment Letter from Anonymous (March 14, 2022) (positing that managers should report 
whether, and to what extent, they are hedged, along with an explanation of what that means; such 
information is valuable in determining a manager’s position with regard to the associated risks); see also 
Comment Letter from Biotechnology Innovation Organization (Apr. 25, 2022) at 3, available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126539-287214.pdf (“BIO Letter”) (positing that 
transparency into hedging data would facilitate understanding of price and behavior dynamics). 

84 
than normal rates of short selling.
259
 The commenter further explained that under the status quo, 
it is unclear whether short positions are used for hedging long positions or whether they are 
being used to speculate on perceived overvaluation in the market in recent years.
260
 Another 
commenter stated that publishing hedging information regarding the actions of hedge funds and 
other large market participants would inform the decision making of retail investors.
261
 Other 
commenters posited that the proposed “not hedged” indicator would provide the most useful 
information to the market because unhedged short positions may be the most likely to be riskier 
or manipulated.
262
 
Final Rule 
After considering the comments received,
263
 the Commission is not adopting the hedging 
reporting requirement as proposed. Specifically, when filing Form SHO Information Table 1, a 
 
259
  BIO Letter, at 7. 
260
  Id. at 2. 
261
  Peyton Bailey Comment. 
262
  See Comment from Max Knaus (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-316957.htm; Comment Letter from Brendan Casey (Oct. 30, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20149998-319181.pdf. 
263
  One commenter stated that the proposed hedging requirement “fails to appreciate the difficulty—
particularly for multi-service broker-dealers that use aggregation units and investment funds with multiple 
strategies—of calculating and determining such information for reporting purposes.” SIFMA Letter, at 20. 
Under Regulation SHO, a person shall be deemed to own a security only to the extent it has a net long 
position in that security. See Rule 200(c). See also Rule 200(g)(1) (an order shall be marked long only if the 
seller is deemed to own the security and the security is in the physical possession or control of the broker or 
dealer or it is reasonably expected that the security will be in the physical possession or control of the 
broker or dealer by settlement date). Under Rule 200(f), a broker must aggregate all of its positions in a 
security to determine its net position, unless it qualifies for independent trading unit aggregation. If the 
broker or dealer qualifies for independent aggregation units, each independent trading unit shall aggregate 
all of its positions in a security to determine its net position. See Rule 200(f). Qualification requires that the 
independent aggregation unit meet four conditions. See Rule 200(f)(1) through (4). For instance, all traders 
in an aggregation unit must pursue only the particular trading objective(s) or strategy(s) of that aggregation 
unit and may not coordinate that strategy with any other aggregation unit. See Rule 200(f)(3). In adopting 
Rule 200(f), the Commission stated that “conditions are necessary to prevent potential abuses associated 
with establishing aggregation units within multi-service broker-dealers.” Regulation SHO Adopting 
Release, at 48011. Thus, to be eligible for the aggregation unit exception, the broker or dealer’s units must 
operate independently, with defined trading strategies, and one unit’s trades or positions cannot be used to 
offset or hedge another unit’s trades or positions. See, e.g., Rule 200(f)(3); see also Regulation SHO 
 

85 
Manager will not be required to indicate whether the identified gross short position in Column 9 
of Information Table 1 is fully hedged (“F”), partially hedged (“P”), or not hedged (“0”) at the 
close of the last settlement date of the calendar month of the reporting period; Column 9 will be 
removed from Information Table 1 of Form SHO as adopted. 
While the Commission laid out the rationale behind the hedging reporting requirement in 
the Proposing Release, comments received, as discussed above, persuaded the Commission that 
such reported data may not result in as consistent and accurate data as it originally envisioned. In 
addition to the definitional challenges discussed above, the Commission recognizes the 
challenges of applying the Rule 13f-2 reporting requirements in the scenario when a Manager 
has investment discretion over multiple accounts. For example, purchases and sales in different 
accounts may not be intended to hedge one another, but the proposal would have required that 
the Manager indicate that it was “partially-hedged” nonetheless. Such information would not be 
an accurate reflection of the Manager’s hedging status, and thus would not be useful. As another 
example, a Manager that has purchased a few shares of a security (for example, 100 shares) for 
which it holds a substantial short position (for example, 1 million shares) would have had to 
report that it was “partially hedged” without regard for the scale of such purchases in relation to 
the position for which it would have had to report it was hedging. That said, the Commission 
 
Adopting Release, at 48011 (each unit must be engaged in separate trading strategies). While information 
barriers between aggregation units may be useful, as the commenter suggests, such barriers alone are not 
sufficient for eligibility for Rule 200(f). See e.g., Rule 200(f)(3); see also Regulation SHO Adopting 
Release at 48011 (conditions are intended to limit potential for abuse associated with coordination among 
units and to maintain the independence of the units). Thus, a broker or dealer that has created multiple units 
with fungible trading strategies as a means of affecting order marking may not be eligible for aggregation 
unit treatment under Rule 200(f) of Regulation SHO. See e.g., In re Morgan Stanley & Co., LLC, 34-90046 
(Sept. 30, 2020) (settled case), available at https://www.sec.gov/litigation/admin/2020/34-90046.pdf (long-
only and short-only aggregation units were not independent and separate trading strategies, but were 
instead operated by the same employees, managed by the same manager, and consisted of the same trading 
strategies).  

86 
continues to believe, as did some commenters favoring the proposed requirement, that if accurate 
data on hedging could be collected, such information would be useful to regulators. 
The Commission considered whether, as suggested by a commenter, the hedging 
indicator could be simplified so that Managers would be required only to report whether a 
position is not hedged.
 264
 While short positions that are unhedged may involve greater risk, this 
alternative could be too easily circumvented by, for example, simply purchasing a nominal 
number of shares of the security and stating the position is therefore hedged (or partially hedged 
under the rule as proposed). The Commission also considered another commenter’s suggestion 
that hedged short positions should be exempted from reporting.
265
 This alternative would create a 
similar circumvention scenario to the one mentioned above (i.e., using a nominal long position to 
create an exempt hedged position). 
Accordingly, the Commission is not adopting the hedging reporting requirement as 
proposed. 
iv. Information Table 2: “Daily Activity Affecting 
Manager’s Gross Short Position During the Reporting 
Period” 
(A)  Proposal 
As proposed, Information Table 2 of Form SHO captures daily activity that increases or 
decreases a Manager’s short position for each settlement date during the calendar month 
reporting period. More specifically, on proposed Form SHO, a Manager would report the number 
 
264
  See Comment from Max Knaus (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-316957.htm; Comment Letter from Brendan Casey (Oct. 30, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20149998-319181.pdf. 
265
  Perkins Coie Letter, at 6 (stating that “[o]r, alternatively, the SEC should consider exempting hedged short 
positions from reporting on Form SHO”). 

87 
of shares of the equity security that: (i) were sold short; (ii) were purchased to cover, in whole or 
in part, an existing short position in the security; (iii) were acquired through the exercise or 
assignment of an option, through a tendered conversion, or through a secondary offering 
transaction,
266
 that reduces or closes a short position on the (underlying) security; (iv) were sold 
through the exercise or assignment of an option that creates or increases a short position on the 
(underlying) security; (v) resulted from other activity not previously reported in the Information 
Table that reduces or closes, or creates or increases a Manager’s short position on the security, 
including, but not limited to, ETF creation or redemption activity. Pursuant to Proposed Rule 
13f-2, Managers would assemble, review, and file the required information with the Commission 
on new Form SHO within fourteen (14) calendar days after the end of the calendar month. As 
noted above, the Commission would then publish aggregated information derived from the data 
reported on new Form SHO, aggregated across all reporting Managers, within one month after 
the end of the reporting calendar month. 
Specifically, as proposed, the Manager would report the following information on 
Information Table 2 for each date during the reporting period on which a trade settled (settlement 
date) during the calendar month. 
 
266
  The term “sale” under the Securities Act includes contract of sale. See Securities Offering Reform, 
Exchange Act Release No. 52056 (July 19, 2005), 70 FR 44722, 44765 (Aug. 3, 2005); Short Selling in 
Connection With a Public Offering, Exchange Act Release No. 56206 (Aug. 6, 2007), 72 FR 45094, 45102 
(Aug. 10, 2007). The Commission has previously stated that, in a short sale, the sale of securities occurs at 
the time the short position is established, rather than when shares are delivered to close out that short 
position, for purposes of section 5 of the Securities Act of 1933 (“Securities Act”). See, e.g., Commission 
Guidance on the Application of Certain Provisions of the Securities Act of 1933, the Securities Exchange 
Act of 1934, and Rules Thereunder to Trading in Security Futures Products, Exchange Act Release No. 
46101 (June 21, 2022), 67 FR 43234, 43236 (June 27, 2002) (see Questions 3 and 5); Short Selling in 
Connection With a Public Offering, 72 FR 45094.  

88 
• In Column 1, a Manager would enter the date during the reporting period on which a 
trade settled for the activity reported. This would identify the settlement date activity 
being reported. 
• In Column 2, consistent with section 13(f)(2), a Manager would enter the name of the 
issuer, to identify the issuer of the security for which information is being reported. 
• In Column 3, a Manager would enter the issuer’s active LEI, if the issuer had an active 
LEI. The LEI provides standardized information that would enable the Commission and 
market participants to more precisely identify the issuer of each equity security for which 
information is being reported. 
• In Column 4, consistent with section 13(f)(2), a Manager would enter the title of the class 
of the security for which information is being reported. 
• In Column 5, consistent with section 13(f)(2), a Manager would enter the nine (9) digit 
CUSIP number of the equity security for which information is being reported, if 
applicable. 
• In Column 6, a Manager would enter the twelve (12) character, alphanumeric FIGI of the 
equity security for which information is being reported, if a FIGI has been assigned. Like 
CUSIP, FIGI provides a methodology for identifying securities. 
• In Column 7, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the equity security for which information is being reported that 
resulted from short sales and settled on that date. 
• In Column 8, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that were 
purchased to cover, in whole or in part, an existing short position in that security and 

89 
settled on that date. This activity information would allow the Commission and other 
regulators to more quickly identify a potential “short squeeze,” which could be evidenced 
by short sellers closing out short positions by purchasing shares in the open market. If it 
appeared that a short squeeze may have occurred through potential manipulative behavior 
involving short selling, the Commission could perform further analysis regarding the 
squeeze. Increased risk of detection could deter some market participants seeking to 
orchestrate a short squeeze. 
• In Column 9, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that are acquired 
in a call option exercise that reduces or closes a short position on that security and settled 
on that date. The exercise or assignment of an option position can reduce or close a short 
position in the underlying equity security. 
• In Column 10, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that were sold in 
a put option exercise that created or increased a short position on that security and settled 
on that date. Options can be used to create economic short exposure such that an exercise 
or assignment of an option could create or increase a short position in the underlying 
equity security. 
• In Column 11, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that were sold in 
a call option assignment that created or increased a short position on that security and 
settled on that date. Options can be used to create economic short exposure such that an 

90 
exercise or assignment of an option could create or increase a short position in the 
underlying equity security. 
• In Column 12, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that were 
acquired in a put option assignment that reduced or closed a short position on that 
security and settled on that date. The exercise or assignment of an option position can 
reduce or close a short position in the underlying equity security. 
• In Column 13, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that are acquired 
as a result of tendered conversions that reduced or closed a short position on that security 
and settled on that date. Holders of convertible debt often hold short positions to hedge 
their convertible position. When the shares of the convertible debt are converted, they can 
reduce or close a short position in the equity security. 
• In Column 14, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that were 
obtained through a secondary offering transaction that reduces or closes a short position 
on that security and settled on that date. Purchasing securities in a secondary offering
267
 
can reduce or close a short position in the equity security.
 
 
 
267
  Such offering purchases must be reported whether they occurred outside or within the restricted period of 
17 CFR 242.105, Rule 105 of Regulation M, which makes it unlawful for a person who sells short a 
security that is the subject of an offering to purchase in the offering if the short sale occurred during the 
restricted period. Rule 105 originally prohibited persons from covering short sales with offering purchases 
but was amended to prohibit any purchases of offering shares if the person sold short during the restricted 
period (with limited exceptions) “to end the progression of schemes and structures engineered to 
camouflage prohibited covering.” Short Selling in Connection with a Public Offering, Exchange Act 
Release No. 34-54888 (Dec. 6, 2006), 71 FR 75002 at 75005 (Dec. 13, 2006). The amendment was 
designed to address a proliferation of trading strategies and structures attempting to accomplish the 
economic equivalent of the activity that the rule seeks to prevent, specifically, attempts to obfuscate the 
 

91 
• In Column 15, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that resulted 
from other activity not previously reported in Information Table 2 that creates or 
increases a short position on that security and settled on that date. Other activity to be 
reported includes, but is not limited to, shares resulting from ETF creation or redemption 
activity. 
• In Column 16, for the settlement date set forth in Column 1, a Manager would enter the 
number of shares of the security for which information is being reported that resulted 
from other activity not previously reported on Information Table 2 that reduces or closes 
a short position on that security and settled on that date. Other activity to be reported 
includes, but is not limited to, shares resulting from ETF creation or redemption activity. 
The Commission stated in the Proposing Release that it believes that the information in 
Columns 9, 12, 13, 14, and 16 of proposed Information Table 2 would be useful in providing the 
Commission additional context and transparency into how and when short positions in the 
reported equity security are being closed out or reduced.
268
 The Commission also stated that the 
information in Columns 10, 11, and 15 would be useful in providing the Commission additional 
context and transparency into how and when short positions in the reported equity security are 
being created or increased.
269
 
Such daily activity information would provide market participants and regulators with 
additional context and transparency into whether, how, and when reported gross short positions 
 
prohibited “covering” of the short sale. See, e.g., Short Selling in Connection with a Public Offering, 
Exchange Act Release No. 34-56206 (Aug. 6, 2007), 72 FR 45094 (Aug. 10, 2007).   
268
  Proposing Release, at 14960. 
269
  Id. 

92 
in the reported equity security are being closed out (or alternatively, increased) as a result of the 
acquisition or sale of shares of the equity security resulting from call options exercises or 
assignments; put options exercises or assignments; tendered conversions; secondary offering 
transactions;
270
 and other activity. The Commission stated that it believed that such activity data 
would also assist the Commission in assessing systemic risk and in reconstructing unusual 
market events, including instances of extreme volatility. 
(B) Comments and Final Rule 
The Commission solicited and received comment on the categories of short sale activity 
data that a Manager would be required to report on new Form SHO Information Table 2. 
Commenters differed on the appropriate level of transparency of the short sale-related data 
presented. Some commenters called for robust—if not complete—transparency of short 
sale-related data, while other commenters expressed concerns about the breadth of the activity 
information to be reported, the related cost burdens to report such information, and data security. 
Individual investor commenters, generally, were critical of the opacity of current short 
position and short activity data disclosure. A group consisting of retail investors stated there was 
a “lack of transparency around short positions, the inability to adequately quantify short interest, 
and the ability for firms to skirt regulation through derivative positions such as options and 
security-based swaps.”
271
 Some individual investor commenters viewed Proposed Rule 13f-2 
and related Form SHO as a first step toward achieving the full transparency in disclosure they 
 
270
  See supra n. 263. 
271
  WTI Letter. 

93 
perceived as necessary for a fair and efficient market.
272
 To these commenters, greater 
transparency is a means to level the playing field for retail investors.
273
  
Other commenters acknowledged the Commission’s authority to promulgate rules to 
capture short sale-related data but took the position that Form SHO reporting should be limited 
to the bare minimum necessary to satisfy the statutory mandate of DFA section 929X (i.e., 
Exchange Act section 13(f)(2)).
274
 These commenters expressed concerns about requiring the 
reporting of anything beyond the data elements expressly specified in section 13(f)(2) of the 
Exchange Act.
275
 E xpressing concerns that the data required in Information Table 2 of Proposed 
 
272
  Id. See also Anonymously Submitted Comment (Mar. 11, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20119226-272030.htm (“any and all information” should 
be accessible by any investors); Anonymously Submitted Comments (Apr. 26, 2022, May 10, 2022, Oct. 9, 
2022, Oct. 26, 2022); Comment from Erin Ashford (Oct 9, 22), available at 
https://www.sec.gov/comments/s7-08-22/s70822-309605.htm (calling for “robust and complete 
transparency”); cf. Anonymously Submitted Comment (Mar. 17, 2022) (raising concerns about data 
integrity when the reporting system is based on reporting). 
273
  See, e.g., Comment from Richards (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-317124.htm (“Market fairness and transparency is an important part of this democracy. It helps 
to level the playing field.”); Anonymously Submitted Comment (Oct. 19, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20146713-312005.pdf (“In summary, I, like many others, 
support the above proposal to increase transparency in the markets, and to somewhat level the playing field 
for smaller, independent investors and retail alike.”); Comment from Jonathan Patterson (Mar. 14, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-272193.htm ("Shedding some light into the 
transactions of short sellers would be very supportive for retail investors and would help to level the 
playing field.”).  
274
  See T. Rowe Price Letter, at 2 (urging a measured approach to meeting the 929X reporting obligation so 
that “the public reporting of short sale information only satisfies the specific data elements and minimum 
frequency of dissemination referenced in section 929X and goes no further.”); Comment Letter from 
Robert Sloan, Managing Partner, S3 Partners, LLC (May 20, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20129426-295541.pdf (recommending reporting be 
limited to public disclosure of “only those data elements required by Section 13(f)(2)”) (“S3 Letter”); see 
also AIMA Letter (positing that Information Table 1 of Form SHO, without the requirement to report 
hedging information, would alone be sufficient for the Commission to carry out its statutory mandate and 
achieve its goals). 
275
  See, e.g., SIFMA Letter, at 2 (positing that “expansive reporting regime contemplated under the Proposed 
Rules would extend significantly beyond what Congress intended in passing Section 929X . . . .”); 
Comment Letter from James Toes, President & CEO, et al., Security Traders Association (Apr. 26, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-20126796-287509.pdf (“STA Letter”) 
(criticizing rulemaking proposal as going far beyond mandate of 929X of Dodd-Frank Act to prescribe 
rules providing for public disclosure of short sales and recommending more alignment of Proposed Rule 
13f-2 reporting requirements with those of Form 13F); T. Rowe Price Letter, at 2. 

94 
Form SHO is too granular and contains an excessive amount of commercially sensitive 
information that, if misappropriated, would lead to commercial harm, these commenters 
recommended that, at a minimum, the scope of information required to be reported on 
Information Table 2 of Proposed Form SHO be substantially limited, or that Information Table 2 
be eliminated altogether.
276
 Some of these commenters suggested that the Commission rely 
instead on existing sources of short-sale related data, such as CAT or short sale-related data 
provided to FINRA and the exchanges.
277
 Other commenters questioned the utility of the 
reported information proposed to be required.
278
 
Several commenters expressly or effectively questioning the need for Information Table 
2, also raised the concern that the short activity monitoring necessary to comply with the 
reporting requirements of Proposed Form SHO would require any Manager that engages in short 
selling to expend significant time and resources to enhance or revamp its systems to monitor 
activity continuously, without certainty as to if or when its short selling activity would meet or 
 
276
  See, e.g., Two Sigma Letter, at 3-4 (raising concerns about potential data breaches and unintended public 
dissemination of daily short position data); see also AIMA Letter, at 14 (citing negative ramifications for 
Managers, markets and the Commission if commercially sensitive and valuable data reported in 
Information Table 2 were to be compromised). See also discussion in supra Part II.A.4.a.ii. 
277
  See, e.g., AIMA Letter, at 2 (calling for elimination of Information Table 2 because it is “too granular”); 
MFA Letter, at 4 (calling for elimination of Information Table 2 in favor of “less burdensome alternative”); 
see also Ropes & Gray Letter, at 2 (stating that much of the information to be reported under Proposed 
Rule 13f-2 “is, or soon should be” available from existing reporting regimes—e.g., CAT, and information 
reported by broker-dealers to FINRA and the exchanges); SIFMA Letter, at 15-19 (recommending 
elimination of Information Table 2 altogether or alternatively that reporting of short activity data be limited 
to reporting only gross short positions at the end of each settlement day when a reporting threshold is 
breached (excluding detailed purchase and sale activity); cf. T. Rowe Price Letter, at 3 (recommending that 
Commission not use the permissive authority granted in section 13(f)(2) of the Exchange Act to gather 
additional information that would not be beneficial to the market and would be challenging for Managers to 
compile). See also discussion in supra Part II.A.4.a.i. 
278
  See, e.g., Ropes & Gray Letter, at 3, 6 (stating that it would be difficult to “to discern market sentiment or 
levels of activity from the net number published by the Commission, and the utility of publishing daily net 
transactions data to market participants will also likely be limited”); see also K&L Gates Letter, at 2 
(questioning the “value and impact” of the information called for under Proposed Rule 13f-2, that would 
supplement information currently available from other sources). 

95 
exceed the reporting thresholds.
279
 These commenters concluded that the costs to operationalize 
Rule 13f-2 had not been adequately weighed against any benefits to regulators or the public.
280
  
Final Rule 
The Commission continues to believe that publication of aggregated short position data, 
on a delayed basis, is a reasonable means of minimizing the potential negative impacts of short 
position and short activity disclosures on short selling and allaying data security concerns raised 
by commenters while at the same time increasing transparency.
281
 This rationale applies to 
Information Table 2, which is about daily activities. Eliminating Information Table 2 would not 
further the goal of enhancing the transparency of short sale-related data.
282
 And for reasons 
stated below, the data available from existing sources of short sale-related information have 
 
279
  See, e.g., Two Sigma Letter, at 7 (commenting that the “commercial risk and operational burdens created 
by daily reporting of individual short positions” was not adequately justified in the Proposing Release); 
MFA Letter, at 9-10 (raising concern that costs and consequences of Proposals would have a chilling effect 
on institutional investment managers’ pursuit of short strategies); Perkins Coie Letter, at 2-3 (stating that 
the benefits of the reported information would be outweighed by compliance costs for Managers that do not 
regularly utilize short positions “[F]or institutional investment managers that only selectively utilize short 
positions, or who only do so passively, these additional compliance costs in relation to the institutional 
investment manager’s usage of short positions could in turn impose untended risks to the manager’s 
underlying investors if the institutional investment manager must divert additional time and resources for 
compliance and oversight. This appears to be yet another affirmative reporting requirement that will 
increase compliance and overhead cost, without a [commensurate] benefit.”). 
280
  See, e.g., MFA Letter, at 14 (describing categories of information required in Information Table 2 as 
“unclear, requir[ing] complicated judgments on the part of [M]anagers, and . . . likely to yield 
inconsistencies in reporting and results that are not accurate.”); Ropes & Gray Letter, at 3 (positing that 
reporting under Proposed Rule 13f-2 would impose “significant costs” on Managers, would not result in 
disclosure of “actionable information to market participants,” and is not necessary to allow the Commission 
to perform “effective market surveillance”); see also S3 Letter, at 2 (predicting that short activity 
monitoring required by Information Table 2 of Form SHO will be a “substantial lift” for Managers’ 
administrative systems); SBAI Letter, at 2 (positing that proposed Form SHO data collection framework 
not justified from a cost benefit perspective and provides “very limited” additional insight in an untimely 
manner). 
281
  Proposing Release, at 14955. 
282
  See Proposing Release, at 14987-14988, 14991 (discussing how existing sources of short sale-related data 
are not sufficiently granular, for example, to provide sufficient insights to further understanding of short 
selling strategies, to distinguish short sale transactions that impact short positions and those that do not, or 
into the timing with which short positions are established or covered). 

96 
limitations, so they do not extinguish the need for additional transparency in the short sale 
market.
283
 
The data to be reported in the following columns of Information Table 2 in Proposed 
Form SHO will provide regulators with additional context and transparency into how and when 
reported gross short positions were closed out or increased, which will help the Commission 
assess systemic risk.
284
 These columns are as follows: 
• Column 7: Number of Shares Sold Short 
• Column 8: Number of Shares Purchased to Cover an Existing Short Position 
• Column 9: Number of Shares Purchased in Exercised Call Option Contracts 
• Column 10: Number of Shares Sold in Exercised Put Option Contracts 
• Column 11: Number of Shares Sold Short in Assigned Call Option Contracts 
• Column 12: Number of Shares Purchased in Assigned Put Option Contracts 
• Column 13: Number of Shares Resulting from Tendered Conversions 
• Column 14: Number of Shares Obtained Through Secondary Offering Transaction
285
 
• Column 15: Other Activity that Creates or Increases Manager’s Short Position 
• Column 16: Other Activity that Reduces or Closes Manager’s Short Position 
However, the Commission is modifying the design of Information Table 2 of Proposed 
Form SHO to help reduce the costs and burdens of complying with the reporting requirements of 
 
283
  See infra Part VIII.B.4. 
284
  Proposing Release, at 14959. 
285
  A secondary offering transaction for purposes of this requirement means an offering, other than an initial 
public offering, or “IPO,” for the same class of security that is the subject of the short sale. Such an offering 
could be made by the issuer and include newly created and or treasury shares and could also include or be 
made exclusively by selling shareholders.  

97 
Proposed Rule 13f-2 without sacrificing the level of transparency of short sale activity data made 
available to market participants as prescribed in Proposed Rule 13f-2(a)(3). 
Under the reporting regime of Proposed Rule 13f-2, Managers would have been required 
to report each category of short activity information included in Columns 7-16 (above) of 
Information Table 2 of Proposed Form SHO.
286
 The Commission, for each individual column, 
would then tabulate the information reported to determine and publish the net activity in each 
reported equity security, as aggregated across all reporting Managers. That net activity would be 
expressed by a single identified number of shares of the reported equity security and be 
determined by offsetting the purchase and sale activity reported by Managers in Columns 7-16 of 
Information Table 2 of Proposed Form SHO. 
Under the adopted version of Information Table 2, Columns 7-16 of Information Table 2 
of Proposed Form SHO are replaced by a single, new Column 7, in which Managers will report 
net activity in the security for which information is being reported (represented as a number of 
shares). More specifically, Special Instruction 9.g of Form SHO, as adopted, requires Managers 
to report net change in short position reflecting how the gross short position in shares of the 
security for which information is being reported are being closed out—or alternatively, 
increased—as a result of the acquisition or sale of share activity determined by offsetting 
prescribed types of purchase and sale activity. Those prescribed types of purchase and sale 
activities correspond to the purchase and sale activities identified in Columns 7-16 of Proposed 
Form SHO. The net activity will be determined by Managers—rather than by the Commission—
and reported to the Commission. The Commission will then aggregate the reported daily net 
change numbers across Managers for public dissemination. Under the adopted version of 
 
286
  See Special Instructions 9.g of Proposed Form SHO. 

98 
Information Table 2, the Commission will receive less granular information from reporting 
Managers than was proposed. The Commission, however, will receive net activity information 
from reporting Managers for each settlement date during the calendar month which will provide 
additional context and transparency into whether the reported gross short positions in the 
reported equity security are being closed out (or alternatively, increased) as a result of the 
acquisition or sale of shares of the equity security resulting from call options exercises or 
assignments; put options exercises or assignments; tendered conversions; secondary offering 
transactions; and other activity. The Commission believes that this is a reasonable approach that 
considers both those comments that supported additional transparency with regard to short sale-
related information that would result from Information Table 2 reporting, and also comments 
about cost and data security concerns with regard to such reporting. This reported net activity 
information will assist the Commission in assessing systemic risk and in reconstructing unusual 
market events, including instances of extreme volatility.
287
 
These modifications in the final rule for Information Table 2 of Form SHO result in no 
change to the net activity information that will be made publicly available by the Commission. 
Under Proposed Rule 13f-2 and Proposed Form SHO, the Commission would publish net 
activity information for each reported equity security, aggregated across all categories of activity 
in Columns 7-16 of Information Table 2 of Proposed Form SHO, and aggregated across all 
reporting Managers. Under Rule 13f-2   and Form SHO, the Commission will publish this same 
net activity information for each reported equity security as originally proposed by the 
 
287
  See infra Part VIII.C.1 for a discussion of how the Rule 13f-2 (and the adopted CAT amendment) will 
enhance the Commission’s ability to protect investors and investigate market manipulation by providing a 
clearer view into the short selling market and improving the Commission’s and other regulators’ 
reconstruction of significant market events.   

99 
Commission.
288
 And for this reason, Information Table 2 as adopted will not sacrifice 
transparency to market participants. 
e.   Filing Amendments 
i.    Proposal 
To facilitate the Commission’s process of aggregating the short sale-related information 
reported on Form SHO for publication, the Commission proposed that amendments to Form 
SHO must restate the Form SHO in its entirety. To inform the Commission that the filing is an 
amendment of a previously filed Form SHO, the Commission proposed that a Manager must 
check the box on the Form SHO Cover Page to indicate that the filing is an “Amendment and 
Restatement.” On the Cover Page of each Amendment and Restatement filed, the Commission 
proposed that a Manager must provide a written description of the revision being made, explain 
the reason for the revision, and indicate whether data from any additional Form SHO reporting 
period(s) (up to the past 12 calendar months) is/are affected by the amendment. If other reporting 
periods have been affected, the Commission proposed that a Manager shall complete and file a 
separate Amendment and Restatement for each previous calendar month so affected and provide 
a description of the revision being made and explain the reason for the revision. 
In cases where a revision is reported in an Amendment and Restatement that changes a 
data point reported in the Form SHO by twenty-five (25) percent or more, the Commission 
proposed that the Manager must notify the Commission staff via the Office of Interpretation and 
Guidance of the Division of Trading and Markets (“TM OIG”) at [email protected] 
within two (2) business days after filing the Amendment and Restatement. 
 
288
  Proposing Release, at 14961. 

100 
ii.   Comments and Final Rule 
The Commission received some comments on the issue of amendments and restatements. 
One comment stated that the notification requirement for an amendment of 25 percent or more is 
too large, and that lower percentage revisions can be considered significant.
289
 The commenter 
further recommended that the notification requirement for amendments be reduced to revisions 
of 15 percent or more and that the number of revisions allowed for individual Managers be 
limited.
290
 Another commenter stated that if a non-material error has been made, a Manager 
should not have to restate Form SHO in its entirety, and that a simple note or addendum should 
suffice.
291
 This commenter also encouraged the Commission to adopt a materiality threshold for 
other errors or omissions, i.e., if the error does not “materially impact the data the Commission 
intends to publish, then the Manager should not be required to restate Proposed Form SHO in its 
entirety,” stating that this would “eliminate the need for the Commission to collect even more 
commercially sensitive and valuable data and, in turn, relieve Managers of the time and costs 
that would be required to calculate, populate, and re-file an entirely new Proposed Form 
SHO.”
292
 
The Commission is adopting procedures for filing and amending Form SHO consistent 
with the Proposing Release but modified to no longer require Managers to separately notify the 
Commission that the reporting discrepancies presented in an Amendment and Restatement have 
occurred. A Manager that determines or is made aware that it has filed a Form SHO with errors 
that affect the accuracy of the information reported must file an amended Form SHO within ten 
 
289
  Comment Letter from Anonymous (Mar. 21, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20120739-272894.pdf. 
290
  See id. 
291
  AIMA Letter, at 15. 
292
  Id.  

101 
(10) calendar days of discovery of the error. The Commission continues to believe that filing an 
amended Form SHO within 10 calendar days of discovery of the error will provide Managers 
with a reasonable period of time to prepare the Form SHO amendment, while helping to ensure 
that accurate information is received by the Commission in a timely manner. 
The Commission is adopting the requirement, as proposed, that amendments to a 
previously filed Form SHO restate the Form SHO in its entirety, as described in Special 
Instruction 3 to Form SHO. Form SHO Special Instruction 3.a provides that on the Cover Page 
of each amended and restated Form SHO filing, a Manager must: check the box to indicate that 
the filing is an “Amendment and Restatement,”  provide a written description of the revision 
being made, explain the reason for the revision, and indicate whether data from any additional 
calendar month reporting period(s) (up to the past 12 calendar months) is/are affected by the 
amendment. Consistent with the proposed procedures for filing an amended Form SHO, if other 
reporting periods have been affected, a Manager must complete and file a separate Amendment 
and Restatement for each previous calendar month so affected, and provide a description of the 
revision being made and explain the reason for the revision. As proposed and discussed further 
below, the Commission will provide aggregated data on a rolling twelve-month basis, with prior 
months’ data updated as necessary to reflect data from Amendments and Restatements. The 
Commission continues to believe that limiting the requirement to file an amended Form SHO to 
twelve months will reduce the burden and cost on Managers.
293
 In response to comments 
requesting a materiality threshold, requiring a Form SHO to be restated in its entirety should add 
little if any additional burden, as the Manager will have already compiled such data, and thus no 
additional data collection will be required other than to correct the data point that is being 
 
293
  Proposing Release, at 14960. 

102 
amended. A materiality threshold could create additional complexity in determining how and 
when to file an amendment to Form SHO, and as such, the Commission is adopting the 
straightforward approach that any revision requires the Manager to restate Form SHO in its 
entirety when filing an amendment. 
The Commission is not adopting, however, the requirements that a Manager provide the 
Commission notice of the revision(s) reported in an Amendment and Restatement and an 
explanation of the reason(s) for the revision(s), as prescribed in Proposed Form SHO Special 
Instruction 3.b and 3.c;
294
 and each of those Special Instructions in Proposed Form SHO is 
deleted from Form SHO as adopted. This change will reduce compliance costs for Managers 
filing Amendments and Restatements by not requiring them to provide a separate notice 
regarding information that has been reported, and therefore is available, to the Commission via 
EDGAR, without sacrificing transparency. 
Consistent with the proposed procedures for publishing data reported on or derived from 
Form SHO reports—including any Amendments and Restatements, the Commission plans to 
update prior months’ aggregated Form SHO data on EDGAR to reflect information reported in 
Amendments and Restatements and will add an asterisk (i.e., *) or other mark for any updated 
data for which a Manager notified Commission staff that it filed an Amendment and Restatement 
that changes a data point reported in the Form SHO by 25 percent or more to highlight for 
market participants that the published aggregated data includes significantly revised data. The 
 
294
  Special Instruction 3.b of Proposed Form SHO provided that if a data being reported in an Amendment and 
Restatement affects the data reported on the Form SHO reports filed in at least three of the immediately 
preceding Form SHO reporting periods, the Manager, within two (2) business days after filing the 
Amendment and Restatement, must provide the Commission staff, via TM OIG at 
[email protected], with notice of (1) this circumstance; and (2) an explanation of the reason for 
the revision. Special Instruction 3.c of Proposed Form SHO provided that if a revision reported in an 
Amendment and Restatement changes a data point reported in the Form SHO that is being amended by 
25% or more, the Manager must notify the Commission staff via TM OIG at [email protected] 
within two business days after filing the Amendment and Restatement. 

103 
Commission will publish the aggregated Form SHO data for the latest reporting period along 
with aggregated Proposed Form SHO data for the prior twelve months on a rolling basis. The 
published aggregated Form SHO data will include a disclaimer that the Commission does not 
ensure the accuracy of the data being published.
295
 Maintaining these requirements will help 
preserve the integrity of the reported short sale data and alert market participants to any potential 
issues with published data.
296
 
f.    Confidential Treatment 
i.    Proposal 
The instructions to Proposed Form SHO provided that all information that would reveal 
the identity of a Manager filing a Proposed Form SHO report with the Commission would be 
deemed subject to a confidential treatment request under 17 CFR 240.24b–2 (“Rule 24b-2”).
297
 
As discussed in the Proposing Release, the Commission proposed to publish only aggregated 
data derived from information provided in Proposed Form SHO reports. Proposed Form SHO, by 
its terms, ensured that information reported on the form that could reveal the identity of the 
reporting Manager would be deemed subject to a confidential treatment request. Pursuant to 
section 13(f) of the Exchange Act, the Commission may prevent or delay public disclosure of all 
other information reported on Proposed Form SHO in accordance with the Freedom of 
Information Act (“FOIA”), s  ection 13(f)(4) and (5), Rule 24b–2(b) under the Exchange Act, and 
any other applicable law. 
 
295
  See Proposing Release, at 14961. 
296
  See id. 
297
  Id. at 14957.  

104 
ii.   Comments and Final Rule 
The Commission received a single comment regarding confidential treatment. Stating 
that there are a variety of valid reasons beyond the example provided in the Proposing Release 
that a Manager might seek confidential treatment of information reported on Proposed Form 
SHO, the commenter urged the Commission to adopt a more flexible process for seeking 
confidentiality that would enable Managers and the Commission staff to determine whether 
confidential treatment is appropriate.
298
 The Commission is adopting an approach consistent with 
the Proposing Release but modified to refer to Rule 83 (17 CFR 200.83), and to provide that all 
information will be deemed subject to a confidential treatment request under Rule 83. 
As proposed, the instructions to Form SHO expressly provided that all information that 
would reveal the identity of a Manager filing a Proposed Form SHO report with the Commission 
would be deemed subject to a confidential treatment request under Rule 24b–2, as described in 
the “Filing of Form SHO” section of the General Instructions to Form SHO. Because the 
Commission does not intend those filings to be public, Rule 83 includes appropriate and less 
burdensome procedures and, accordingly, is revising the General Instructions to provide that data 
will also be deemed subject to a confidential treatment request under Rule 83. 
As with the Proposed Rule, the Commission currently plans to publish only aggregated 
data derived from information provided in Proposed Form SHO reports. While it is possible a 
person may be able to determine the identity of a Manager (or reverse engineer a Manager’s 
trading strategies) in a situation where only one person was selling short, especially where the 
short seller has publicly disclosed that it has a short position in a specific security, the 
 
298
  Schulte Roth & Zabel Letter, at 5 (urging the Commission to permit confidential treatment requests with 
respect to the data to be included in the aggregated data to be published by the Commission on a case-by-
case basis). 

105 
Commission continues to believe that excluding such data from the aggregated data published by 
the Commission could affect the integrity of the data. The Commission anticipates that the risk 
of exposing a single short seller will be mitigated by the delay in publication of the aggregated 
data. 
The Commission does not anticipate disclosing information in Form SHO, other than to 
the extent the data is included in the Commission’s aggregated disclosures, and the Commission 
will deem the information included in Form SHO as being subject to a confidential treatment 
request under Rule 83. Accordingly, the Commission is further revising the General Instructions 
to provide that all information included in the Form SHO is deemed subject to a confidential 
treatment request under Rule 83. Pursuant to section 13(f) of the Exchange Act, the Commission 
may prevent or delay public disclosure of all other information reported on Form SHO in 
accordance with FOIA, section 13(f)(4) through (5), Rule 83, and any other applicable law.
299
 
g. Preventing Duplicative Reporting 
i.    Proposal 
The rules to prevent duplicative reporting of information regarding short positions and 
short activities of an equity security in Proposed Form SHO were partially modeled after those in 
Form 13F.
300
 More specifically, as described in the General Instructions to Proposed Form SHO, 
if two or more Managers, each of which would be required by Proposed Rule 13f–2 to file 
Proposed Form SHO for the reporting period, exercise investment discretion with respect to the 
same security, only one such Manager would be required to report information regarding that 
 
299
  The Commission will follow Rule 83 procedures in addressing any requests for information reported on 
Form SHO deemed subject to a confidential treatment request. 
300
  See “Rules to Prevent Duplicative Reporting” in the “General Instructions” of Form 13F, available at 
https://www.sec.gov/pdf/form13f.pdf. 

106 
security in its Proposed Form SHO report. The Commission proposed that if a Manager were 
required to file a Proposed Form SHO report with respect to a security and chose to rely on the 
duplicative reporting provisions of the General Instructions to Proposed Form SHO, then such 
Manager would be required to identify on the cover page of its Proposed Form SHO report any 
other Managers filing a Proposed Form SHO report with respect to such security on behalf of the 
Manager, in the manner described in Special Instruction 5 of Proposed Form SHO. Duplicative 
reporting could result in unnecessary costs to Managers and could make the aggregated data 
published by the Commission less accurate. 
ii.   Comments and Final Rule 
The Commission did not receive any comments regarding duplicative reporting, and for 
the reasons stated in the Proposing Release, is adopting Special Instruction 5 to Form SHO as 
proposed. 
h.    Verification of Short Sale Data 
i.    Proposal 
The Commission stated in the Proposing Release that it does not intend to verify the 
accuracy of the data reported by Managers, but may consider doing so in the future after 
assessing whether such verification would be useful or necessary to enhance the integrity of the 
data.
301
 The Commission further stated that field validations act as an automated form 
completeness check when a Manager files Proposed Form SHO through EDGAR, and that the 
validations do not verify the accuracy of the information filed in the Proposed Form SHO 
filings.
302
 
 
301
  Proposing Release, at 14955. 
302
  Proposing Release, at 14960 n.72. 

107 
ii. Comments and Final Rule 
The Commission received many comments on the issue of Manager reporting and data 
verification. The comments supported implementing a Commission verification system for 
reported data, stating that reporting as proposed would lead to inconsistencies. Commenters 
expressed concerns regarding the self-reporting of data, citing the potential for errors or 
intentional manipulation of data.
303
 One commenter stated that Managers have incentives to 
report inaccurately, especially if there is concern over unveiling short selling strategies.
304
 Other 
commenters cited examples of instances of potential issues with data resulting from 
under-reporting, over-reporting, and misreporting.
305
 One commenter stated, without further 
detail, that orders were being mismarked as short exempt in order to circumvent the short sale 
circuit breaker of Rule 201 of Regulation SHO.
306
 Other commenters suggested that the 
Commission verify the accuracy of reported data via a random audit, such as auditing reporting 
at a rate applicable to five percent of reported data per quarter.
307
 Several commenters also 
 
303
  See, e.g., Comment from Dale Eaglen (Feb. 25, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20117894-270815.htm; Comment from Michael Behrens (Feb. 25, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-270806.htm (“Michael Behrens Comment”); Comment 
from Stephen (Mar. 4, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20118671-
271537.pdf; Comment from Kevin B. (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20119357-272243.htm; see also Steve B. Comment (expressing concern that “[s]hort positions 
are currently ‘self regulated’”), Comment Letter from Mike Monisky (Mar. 4, 2022) available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118657-271529.pdf (expressing concerns about 
misreporting of securities transactions to FINRA) (“Mike Monisky Letter”), Comment from Jonathan 
Dumaine (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20119364-
272250.htm (expressing general concern for potential for abuse whenever self-reporting on forms is 
involved) (“Jonathan Dumaine Comment”). 
304
  Comment from J. T. (Oct. 2, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
309405.htm. 
305
  See, e.g., Michael Behrens Comment; Mike Monisky Letter; Jonathan Dumaine Comment. 
306
  See Michael Behrens Comment. 
307
  See, e.g., Michael Behrens Comment; Comment from Jana Caperton (Mar. 12, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20119201-272007.htm; Comment from Jim Lee (May 26, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-295810.htm (“Jim Lee Comment”); 
Comment from Gerry T. (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
 

108 
suggested that short sale transactions be placed on a publicly available, immutable log, perhaps 
using blockchain technology, as a solution to the issue of verification.
308
 Finally, one commenter 
suggested that it should be the duty of exchanges and broker-dealers to report eligible short 
positions.
309
 
The Commission is adopting the reporting requirement as proposed. Consistent with the 
Commission’s statement in the Proposing Release, the Commission does not intend to verify the 
accuracy of the data received from the Managers but may consider doing so after assessing 
whether such verification would be useful or necessary to enhance the integrity of the data. The 
reporting Managers are responsible for the completeness, timeliness, and accuracy of 
information included in their mandatory filings to the Commission. The Commission has the 
ability to conduct examinations to help evaluate whether reporting Managers are in compliance 
and, where necessary, the Commission may bring enforcement actions where potential violations 
are believed to have occurred. 
i. New Reporting Regime—Comments and Final Rule 
Rather than create a new reporting regime by adopting the Proposals, several industry 
commenters urged the Commission to leverage the existing data frameworks of FINRA, CAT, 
and other data filed with the Commission (e.g., Form N-PORT).
310
 These commenters stated that 
 
317082.htm; Comment Letter from Wayne C. Smith (Dec. 3, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20152504-320238.pdf. 
308
  See, e.g., Comment from Joseph M. Grato (Mar. 21, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-20120589-272777.htm (“Joseph Grato Comment”); Jim Lee Comment. 
309
  Jonathan Dumaine Comment. 
310
  See, e.g., Ropes & Gray Letter, at 2; Two Sigma Letter, at 9-10; ICI Letter, at 5; see also K&L Gates 
Letter, at 2 (stating that the Proposal “is unnecessary and, on balance, overly burdensome given the 
sufficiency of existing data availability”); Virtu Letter, at 2 (stating that the Commission “has not proffered 
a regulatory need or justification for why the current reporting regime is inadequate”); SIFMA Letter, at 13 
(“respectfully disagree[ing] with the Commission’s assertions that the data available to it through the 
existing reporting regimes is not sufficient to allow the SEC to meet its obligations under Section 929X”); 
 

109 
leveraging existing reporting frameworks would alleviate compliance burdens and associated 
costs,
311
 and that existing reporting frameworks were already sufficient for short interest 
reporting.
312
 These commenters stated, and the Commission acknowledges,
313
 that there are 
multiple sources of existing public and non-public data related to short sales. FINRA and most 
exchanges collect and publish daily aggregate short sale volume data, and on a one month 
delayed basis publish aggregated information regarding short sale transactions. FINRA collects 
and aggregates short interest data from broker-dealer member firms, by security, twice each 
month. 
In assessing how the Commission might leverage existing data to satisfy the mandate of 
section 929X, it is important to note differences in reporting entities, timing, and the specific data 
being collected in existing public and non-public sources of short sale-related data. The letters 
submitted by industry commenters critical of the Proposed Rule 13f-2 reporting regime did not 
explain with any specificity how the Commission could leverage existing sources of short data so 
that the Commission would receive equal or comparable data to that which will be reported on 
Form SHO, nor did Commenters articulate how short data that is currently available to market 
 
Perkins Coie Letter, at 2; AIMA Letter, at 8-10 (stating that “[w]ith tailored refinements to FINRA 
reporting and the combination of the proposed CAT amendments...the Commission can still fulfill the 
statutory mandate and achieve the goals outlined in the Proposal but without creating additional reporting 
requirements, burdens and costs for many market participants”); SBAI Letter, at 2 (stating that instead of 
implementing a new reporting regime, the Commission should “[f]ocus should instead lie on making 
enhancements to FINRA’s existing collection and activity fit for purpose.”); T. Rowe Price Letter, at 3 
(stating that “[g]iven the extensive data already available to the SEC through FINRA’s existing short 
interest reporting, stock exchanges’ reporting of short sale activity, and the [CAT], the SEC should extract 
the short data it desires from these sources, rather than create new reporting obligations for managers 
whose activity is already captured by these existing frameworks.”).  
311
  See, e.g., Ropes & Gray Letter, at 2; SIFMA Letter, at 19.  
312
  See, e.g., SIFMA Letter, at 9-10; K&L Gates Letter, at 2; Virtu Letter, at 2. 
313
  See Proposing Release, at 14953-4. 

110 
participants is comparable to data which would be reported on Form SHO and published by the 
Commission, rather the comments referenced leveraging of existing sources generally.
314
 
After considering the viewpoints of commenters, the Commission believes that a new 
reporting regime will increase transparency into short positions consistent with the goals of DFA 
929X, and that market participants and regulators alike will benefit from the required Form SHO 
disclosures, as they are distinct from existing short sale reporting regimes. Further, the short sale-
related information that will be collected under Rule 13f-2 and Form SHO will fill an 
information gap for market participants and regulators by providing insights into increases and 
decreases in reported short positions. As stated in the Proposing Release, the Commission 
believes that the short position data reported pursuant to Rule 13f-2 on Form SHO will 
supplement the short sale information that is currently publicly available from FINRA and the 
exchanges.
315
 In the Proposing Release, the Commission elaborated on the limitations of using 
existing data, such as the CAT or FINRA data, to reconstruct market events like the “meme” 
stock events of January 2021.
316
 The Commission stated that while some existing sources report 
daily short sale volume, there are several limitations with regard to using existing data sources to 
accurately represent the short exposure of Managers. The short sale data reported on Form SHO 
will include the daily “net” activity by reporting Managers on each settlement date during the 
calendar month in the security for which information is being reported, and such information is 
not currently available from FINRA or the exchanges. Moreover, because FINRA’s existing 
 
314
  See, e.g., Virtu Letter, at 2 (stating that the Commissions should “explore ways to utilize the existing 
sources of data that already are available to the SEC rather than establishing yet another pool of short sale 
data.”). 
315
  See Proposing Release, at 14981-82. See also infra Part VIII.B.4. 
316
  See Proposing Release, at 14981-82. 

111 
short interest data reports aggregate short positions on a bimonthly basis,
317
 those reports do not 
reflect the timing with which short positions increase or decrease in the two-week period 
between the two reporting dates. The short sale data reported on Form SHO will help to fill that 
information gap. The Commission continues to believe that publication of this additional 
aggregated information can help to further inform market participants regarding overall short 
sale activity by Managers with substantial short positions and will provide regulators as well as 
market participants with important information regarding the timing of increases and decreases 
in the reported short positions.
318
 Finally, compared to other existing reporting regimes, the 
Reporting Thresholds in Rule 13f-2 are designed to require the reporting of only substantial , 
hence more informative, short positions.
319
 
Further, the Commission understands that while FINRA makes publicly available short 
sale-related data pertaining to both exchange-traded equity securities and OTC equity securities 
that is reported to it by its member firms,
320
 some of the exchanges require payment of a fee to 
access short sale-related data, which may make it difficult for some investors to access the data. 
The reporting regime under Rule 13f-2, by contrast, will provide aggregated short sale-related 
data in a readily accessible location (i.e., EDGAR or the Commission website), free and 
accessible to all investors and other market participants. The Commission continues to believe 
 
317
  The short interest data reported reflects aggregate short positions as of the specified reporting dates. 
318
  Proposing Release, at 14995. 
319
  With regard to Threshold B, as discussed in the Proposing Release, a $500,000 or more threshold for non-
reporting company issuer securities is similar to the median dollar value of a position of 2.5 percent of the 
market capitalization of OTC stocks for which the Commission was able to obtain information on total 
shares outstanding. Hence, it is proportional to Threshold A in capturing substantial short positions. See 
supra Part II.A.3.a for additional discussion of Reporting Thresholds.  
320
  In mid-to-late Dec. 2022, FINRA began publishing short sale information for exchange-traded as well as 
OTC equity securities. See Equity Short Interest Files, FINRA, available at https://www.finra.org/finra-
data/browse-catalog/equity-short-interest/files. 

112 
that providing free, accessible, and more complete information to market participants regarding 
short sale-related data will aid market participants in their understanding of the level of negative 
sentiment about a particular equity security and the actions of short sellers collectively and aid 
the Commission’s oversight of short selling.
321
 
Other industry commenters were concerned about reporting burdens for smaller 
Managers, and one such commenter predicted that the increased reporting costs resulting from 
the Proposals and other related Commission proposed rulemakings could lead to industry 
consolidation and decrease competition and investor choice.
322
 T he Commission continues to 
believe that application of the Reporting Thresholds will not result in Rule 13f-2 applying to a 
significant number of small entities, especially considering the modification to Threshold A to be 
based on a monthly average gross short position rather than the proposed daily calculation.
323
  
In response to comments about reporting burdens, the Commission is not adopting the 
proposed hedging requirement, not adopting Proposed Rule 205 and “buy to cover” reporting to 
CAT, and is streamlining Information Table 2, thus reducing the costs of reporting from the 
proposed rule and form as compared to Rule 13f-2 and Form SHO as adopted.
324
 
B.   Data Aggregation and Publication of Information by the Commission 
1. Proposal 
The Commission proposed to require Managers exercising investment discretion over 
short positions meeting specified thresholds to report information relating to end-of-the-month 
 
321
  Proposing Release, at 14952. 
322
  See, e.g., MFA Letter, at 2 (positing that combined costs of compliance with the Proposals and other related 
Commission proposed rulemakings would be “insurmountable for small and newly-formed advisers”); 
Anonymous Fund Manager Letter, at 7-8. See infra Parts VIII.B, VIII.C.6.f, VIII.D.2 for a discussion of 
interactions between the economic effects of the adopted rule and other Commission rulemakings. 
323
  See infra Part IX.  
324
  See generally infra Part VIII. 

113 
short positions on Information Table 1, and certain daily activity affecting such short positions 
on Information Table 2, of a new Form SHO. The Commission would aggregate the reported 
data by security, including daily short sale activity data, and then, on a delayed basis, make such 
aggregated data available to the public. As proposed, data would be aggregated across all 
reporting Managers for each reported equity security prior to publication. The Commission 
stated its belief that publicly disclosing the identity of individual reporting Managers may not be 
necessary to advance the policy goal of increasing public transparency into short selling activity, 
and that aggregating across reporting Managers would help safeguard against the concerns noted 
above related to retaliation against short sellers, including short squeezes, and the potential 
chilling effect that such public disclosure may have on short selling.
325
 
As proposed, the Commission would publish aggregated information derived from data 
reported on Proposed Form SHO. The Commission estimated that it will publish such aggregated 
information within one month after the end of the reporting calendar month—e.g., for data 
reported by Managers on Proposed Form SHO for the month of January, the Commission would 
expect to publish aggregated information derived from such data no later than the last day of 
February. This additional time prior to publication of data by the Commission following receipt 
of the monthly Proposed Form SHO reports would be used to aggregate the data received from 
the reporting Managers, and would also help to reduce the risk of imitative trading activity by 
market participants and help to protect report Managers’ proprietary trading strategies.
326
 In 
proposing an approach for reporting the short sale-related information gathered, the Commission 
sought to balance calls to level the playing field for retail investors by, for example, taking steps 
 
325
  See Proposing Release, at 14955. 
326
  See id., at 14955. 

114 
to enhance the transparency of short sale-related data, with, among other things, concerns 
raised—primarily by institutional investors—regarding potential “chilling effect[s]” on short 
selling and potential issuer and investor retaliation against an identified short seller.
327
 
The Commission also presented, and sought comment on, an alternative approach for its 
publishing of information reported on proposed Form SHO that would offer greater transparency 
and less anonymization of the published short sale-related data.
328
 Specifically, under this 
alternative, the Commission would publish the information reported to it at the individual 
Manager level rather than aggregate that information across all reporting Managers.
329
 Before 
publication, a reporting Manager’s identifying information would be removed to anonymize the 
information published. 
2. Comments 
Several commenters raised concerns about potential negative consequences of more 
detailed short position disclosures—particularly, negative effects on liquidity and price 
discovery, the facilitation of copycat trading, and the greater susceptibility of holders of short 
positions to short squeezes.
330
 These commenters also preferred an “aggregation” approach to 
the alternative of publishing data at the individual Manager level, due to the commercially 
 
327
  See id., at 14955.  
328
  See id., at 14967. 
329
  Id. 
330
  E.g., SBAI Letter, at 2 (concluding that “only aggregate, anonymized, and delayed public reporting of short 
positions” mitigates concerns about the potential risks of short position disclosures); Two Sigma Letter, at 
1-3 (expressing concerns that disclosure of individual short positions could lead to revelation of 
commercially sensitive systematic investment strategies and to front-running and other actions that 
undermine those strategies, and that such disclosures would provide incomplete information, and 
potentially misleading signals, to investors); see also T. Rowe Price Letter, at 2 (raising concerns about the 
effects the rulemaking proposal would have on liquidity and price discovery); Law and Finance Professors 
Letter, at 2-3 (stating potential chilling effect on short selling if identities of short sellers are publicly 
disclosed). 

115 
sensitive investment and trading information that Managers are required to report under Rule 
13f-2.
331
 
These commenters stated, however, that aggregation would not go far enough to lower 
the risk that the trading and investment behavior reported would be attributable to a single 
Manager or set of Managers.
332
 Commenters stated that the risk of Manager attribution would be 
heightened when only one Manager or a small set of Managers report a short position in the 
relevant security. Under these circumstances, market participants could use the information 
reported on Form SHO to extrapolate an individual Manager’s overall position, and potentially 
the Manager’s strategies or portfolio management methods across different clients.
333
 One 
commenter expressed concern that Manager attribution/identification could result in retaliation 
against Managers by market participants.
334
 
By contrast, other commenters favored the alternative approach of publishing reported 
information at the individual Manager level after removing all identifying information of the 
 
331
  E.g., Schulte Roth & Zabel Letter, at 4 (alternative proposal to publish anonymized short sale-related data 
reported on an individual Manager would risk eviscerating potential confidentiality protections of reporting 
Managers and jeopardize the confidentiality of a Manager’s positions, strategies or proprietary business 
information); MFA Letter, at 3 (stating the need for “robust data security protocols” to protect information 
reported pursuant to Proposed Rule 13f-2). 
332
  E.g., MFA Letter, at 3 (stating that publishing aggregated short position data can help mitigate the risk of 
identification of Manager(s), but is not “foolproof, . . . the effectiveness will depend on what data is 
published and with what frequency”); AIMA Letter, at 4 (stating that “even if the data is anonymized, 
market participants could still identify certain reporting Managers.”); see also SIFMA Letter, at 5 (positing 
that reporting anonymized short sale data at the Manager level without first aggregating such information is 
inconsistent with the directive in 929X of DFA and could expose investment strategies of institutional 
investment managers and their clients to their detriment); T. Rowe Price Letter, at 2 (positing that 
“attribution or anonymized manager-level data in public reports would be inappropriate and . . . create 
unacceptable risks to . . . [market] participants and discourage a useful source of liquidity provision.”). 
333
  See, e.g., ICI Letter, at 7-8 (further stating that risk of Manager identification “may be especially high” for 
[regulated investment] funds that currently disclose their identities as well as their individual short 
positions on Form N-PORT filings with the Commission). 
334
  MFA Letter, at 9 (citing potential for retaliation against short sellers if Manager’s confidential information 
reported on Proposed Form SHO is leaked). 

116 
reporting Manager that the Commission sought comment on in the Proposing Release.
335
 While 
expressing general support for rulemaking that increases transparency of short sale-related data, 
proponents of this alternative approach also criticized Proposed Rule 13f-2 for not going far 
enough.
336
 These commenters pointed to a need for complementary reporting of long and short 
positions, and downplayed industry concerns about potential risks of greater transparency of 
short sale data, including, the costs and challenges of operationalizing Rule 13f-2 and the threat 
of “copycat trading” if short positions are disclosed pursuant to Rule 13f-2.
337
 These commenters 
supported publishing short sale-related data that is “current.”
338
 Two such commenters suggested 
that the Commission publish, or at least share on a confidential basis with issuers of the 
securities for which information is reported on Form SHO, the names of the firms shorting 
 
335
  See, e.g., Better Markets, at 13; Comment from An Investor (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm; Comment from Rick Sweeney 
(Oct. 10, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-309597.htm (Rick Sweeney 
Comment). But see Samuel Meadows Comment (“It would be strongly against retails best interests to have 
the reports published at the managers level. This would make finding and understanding the scope of 
shorting very difficult. I believe it is best to have the report aggregated with other reporting Managers 
reports. Ease of access to this information is critical in creating fairer markets.”); Comment Letter from 
Matthew D. Brusch, Interim President and CEO, National Investor Relations (Apr. 28, 3033), at 4, 
available at https://www.sec.gov/comments/s7-08-22/s70822-20127576-288806.pdf (“NIRI Letter”); K&L 
Gates Letter, at 5-6. See Proposing Release, at 14967. 
336
  In addition to underscoring the need for transparency in the reporting of short sale-related data, commenters 
recommended ways to enhance the transparency of U.S. stock market transactions with the creation of a 
“transparent and publicly viewable platform” through which U.S. stock market securities would be traded, 
and the use of block chain technology to allow verification of transactions in real time. See, e.g., Joseph 
Grato Comment; Anonymously Submitted Comment (Mar. 7, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-271636.htm; Comment from Jason Payne (Mar. 7, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-20118798-271634.htm; Comment from Lex 
Stultz (Mar. 13, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20119199-
272005.htm; Comment from Devon Turcotte (Mar. 15, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20119399-272285.htm. 
337
  See WTI Letter. These and other commenters expressed concern for the danger to “fair and free” U.S. 
markets posed by “the lack of transparency, the inability to adequately quantify short interest, and the 
ability of firms to skirt regulations through derivative positions such as options and security-based swaps.” 
These commenters also called for symmetry in the level of disclosures and transparency for short positions 
as is currently the case for long positions, to allow retail and institutional investors to conduct the same type 
of analysis regarding short positions as is currently possible for long positions using data from Form 13F. 
338
  See, e.g., NIRI Letter, at 4 (stating that the alternative approach to publishing Form SHO reports would 
bring short position information to the marketplace faster, closer in real time to when the Form SHO is 
filed). 

117 
securities.
339
 Other commenters further recommended that the Commission glean more from and 
build upon the experience of the European Union (“EU”) with publishing short sale-related data 
in developing an approach for gathering and reporting such data.
340
 A few commenters also 
pointed out ways that, by monitoring the published information from Form SHO reports, the 
public and reporting companies could serve as watchdogs for the SEC, a “first line of defense 
against abusive practices.”
341
 
3. Final Rule 
The approach taken for publishing short sale-related data reported on Form SHO must 
balance competing interests of public transparency against the potential negative impacts on 
price discovery, and of short position and short activity disclosures on short selling as well as 
data security concerns. After considering the comments received, the Commission continues to 
believe that the indirect costs of publishing information reported at the individual Manager level 
would likely exceed those of publishing information aggregated across all reporting Managers.
342
 
More specifically, the Commission continues to believe that if the Commission were to release 
the information reported on Form SHO as filed, there would be a greater potential to reveal a 
 
339
  See id. (recommending confidential disclosures of short position and identifying Manager information 
reported on Form SHO to an issuer whenever a “large short position” is reported for a security of that 
issuer, or alternatively, only to those issuers that request such confidential information); Letter from Tim 
Quast, President and Founder, Modern Networks IR LLC (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122528-278558.pdf (urging Commission to publish the 
names of reporting Managers) (“Modern IR Letter”). 
340
  Better Markets Letter, at 13 (suggesting reliance on “EU’s experience with publishing much more 
comprehensive, specific, and current information” in developing an approach for gathering and reporting 
short sale data that enhances the usability of short position information to be published pursuant to 
Proposed Rule 13f-2 without “inviting some of the more damaging consequences” of doing so). More 
generally, a few commenters recommended harmonizing Proposed Rule 13f-2 requirements with 
potentially overlapping EU and UK regulations. See, e.g., WTI Letter, at 2-3; HSBC Letter, at 14-15. 
341
  E.g., Anonymously Submitted Comments (Oct. 14, 2022, Oct. 24, 2022, Oct. 29, 2022, Oct. 31, 2022, Nov. 
1, 2022); Rick Sweeney Comment. 
342
  See infra Part VIII.E.2.a. 

118 
reporting Manager’s trading strategies and to signal whether a Manager has a large and 
potentially vulnerable short position. It would also make it easier for a market participant to 
deduce the identity of a reporting Manager, even if that Manager’s identity remains 
anonymous.
343
 The easier it is for a market participant to deduce the identities of individual short 
sellers, the greater the risk of retaliation, copycat trading and other market activity that might 
have an undesired chilling effect on price discovery.
344
 For these reasons, and in response to 
commenters that raised concerns about potential negative consequences of more detailed short 
position disclosures, the Commission believes that the anticipated benefit of enhanced 
transparency by publishing reported information at the individual Manager level after removing 
all identifying information of the reporting Manager does not justify the costs were the 
Commission to take that approach in publishing information reported to it on Form SHO.  
Some commenters suggested the Commission adopt an approach similar to that of the EU 
structure whereby individual short sellers’ names are made public.
345
 The final rule, as modified, 
addresses the potential risk of retaliation towards individual short sellers, and the potential 
chilling of the incentive of gathering information and price discovery.
346
 For more discussion of 
the EU’s approach and the Commission’s decision to aggregate and publish anonymized data 
instead, see Part VIII.E.1.c. 
Further,  aggregating across reporting Managers will address certain non-financial costs 
and burdens identified by commenters by helping to safeguard against the concerns raised about 
potential chilling effects on short selling and data security regarding the information reported by 
 
343
  Id. 
344
  Id. 
345
  See WTI Letter at 2-3; Better Markets Letter at 13 and 16. See also Proposing Release, at 15005. 
346
  See supra Part II.A.2.b. 

119 
Managers on Form SHO.
347
 Additionally, the Commission anticipates that many potential 
negative effects on the market will be mitigated by the delay in publication of the aggregated 
data. Accordingly, the Commission is adopting as proposed the approach of publishing, on a 
delayed basis, aggregated short sale-related data reported on Form SHO and treating each filed 
Form SHO confidentially. 
III. Proposed Amendment to Regulation SHO to Aid Short Sale Data Collection 
A. Proposed Rule 205 
Under Proposed Rule 205, a broker-dealer would be required to mark a purchase order as 
“buy to cover” if, at the time of order entry, the purchaser (i.e., either the broker-dealer or 
another person) has a gross short position in such security in the specific account for which the 
purchase is being made at such broker-dealer. A broker-dealer would be required to mark a 
purchase order as “buy to cover,” regardless of the size of such purchase order in relation to the 
size of the purchaser’s gross short position in such security in the account, and regardless of 
whether the gross short position is offset by a long position held in the purchaser’s account at the 
broker-dealer at the time of order entry. Unlike the netting requirements under Rule 200 of 
Regulation SHO, the “buy to cover” order marking determination under Proposed Rule 205 
would be made on a “gross” basis. Under the proposed rule, short positions held by the purchaser 
in any account(s) other than the purchasing account, as well as offsetting long positions held by 
the purchaser in the purchasing account or any other account(s), would not be considered by a 
broker-dealer when making a “buy to cover” order marking determination. The Proposed CAT 
Amendments, discussed below, would require CAT reporting firms to report “buy to cover” 
order marking information to CAT. 
 
347
  Id. 

120 
B. Comments 
Some commenters expressed support to adopt Proposed Rule 205, and generally 
applauded the potential added transparency that “buy to cover” order marking could help 
provide.
348
 Other commenters stated that the proposed rule would assist the Commission in 
monitoring short selling activity and help to ensure compliance with the requirements of 
Regulation SHO.
349
 
The Commission also received numerous comments that opposed the adoption of 
Proposed Rule 205.
350
 In opposing Proposed Rule 205, these commenters voiced concerns 
regarding the extensive costs and burdens associated with anticipated systems changes necessary 
to implement and report “buy to cover” order marking as proposed.
351
 A  number of these 
 
348
  See, e.g., Comment from Mark Tate (Mar. 1, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20118151-271054.htm (“Mark Tate Comment”) (believed that increased information about 
marking trades as “buy to cover” is a “good thing for the market”); Comment from An Investor (Apr. 4, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm (expressing 
general support for Proposed Rule 205 and the “gross” short position approach); Comment from Jean 
Garcia-Gomez (Oct. 9, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-309610.htm 
(“Jean Garciz-Gomez Comment”) (expressing general support for “buy to cover” order marking); 
Comment from Aladdin Erzrumly (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-312058.htm (expressing general support for “buy to cover” order marking); Comment from 
Brian Herrmann (Jan. 20, 2023), available at https://www.sec.gov/comments/s7-08-22/s70822-323670.htm 
(expressing general support for Proposed Rule 205). 
349
  See, e.g., Better Markets Letter (stating that “buy to cover” order marking should assist the Commission in 
monitoring short sale activity and actually ensure compliance with Regulation SHO requirements); ICI 
Letter (Apr. 26, 2022) (stating that, to the extent that the Commission requires information on close outs of 
open short positions, ICI supports the proposed approach of amending Rule 205 of Regulation SHO to 
require a broker-dealer to mark transactions as “buy to cover,” and supports the simplified single account 
gross short position approach as proposed); BIO Letter (stating that “buy to cover” reporting would assist 
in understanding “the full lifecycle of short positioning in the biotechnology industry”). 
350
  See, e.g., SIFMA Letter; Virtu Letter; AIMA Letter; Comment Letter from Joanna Mallers, Secretary, FIA 
Principal Traders Group (Apr. 27, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
20127313-288259.pdf (“FIA PTG Letter”); Comment Letter from Howard Meyerson, Managing Director, 
Financial Information Forum (Apr. 25, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20126605-287256.pdf (“FIF Letter”); STA Letter; XR Securities Letter; Comment Letter from 
Kirsten Wegner, Chief Executive Officer, Modern Markets Initiative (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122473-278481.pdf (“MMI Letter”).  
351
  See, e.g., FIA PTG Letter, at 2 (requiring the reporting of orders on an order-by-order basis with either a 
“buy to cover” or bona fide market making attestation appears unnecessary from an added transparency 
perspective and therefore unnecessarily costly); MMI Letter, at 2; Virtu Letter, at 3 (“If this aspect of the 
 

121 
commenters stated that a “buy to cover” order mark does not currently exist and would require 
broker-dealers to effectively redesign and update their order creation systems and 
communications protocols to accommodate the recording and downstream reporting of a “buy to 
cover” order mark.
352
 One commenter stated that all industry participants ( which it described as 
“all institutions and all broker-dealers”) will also need to create a new “buy to cover” order type 
and capture that in their respective books and records protocols and regulatory reporting 
systems.
353
 One commenter suggested that costs to implement changes necessary to comply with 
the requirements of Proposed Rule 205 could range from $5 million to $10 million, or more.
354
 
Some commenters that opposed the adoption of Proposed Rule 205 expressed general 
concerns that the proposed single account “gross” short position methodology (which, by design, 
does not require the broker-dealer to consider the purchaser’s other positions held in that 
account, in other accounts at the broker-dealer, or elsewhere) could routinely result in inaccurate 
“buy to cover” order marking reporting by broker-dealers.
355
 S ome commenters also questioned 
whether the proposed “buy to cover” order marking reporting would provide regulatory benefits, 
 
Proposal were adopted, firms would have to reprogram their systems to recognize a ‘buy to cover’ order. 
We believe that this would be exceedingly burdensome, costly, and challenging for broker-dealers to make 
the required changes and provide the required information.”); STA Letter, at 4 (stating that “buy to cover” 
as proposed would “impose tremendous costs on industry firms by essentially forcing them to keep two 
separate position aggregations” and suggesting that there be an exemption for firms with “low” amounts of 
“buy to cover” order types); FIF Letter, at 10; XR Securities Letter, at 2; SIFMA Letter, at 3; FIA PTG 
Letter, at 2. 
352
  See, e.g., SIFMA Letter, at 23-24; Virtu Letter, at 3; FIF Letter, at 3; STA Letter, at 6; XR Securities Letter, 
at 2; FIA PTG Letter, at 2-3. 
353
  See FIF Letter, at 3. 
354
  See SIFMA Letter, at 24. 
355
  See, e.g., Virtu Letter, at 5; AIMA Letter, at 16; SIFMA Letter, at 22-23; FIF Letter, a 6. 

122 
including identifying signals of a “short squeeze,” as was suggested by the Commission in the 
proposing release.
356
 
Commenters highlighted the inherent differences and resulting complexities between 
Proposed Rule 205’s single account “gross” short position methodology for purchases, and 
Regulation SHO’s all accounts net position order marking requirements for sales. These 
commenters generally stated that if Proposed Rule 205 were adopted, broker-dealers would be 
required to create and maintain, at great expense, two separate order marking systems that utilize 
very different methodologies—one for determining whether a purchase order should be marked 
as “buy” or “buy to cover,” and another for determining whether a sell order should be marked as 
“long” or “short.”
357
 Some of these commenters suggested that if the Commission were intent on 
adopting a “buy to cover” order marking reporting requirement, it should instead consider 
utilizing the Commission’s “alternative” approach.
358
 These commenters stated that utilizing this 
“alternative” approach would help to ensure that Proposed Rule 205 would operate in a manner 
that is more consistent with current Regulation SHO order marking requirements, which would 
effectively help reduce complexity and interpretive confusion for broker-dealers. Another 
 
356
  See e.g., Virtu Letter, at 6 (“The Proposal’s rationale for requiring broker-dealers to mark transactions a 
‘buy to cover’ – i.e. to facilitate the identification of potential ‘short squeeze’ activity – is equally 
unpersuasive. As described above, the data that will be reported under this provision will bear little 
resemblance to a firm’s actual short sale positions and therefore will not yield meaningful information that 
would allow the Commission to target short squeeze activity.”); SIFMA Letter, at 23 (believed there is only 
a remote chance that Proposed Rule 205 reporting might identify signals of a short squeeze that would not 
otherwise be identifiable to the Commission through other currently available information). 
357
  See, e.g., STA Letter, at 4; FIF Letter, at 8; FIA PTG Letter, at 2-3; MMI Letter, at 2; SIFMA Letter, at 24; 
XR Securities Letter, at 2; Virtu Letter, at 5. 
358
  See, e.g., MMI Letter at 2; FIF Letter, at 2. In the Proposing Release, the Commission explained that it had 
considered an “alternative approach” that would have required the broker-dealer, when making a “buy to 
cover” order marking determination, to net all positions (long positions and short positions) held by the 
purchaser in any account, whether at the broker-dealer itself, or elsewhere. See Proposing Release, at 
14968. 

123 
commenter suggested that the Commission consider an exception for firms with “low” amounts 
of “buy to cover” order types.
359
 
One commenter stated that additional guidance or clarification would be necessary if the 
Commission adopted Proposed Rule 205.
360
 Another commenter stated that Proposed Rule 205 
fails to recognize that broker-dealers would need to rely on representations from 
purchasers/account holders in order to accurately report “buy to cover” order marking 
information, similar to how broker-dealers currently rely on account holders when marking sale 
orders “long” or “short.”
361
 One commenter stated that this would be especially true where the 
broker-dealer does not custody the purchaser’s positions (i.e., where the customer’s positions are 
custodied “away,” such as at a prime broker or bank), and for a number of operational reasons, 
be equally true even when the broker-dealer custodies the purchaser’s positions.
362
 
The Commission is not adopting Proposed Rule 205 in light of questions raised by 
commenters regarding potential operational issues with the requirement as proposed that merit 
further consideration, and the Commission will continue to evaluate the issues raised to 
determine if any further action is appropriate. 
IV. Amendments to CAT 
In July 2012, the Commission adopted 17 CFR 242.613 (“Rule 613 of Regulation 
NMS”), which required national securities exchanges and national securities associations (the 
“Participants”)
363
 to jointly develop and submit to the Commission a national market system plan 
 
359
  STA Letter, at 5. 
360
  XR Securities Letter, at 2. 
361
  SIFMA Letter, at 23. 
362
  SIFMA Letter, at 23. 
363
  The Participants include: BOX Exchange LLC; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; 
Cboe C2 Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe Exchange, Inc.; 
 

124 
to create, implement, and maintain a CAT that captures customer and order event information for 
orders in NMS securities.
364
 The goal of Rule 613 was to create a modernized audit trail system 
that provides regulators with more timely access to a sufficiently comprehensive set of trading 
data, thus enabling regulators to more efficiently and effectively reconstruct market events, 
oversee market behavior, and investigate misconduct. On November 15, 2016, the Commission 
approved the national market system plan required by Rule 613, the National Market System 
Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan”).
365
 
Section 6.4(d) of the CAT NMS Plan provides that each Participant, through its 
Compliance Rule,
366
 must require Industry Members
367
 to record and electronically report 
certain information to the CAT Central Repository. Compliance rules have been adopted by each 
Participant. As such, any broker-dealer that is a member of a national securities exchange or a 
member of a national securities association must report each order and reportable event, which 
includes the original receipt or origination, modification, cancellation, routing, execution (in 
 
Financial Industry Regulatory Authority, Inc.; Investors’ Exchange LLC; Long-Term Stock Exchange, Inc.; 
MEMX LLC; Miami International Securities Exchange LLC; MIAX Emerald, LLC; MIAX PEARL, LLC; 
Nasdaq BX, Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; Nasdaq PHLX LLC; The 
Nasdaq Stock Market LLC; New York Stock Exchange LLC; NYSE American LLC; NYSE Arca, Inc.; 
NYSE Chicago, Inc.; and NYSE National, Inc. 
364
  See Consolidated Audit Trail, Exchange Act Release No. 67457 (July 18, 2012), 77 FR 45722 (Aug. 1, 
2012).  
365
  Exchange Act Release No. 79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (“CAT NMS Plan 
Approval Order”). The CAT NMS Plan is Exhibit A to the CAT NMS Plan Approval Order. See CAT 
NMS Plan Approval Order, 81 FR 84943 at 84696. The CAT NMS Plan functions as the limited liability 
company agreement of the jointly owned limited liability company formed under Delaware state law 
through which the Participants conduct the activities of the CAT (the “Company”). Each Participant is a 
member of the Company and jointly owns the Company on an equal basis. The Participants submitted to 
the Commission a proposed amendment to the CAT NMS Plan on Aug. 29, 2019, which they designated as 
effective on filing. Under the amendment, the limited liability company agreement of a new limited liability 
company named Consolidated Audit Trail, LLC serves as the CAT NMS Plan, replacing in its entirety the 
CAT NMS Plan. See Exchange Act Release No. 87149 (Sept. 27, 2019), 84 FR 52905 (Oct. 3, 2019). 
366
  “Compliance Rule” means, with respect to a Participant, the rule(s) promulgated by such Participant as 
contemplated by section 3.11 of the CAT NMS Plan. See CAT NMS Plan, section 1.1. 
367
  An “Industry Member” means a member of a national securities exchange or a member of a national 
securities association. See CAT NMS Plan, section 1.1. 

125 
whole or in part) and allocation of an order, and receipt of a routed order to the CAT.
368
 This 
requirement is designed to provide regulators, including the Commission, access to 
comprehensive information regarding the lifecycle of orders, from origination to execution, as 
well as the post-execution allocation of shares. 
Broker-dealers, through the Compliance Rule adopted pursuant to the CAT NMS Plan, 
are required to report certain short sale order data, including for sell orders,  whether an order is 
long, short, or short exempt,
369
 but not other short sale order data, including when a buy order is 
designed to close out an existing short position, or whether a market participant is relying on the 
bona fide market making exception to the Regulation SHO locate requirement in Rule 203. To 
supplement the short sale-related data that would be reported by Managers to the Commission 
pursuant to Proposed Rule 13f-2 and on Proposed Form SHO, the Commission proposed to 
amend the CAT NMS Plan to require the Participants to require CAT reporting firms to report 
certain additional short sale-related data to the CAT, as discussed below. 
A.  Proposal to Require “Buy to Cover” Order Marking 
The Commission proposed that Industry Members be required to report to the CAT “buy 
to cover” information, which was proposed to be collected pursuant to Regulation SHO through 
Proposed Rule 205 (discussed above). Specifically, the Commission proposed to amend section 
6.4(d)(ii) of the CAT NMS Plan by adding new paragraph 6.4(d)(ii)(D) which would require the 
Participants to update their Compliance Rules to require Industry Members to report for the 
original receipt or origination of an order to buy an equity security, whether such buy order is for 
 
368
  “Central Repository” means a repository responsible for the receipt, consolidation, and retention of all 
information reported to the CAT pursuant to Rule 613 of Regulation NMS and the CAT NMS Plan. See 
CAT NMS Plan, section 1.1. 
369
  Section 1.1 of CAT NMS Plan defines “Material Terms of the Order,” which includes, for sell orders, 
“whether the order is long, short, [or] short exempt[.]” 

126 
an equity security that is a “buy to cover” order as defined by Proposed Rule 205(a).
370
 This 
provision would have required   Industry Members to identify “buy to cover” equity orders 
received or originated by Industry Members and Customers
371
 as “buy to cover” orders in order 
receipt and order origination reports submitted to the CAT Central Repository. 
The Commission, as discussed in Part III above, is not adopting Proposed Rule 205 
which would have established a new “buy to cover” order marking requirement. Accordingly, 
the Commission is likewise not adopting an amendment to add new paragraph 6.4(d)(ii)(D) to 
the CAT NMS Plan which would have required the Participants to update their Compliance 
Rules to require Industry Members to report “buy to cover” order marking information to CAT. 
B.  Proposal to Require Reporting of Reliance on Bona Fide Market Making 
Exception 
The Commission also proposed to require CAT reporting firms that are reporting short 
sales to indicate whether such reporting firm is asserting use of the bona fide market making 
exception under Regulation SHO for the locate requirement in Rule 203(b)(2)(iii) (i.e., the 
BFMM locate exception) for the reported short sales. Specifically, the Commission proposed to 
amend section 6.4(d)(ii) of the CAT NMS Plan to add a new paragraph (E) which would require 
Participants to update their Compliance Rules to require Industry Members to report to the CAT, 
for the original receipt or origination of an order to sell an equity security, whether the order is a 
short sale effected by a market maker in connection with bona fide market making activities in 
 
370
  See Proposed section 6.4(d)(ii)(D) of the CAT NMS Plan; Proposed Rule 205(a) of Regulation SHO, 17 
CFR 242.205(a)). 
371
  Section 1.1 of the CAT NMS Plan defines the term “Customer” as (a) the account holder(s) of the account 
at a registered broker-dealer originating the order; and (b) any person from whom the broker-dealer is 
authorized to accept trading instructions for such account, if different from the account holder(s). See also 
17 CFR 242.613(j)(3). 

127 
the security for which the BFMM locate exception is claimed.
372
 The Commission believed that 
this information would provide valuable data to both the Commission and other regulators 
regarding the use of this narrow exception. The Commission believed that requiring Industry 
Members to identify short sales for which they are claiming the bona fide market making 
exception would provide the Commission and other regulators an additional tool to determine 
whether such activity qualifies for the exception, or instead could be indicative of, for example, 
proprietary trading instead of bona fide market making activity. 
Rule 203(b)(1) of Regulation SHO generally prohibits a broker-dealer from accepting a 
short sale order in an equity security from another person, or effecting a short sale in an equity 
security for its own account, unless the broker-dealer (i) has borrowed the security, (ii) has 
entered into a bona fide arrangement to borrow the security, or (iii) has reasonable grounds to 
believe that the security can be borrowed so that it can be delivered on the date delivery is 
due.
373
 This is generally referred to as the locate requirement. Rule 203(b)(2) of Regulation SHO 
provides an exception to the locate requirement for short sales effected by a market maker in 
connection with bona fide market making activities.
374
 To qualify for the BFMM locate 
exception,
375
 a market maker must be engaged in bona fide market making activities at the time 
they effect a short sale. The Commission adopted this narrow exception to Regulation SHO’s 
 
372
  See Proposed section 6.4(d)(ii)(E) of the CAT NMS Plan. 
373
  17 CFR 242.203(b)(1). 
374
  17 CFR 242.203(b)(2). The Commission has provided guidance on indicia of bona fide market making 
activities eligible for the locate exception. See Regulation SHO Adopting Release (setting forth examples 
of activities that would not be considered to be bona fide market making activities); see also Exchange Act 
Release No. 58775 (Oct. 14, 2008), 73 FR 61698 at   61690 (Oct. 17, 2008) (“2008 Regulation SHO 
Amendments”) (adopting amendments to Regulation SHO and providing additional guidance on what 
constitutes bona fide market making). Only market makers that are engaged in bona fide market making 
activity in the security at the time they effect a short sale are eligible for the locate exception. See 2008 
Regulation SHO Amendments, at 61699. 
375
  Rule 204 of Regulation SHO also provides an extended close-out period for a fail to deliver resulting from 
bona fide market making activities. 17 CFR 242.204. 

128 
locate requirement for market makers that may need to facilitate customer orders in a fast 
moving market without possible delays associated with complying with such a requirement.
376
 
Comments and Final Rule 
Some commenters supported requiring CAT reporting firms to report the use of the 
BFMM locate exception to CAT.
377
 These commenters were in favor of the potential added 
transparency that BFMM locate exception reporting could provide.
378
 Other commenters stated 
that such reporting would help the Commission to monitor short selling activity and ensure 
compliance with Regulation SHO’s requirements, and stated that it is important that the 
Commission have the surveillance tools and data such as BFMM locate exception reporting to 
improve the Commission’s oversight of financial markets and compliance with existing 
regulations and otherwise “police” the markets.
379
 
 
376
  See Regulation SHO Adopting Release, at 48015 n.67; see also Emergency Order Pursuant to Section 
12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action to Respond to Market 
Developments, Exchange Act Release No. 58166 (July 15, 2008); Amendment to Emergency Order 
Pursuant to Section 12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action to Respond 
to Market Developments, Exchange Act Release No. 58190 (July 18, 2008) (excepting from the Emergency 
Order bona fide market makers); see also Proposing Release, at 14970-71 (Mar. 16, 2022) (“To qualify for 
the bona fide market making exception, however, a firm must be engaged in bona fide market making at 
the time of the short sale in question. The Commission adopted this narrow exception to Regulation SHO’s 
locate requirement for market makers that may need to facilitate customer orders in a fast moving market 
without possible delays associated with complying with such a requirement.”). 
377
  Virtually all these comments were submitted by individual investors, with the vast majority being 
submitted through an identical (or nearly identical) base letter from a grassroots advocacy campaign “by, 
and for, retail investors.” These commenters stated that they were part of a self-identified group called “We 
the Investors” (“WTI”). WTI supported the adoption of BFMM locate exception reporting. WTI also 
suggested that the BFMM locate exception be eliminated altogether. See WTI Letter. 
378
  See e.g., Michael Behrens Comment; Mark Tate Comment; Comment from Taj Reilly (Mar. 14, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-20119322-272211.htm; Comment from 
Sebastian Stankiewicz Comment (Mar. 15, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-272501.htm; Comment from An Investor (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm; Jean-Garcia Gomez Comment; 
Comment from Andrew Gatley (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-317527.htm. See also WTI Letter. 
379
  See e.g., Better Markets Letter; WTI Letter. 

129 
Other commenters opposed the adoption of BFMM locate exception reporting to CAT.
380
 
These commenters generally believed that the costs and burdens associated with the proposal, 
including costs to update systems to accommodate BFMM locate exception reporting to CAT, 
would materially outweigh the benefit of the information reported to CAT.
381
 These commenters, 
however, did not provide cost estimates. The Commission continues to believe, as stated in the 
Proposing Release, that Industry Members will incur an initial, one-time external expense for 
software and hardware to facilitate reporting of the new data elements to CAT, and separately 
estimated such costs for Industry Members that report directly to the CAT, and those that use 
third-party reporting agents for CAT reporting. The Commission continues to believe that the 
ongoing burden associated with reporting to the CAT is already accounted for in the existing 
information collections burdens associated with Rule 613 and the CAT NMS Plan Approval 
Order submitted under Office of Management and Budget (OMB) number 3235-0671.
382
 
One commenter stated that adopting the proposed BFMM locate exception would be 
operationally difficult and costly to implement.
383
 This commenter stated that, under the 
proposal, the BFMM locate exception information would be required to be reported at the time 
the short sale order is effected, requiring that order entry systems, and other downstream 
systems, be updated to allow the BFMM locate exception information to be reported to CAT.
384
 
To implement the rule, the Commission expects that Industry Members will incur an initial, one-
time external expense for software and hardware to facilitate reporting of the new data elements 
 
380
  See e.g., SIFMA Letter; Virtu Letter; STA Letter; XR Securities Letter; FIA PTG Letter. 
381
  See e.g., SIFMA Letter, at 24-25; FIA PTG Letter, at 3; Virtu Letter, at 6. 
382
  See infra Part VII.C. 
383
  See, e.g., SIFMA Letter, at 24-25; Virtu Letter, at 5. 
384
  SIFMA Letter, at 24-25. 

130 
to CAT but believes that the benefits of such data, as discussed further below, will justify such 
costs. Brokers or dealers generally include fields in order-entry systems, and related downstream 
systems, to indicate whether the broker or dealer obtained a locate as well as the source of such 
locate under Rule 203(b). As stated by the commenter, brokers or dealers may wish to update 
their order entry systems and related downstream systems as a convenient method to track their 
use of the BFMM locate exception to ensure accurate reporting of the use of the BFMM locate 
exception to CAT. As a result, brokers or dealers may wish to make one-time updates to such 
systems to add a field or notation to indicate whether the broker or dealer is claiming the BFMM 
locate exception for the short sale transaction. However, brokers or dealers may also use other 
means to ensure compliance with the final rule. 
This commenter agreed with the Commission that a broker-dealer is required to 
determine whether the firm is eligible for the BFMM locate exception at the time a short sale is 
effected but expressed concerns that market makers that quote and trade on multiple trading 
venues, for example, might encounter certain systematic or operational difficulties in making, 
and reporting, such determination using existing systems design. Specifically, this commenter 
stated that “it may be systematically and/or operationally difficult for the broker to define when 
it is globally acting in a bona fide market maker capacity given the granular details of a market 
maker’s many activities, and the existing systems design.”
385
 However, the final rule does not 
alter the requirements for the use of the BFMM locate exception. The final rule requires that 
brokers or dealers report their use of the BFMM locate exception as provided under Regulation 
SHO. 
 
385
  SIFMA Letter, at 25 n.64. 

131 
Rule 203(b)(2)(iii) provides an exception to the locate requirement for “[s]hort sales 
effected by a market maker in connection with bona-fide market making activities in the security 
for which this exception is claimed.”
386
 Thus, for purposes of qualifying for the BFMM locate 
exception, “a market maker must also be a market maker in the security being sold, and must be 
engaged in bona-fide market making in that security at the time of the short sale.”
387
 
Some commenters stated that the Commission and other regulators can currently request 
a particular market maker to provide information regarding its use of the BFMM locate 
exception, and questioned why the Commission would need to require such costly reporting to 
CAT.
388
 Another commenter stated that there is no data or evidence in the Proposing Release to 
suggest that the Commission’s access to such data has been limited in any way under the current 
request process.
389
 However, the Commission has stated that Regulation SHO does not require 
market makers to specifically record whether they are relying on the BFMM locate exception,
390
 
although brokers or dealers should be able to identify what trading activity qualifies for the 
 
386
  17 CFR 242.203(b)(2)(iii). Further, the locate is required prior to each short sale order unless the broker or 
dealer has determined that an exception applies. See Rule 203(b)(1). A broker or dealer may not accept a 
short sale order in an equity security from another person, or effect a short sale in an equity security for its 
own account, unless the broker or dealer has: (i) borrowed the security, or entered into a bona-fide 
arrangement to borrow the security; or (ii) reasonable grounds to believe that the security can be borrowed 
so that it can be delivered on the date delivery is due; and (iii) documented compliance with Rule 
203(b)(1). 
387
  See 2008 Regulation SHO Amendments, at 61699; Shortening the Securities Transaction Settlement Cycle, 
Exchange Act Release No. 96930 (Feb. 15, 2023), 88 FR 13872, 13911-12 at n.411 (May 5, 2023) 
(“Settlement Cycle Adopting Release”). 
388
  See e.g., SIFMA Letter, at 24-25 (“Given that the information that would result from this proposed 
reporting requirement is already available to the SEC and other regulators on demand, SIFMA believes that 
the cost and burden of implementing the requirement would materially outweigh the benefit of such 
information.”); Virtu Letter, at 6 (“The Proposal offers no data or evidence that its access to data about the 
use of the exception has been limited in any way under the current process it uses to collect such 
information from broker-dealers, nor that there are widespread violations or other abuses of the exception 
that warrant imposing substantial costs and burdens on market makers also to report this information to 
CAT.”). 
389
  Virtu Letter, at 6. 
390
  Proposing Release, at 14971. 

132 
BFMM locate exception so a firm can demonstrate its eligibility for the asserted exception.
391
 To 
the extent a broker or dealer has documented such eligibility, the Commission and its staff have 
access to such documents.
392
 The final rule will capture information regarding the use of the 
BFMM locate exception to Regulation SHO
393
 which will provide the Commission and SROs 
with comprehensive information about market practices with respect to the use of the BFMM 
locate exception.
394
 Because brokers or dealers asserting the BFMM locate exception are already 
required to demonstrate eligibility for the exception, the costs of reporting should be confined 
primarily to the one-time implementation costs related to updating CAT and any methods elected 
by the broker or dealer, such as updating order entry systems and related systems, to ensure 
compliance. 
Another commenter stated that regulators should utilize other existing short sale data 
available through CAT that could identify activity that is “disproportionate to the usual market 
making patterns of practices of the broker-dealer” in order to determine if the BFMM locate 
exception is being misused.
395
 The commenter, however, did not provide detail describing how 
disproportionate the activity would be before the Commission could determine whether the 
exception is being misused. Data showing the existence of short sales would not be sufficient to 
assess whether the exception is being misused. Another commenter suggested that CAT already 
has ample existing data fields, including a market maker account holder designation field, and 
 
391
  See Regulation SHO Adopting Release, 48011 n.27 (“As with any rule, broker-dealers relying on [an] 
exception should be prepared to monitor for compliance with its conditions, and maintain records 
documenting such compliance.”). 
392
  See, e.g., section 17(b) of the Exchange Act.  
393
  Proposing Release, at 14971. 
394
  FIA PTG Letter, at 3 (“Requiring the reporting of orders on an order-by-order basis with either a ‘buy to 
cover’ or bona fide market making attestation appears unnecessary from an added transparency perspective 
and therefore unnecessarily costly.”). 
395
  STA Letter, at 3.  

133 
questioned the need for a BFMM locate exception data field.
396
 Further, a broker or dealer’s 
status as a market maker under an exchange’s rules, or by self-assertion, is not sufficient by itself 
to establish eligibility to use the BFMM locate exception; the broker or dealer that is a market 
maker must be effecting short sales “in connection with bona-fide market making activities in the 
security for which [the] exception is being claimed.”
397
 Further, as discussed above, the broker 
or dealer, whether it calls itself a market maker, or has an account it describes as a market maker 
account, must still determine eligibility for the BFMM locate exception for each transaction 
rather than globally.
398
 Therefore, collecting the data regarding the use of the BFMM locate 
exception will be useful for the Commission, including to assess the use of the exception 
throughout the industry. 
Another commenter stated that there was no data or evidence in the Proposing Release to 
suggest that there are widespread violations or abuses of the BFMM locate exception that 
warrant the costs imposed by the CAT reporting requirements for the BFMM locate exception.
399
 
As the Commission stated in the Proposing Release, there are a number of settled enforcement 
actions against brokers or dealers in connection with their use of the exception.
400
 In addition, 
one commenter stated that “it may be systematically and/or operationally difficult for the broker 
to define when it is globally acting in a bona fide market maker capacity given the granular 
details of a market maker’s many activities, and the existing systems design.”
401
 However, this 
 
396
  XR Securities Letter, at 2. 
397
  See, e.g., Rule 203(b)(2)(iii), which requires that the broker or dealer (1) be a market maker; (2) that is 
effecting short sales in connection with bona-fide market making activities, and (3) in the security for which 
the exception is claimed. Section 3(a)(38) defines the term “market maker.” 
398
  See supra n.374. 
399
  Virtu Letter, at 6. 
400
  See Proposing Release, at 14971. 
401
  See SIFMA Letter, at 25 n.64. 

134 
comment concerns compliance with Regulation SHO rather than reporting of the use of the 
BFMM locate exception in CAT; the new requirements do not affect compliance with 
Regulation SHO.  
Another commenter did not believe that the BFMM locate exception information 
reported to CAT would assist the Commission in identifying violations or misuse of the BFMM 
locate exception “because the data can be manipulated by bad actors and is susceptible to human 
errors of inappropriately marking short sales with the BFMM indicator when they are not 
eligible.”
402
 The fact that bad actors may act contrary to the requirement is not an appropriate 
reason not to adopt a requirement. Similarly, human error is always possible. In addition, the 
human error the commenter describes, if widespread, could be an indication of noncompliant use 
of the BFMM locate exception. 
Another commenter stated that if BFMM locate exception reporting were adopted, “most 
market making firms will simply tag that new [BFMM locate exception] field with the 
affirmative.”
403
 Again, the fact that a commenter speculated that some brokers or dealers may 
violate the requirement by providing incorrect data is not a reason to not adopt a requirement. 
Understanding whether market makers always claim the BFMM locate exception (as this 
commenter suggests), sometimes claim the exception, or never claim the exception, will provide 
important information and context regarding how market makers use the exception.
404
 
 
402
  STA Letter, at 3. 
403
  XR Securities Letter, at 3. 
404
  One commenter disagreed with existing Regulation SHO order marking requirements, with a specific focus 
on a statement made by Commission staff that a broker or dealer should generally not continue to mark 
orders “long” if it has submitted orders beyond the number of shares for which it is long. See Virtu Letter, 
at 3-5; see also FAQ 2.5, Responses to Frequently Asked Questions Concerning Regulation SHO, Division 
of Market Reg., available at https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm. This 
commenter generally stated that this results in virtually all sell orders being marked as short sales and thus, 
information that is reported to CAT under the proposal would not be representative of the market maker’s 
 

135 
Some commenters asked that the Commission provide additional clarity regarding what 
constitutes bona fide market making activities eligible for the BFMM locate exception, and 
requested that the Commission confirm that certain market making activity (e.g., through 
wholesale market making and other activities in connection with facilitating customer orders in 
the OTC market) was bona fide market making activity for purposes of claiming the BFMM 
locate exception.
405
 One of these commenters expressed concerns regarding recent Commission 
statements related to the BFMM locate exception.
406
 The statements that the commenter 
references in particular releases are restatements of multiple prior Commission statements 
regarding the BFMM locate exception.
407
 One commenter expressed concerns that the proposal 
to require BFMM locate exception reporting to CAT was an effort by the Commission to further 
limit the availability of the BFMM locate exception in a manner that would be inconsistent with 
 
“actual” short position and would not be useful short sale-related information. Brokers or dealers must 
mark sell orders “long,” “short,” or “short exempt,” and must obtain a locate for all sales marked short 
unless the broker or dealer can determine that the short sale is “effected by a market maker in connection 
with bona-fide market making activities in the security for which this exception [BFMM locate exception] 
is claimed.” See 17 CFR 242.203(b)(2)(iii). 
405
  See SIFMA Letter, at 25 (“Moreover, and especially to the extent that there is a requirement to identify 
reliance on the exception through CAT, the SEC should re-confirm that, while bona fide market making is 
based on certain ‘facts and circumstances’ as set forth in prior interpretive guidance, there are different 
ways in which broker-dealers engage in bona fide market making, including not only through making 
markets on exchanges, but equally through wholesale market making and other activities in connection 
with facilitating customer orders in the OTC market.”); see also STA Letter, at 3 (STA recommends that 
the Commission clarify its views on the scope of the BFMM exception, citing as an example an “OTC 
market makers that provide extensive liquidity for retail trades but do not affect the trades pursuant to 
published quotations.”). 
406
  See SIFMA Letter, at 25 n.67 (“SIFMA further notes the SEC’s recent statements in its recent proposing 
release on registration of significant market participants that ‘bona fide market-making exceptions under 
Regulation SHO are only available to registered broker-dealers that publish continuous quotations for a 
specific security in a manner that puts the broker-dealer at economic risk’, that ‘[b]roker-dealers that do not 
publish continuous quotations, or publish quotations that do not subject the broker-dealer to such risk (e.g., 
quotations that are not publicly accessible, are not near or at the market, or are skewed directionally 
towards one side of the market), would not be eligible for the bona fide market maker exceptions’ and that 
‘broker-dealers that publish quotations but fill orders at different prices than those quoted would not be 
engaged in bona fide market making for purposes of Regulation SHO.”). SIFMA cited to Further Definition 
of “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer, 
Exchange Act Release No. 94524 (Mar. 28, 2022), 87 FR 23054, 23068-69 at n.157 (Apr. 18, 2022). 
407
  See 2008 Regulation SHO Amendments, at 61698-99; Regulation SHO Adopting Release, at 48015. 

136 
Commission’s original Regulation SHO guidance.
408
 T his commenter expressed particular 
concerns with the Commission’s statement in the Proposing Release that the proposed BFMM 
locate exception reporting would be an additional tool to determine whether such activity 
qualifies for the BFMM locate exception or conversely “could be indicative of, for example, 
proprietary trading instead of bona fide market making.” The Commission has consistently stated 
that the BFMM was intended to be a “narrow” exception,
409
 and the collection of information 
about its usage will be helpful for the Commission to determine whether it is being used 
appropriately as such. The reported information will indeed be used as an “additional tool to 
determine whether such activity qualifies” for the BFMM locate exception as part of the 
Commission’s regulation of short sales, for example, by determining whether brokers or dealers 
are using the exception for proprietary trading, which is not appropriate. Other commenters 
called for the elimination of the BFMM locate exception itself.
410
 Such requests are outside the 
scope of this rulemaking. However, the BFMM locate exception is useful for brokers and dealers 
that are, for example, trying to meet demand in fast-moving markets where they might otherwise 
be forced to back away from published, marketable quotes being hit by prospective purchasers 
solely because of the locate requirement. 
 
408
  SIFMA Letter, at 25. 
409
  See 2008 Regulation SHO Amendments, at 61698-99; Regulation SHO Adopting Release, at 48015. 
410
  See Better Markets Letter, at 14 (“The SEC has correctly concluded that naked short sales are abusive. The 
SEC established this loophole, which permits the largest proprietary trading firms to engage in naked short 
selling, on the theory that it facilitates trading in hard-to-borrow securities. However, the SEC’s settlement 
regulations with respect to mandatory buy-ins already provide special accommodations to market-makers 
that cannot close out their short positions within the standard failure-to-deliver close-out timeframe. This 
accommodation already in place calls into serious question whether the large loophole in the locate 
requirement serves any legitimate purpose. At the very least, the SEC must closely monitor the information 
it receives regarding reliance on this exception to determine whether elimination of this exception is 
warranted.”); see also WTI Letter. 

137 
One commenter stated that the costs imposed on market makers to implement and 
maintain the proposed regulatory requirements might result in wider spreads, reduced liquidity, 
and might represent a barrier to entry for new market participants.
411
 To the extent the 
commenter is concerned that the costs of implementing reporting may be passed on in the form 
of wider spreads or reduced liquidity, on balance the benefits of transparency justify such costs. 
Importantly, it is unclear how reporting the data would create negative results on spreads or 
market liquidity because the reported exception data will only be provided to regulators and not 
made public. If the commenter is concerned that once the data is reported, the Commission may 
become more aware of potential misuse of the BFMM locate exception as described by 
commenters, the consequences identified by the commenter would not flow from the 
requirement to report the use of the exception, but may instead result from the misuse of it. 
Collecting the data will help the Commission with its oversight of the use of the exception, 
including with regard to potentially abusive “naked” short selling.
412
 The BFMM locate 
exception, if properly utilized, benefits investors and the market by preserving market 
liquidity,
413 
but it should not be used for speculative
414
 or potentially abusive “naked” short 
selling.
415
 Instead, the BFMM locate exception data reported to the CAT will provide the 
 
411
  See STA Letter, at 4. 
412
  See generally Amendments to Regulation SHO, Exchange Act Release No. 60388 (July 27, 2009), 74 FR 
38266, 38267-68 (July 31, 2009) (“2009 Regulation SHO Amendments”). 
413
  See Regulation SHO Adopting Release, at 48025 (“[e]xcepting bona-fide market making activity from the 
locate requirement will benefit investors and the market by preserving necessary market liquidity.”). 
414
  See, e.g., 2008 Regulation SHO Amendments, at 61699 (“For example, the Commission has stated that 
bona-fide market making does not include activity that is related to speculative selling strategies or 
investment purposes of the broker-dealer and is disproportionate to the usual market making patterns or 
practices of the broker-dealer in that security.”); see also Regulation SHO Adopting Release, at 48015. 
415
  See, e.g., 2008 Regulation SHO Amendments, at 61691 (“We have previously noted that abusive ‘naked’ 
short selling, while not defined in the federal securities laws generally refers to selling short without having 
stock available for delivery and intentionally failing to deliver stock within the standard ... settlement 
cycle.”). See also Regulation SHO Adopting Release, at 48009, n.10; Exchange Act Release No. 56212 
 

138 
Commission with a better understanding of the use of this limited exception, which should help 
to ensure that the exception is not subject to misuse by brokers or dealers in violation of the 
Commission’s short selling rules. 
In response to commenters that generally requested additional guidance
416
 regarding the 
scope of bona fide market making activity eligible for the BFMM locate exception, the primary 
requirement is that a broker or dealer that is a market maker provide widely accessible, 
continuous quotations at or near the market for which it is at risk.
417
 For example, the 
Commission has stated that for purposes of Regulation SHO, a market maker engaged in bona 
fide market making is a “broker-dealer that deals on a regular basis with other broker-dealers, 
actively buying and selling the subject security as well as regularly and continuously placing 
quotations in a quotation medium on both the bid and ask side of the market.”
418
 Moreover, the 
Commission has stated that “[b]roker-dealers that do not publish continuous quotations, or 
publish quotations that do not subject the broker-dealer to such risk (e.g., quotations that are not 
publicly accessible, are not near or at the market, or are skewed directionally towards one side of 
 
(Aug. 7, 2007), 72 FR 45544, n.3 (Aug. 14, 2007) (“2007 Regulation SHO Final Amendments”); Exchange 
Act Release No. 57511 (Mar. 17, 2008), 73 FR 15376 (Mar. 21, 2008) (“Naked Short Selling Anti-Fraud 
Rule Proposing Release”). 
416
  See, e.g., SIFMA Letter, at 25; STA Letter, at 3. 
417
  See, e.g.,   Settlement Cycle Adopting Release, at n.411 (“Under Regulation SHO’s bona fide market 
making exceptions, the broker-dealer generally should be holding itself out as standing ready and willing to 
buy and sell the security by continuously posting widely accessible quotes that are near or at the market. 
The market maker must be at economic risk for such quotes.”); see also 2008 Regulation SHO 
Amendments, at 61699. Thus, a market-maker that continually executed short sales away from its posted 
quotes would generally be unable to rely on the bona-fide market making exceptions of Regulation SHO. 
See Regulation SHO Adopting Release, at 48015 n.68. The market-maker must also be engaged in bona 
fide market making in that security at the time of the short sale for eligibility for the exceptions. See 2008 
Regulation SHO Amendments, at 61699. 
418
  See, e.g., 2008 Regulation SHO Amendments, at 61699; see also Self-Regulatory Organizations; National 
Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change Relating to Close-Out 
Requirements for Short Sales and an Interpretation on Prompt Receipt and Delivery of Securities, 
Exchange Act Release No. 32632 (July 14, 1993), 58 FR 39072, 39074 (July 21, 1993); see also Settlement 
Cycle Adopting Release, at 13911-12 n.411. 

139 
the market), would not be eligible for the bona-fide market-maker exceptions under Regulation 
SHO.”
419
 Notably, “broker-dealers that publish quotations but fill orders at different prices than 
those quoted would not be engaged in bona-fide market making for purposes of Regulation 
SHO.”
420
 
After considering the comments received regarding the proposal to require CAT 
reporting firms that are reporting short sales to indicate whether such CAT reporting firm is 
asserting use of the BFMM locate exception, the Commission is adopting this proposed 
amendment to CAT with a few technical modifications to improve the readability of the 
amendment.
421
 The Commission recognizes that there will be costs to broker-dealers to 
implement changes to their respective systems and processes to accommodate the reporting of 
the BFMM locate exception information to CAT. For the reasons described above, as well as 
reasons stated in the Proposing Release, the Commission believes that the benefits to the 
Commission in its administration of short sale regulations will justify the burdens and costs to 
CAT reporting firms. This reporting requirement will not adversely affect short selling activity or 
liquidity in the market as it requires that brokers or dealers that are market makers provide 
information that is, or should be, readily available to the market maker at the time they effect a 
short sale, to the Commission without having to request access. The requirement does not change 
 
419
  See Settlement Cycle Adopting Release, at 13911-12 n.411.  
420
  Id. See also Regulation SHO Adopting Release, at 48015 n.68 (“Moreover, a market maker that continually 
executed short sales away from its posted quotes would generally be unable to rely on the bona-fide market 
making exception” of Regulation SHO). 
421
  The amendment includes the following non-substantive, technical changes to the rule text: adding the word 
“for” preceding “a short sale” to clarify that reporting is required for a short sale in which the bona fide 
market maker exception is claimed, adding “the” preceding “exception” and adding “in” preceding Rule 
203(b)(2)(iii) to clarify that the bona fide market making exception is found in Rule 203(b)(2)(iii). 

140 
how such brokers or dealers that are market makers use the exception itself, and the data will not 
be published. 
V. Other Comments 
Other commenters also discussed issues that were beyond the scope of the rulemaking, 
such as suggestions for the Commission to ban short selling, enhance Regulation SHO’s locate 
or close-out requirements, address potentially abusive “naked” short selling, and reduce the 
reporting timeframes or requirements for Form 13F reporting, among others.
422
  
VI. Compliance Date 
The Commission received one comment regarding a compliance date for Rule 13f-2 
reporting requirements; that commenter recommended that Managers be given at least 18 months 
to comply with the new requirements.
423
 Specifically, the commenter stated that “[g]iven the 
complexity and significance of the operational build required by the proposed rule, we think a 
minimum of 18 months would be an appropriate implementation timeframe to give advisers 
adequate time to come into compliance with any new requirements.”
424
 D ue to the modifications 
from the proposal which will reduce the complexity of the operational build, Managers should 
require less time than suggested by the commenter. Although the data that will result from the 
Rule 13f-2 reporting requirements will be useful to market participants and regulators as soon as 
it is available, it is prudent to implement the rule at a measured pace to help ensure that 
Managers have adequate time to update systems to meet the reporting requirements of Rule 
 
422
  One commenter understood the rule as a “self-reporting” rule rather than as a mandatory reporting rule. 
Comment from Sarah (Feb. 25, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
20117824-270590.htm.  
423
  MFA Letter 2, at 3 (stating that the Commission should “provide an appropriate amount of time for firms to 
comply with any new requirements [under Rule 13f-2] (18 months at a minimum)” due to the operational 
build required for compliance with Proposed Rule 13f-2 and Proposed Form SHO). 
424
  Id. 

141 
13f-2. Accordingly, a compliance date of 12 months after the effective date of this release for 
Rule 13f-2 strikes the appropriate balance between the Commission’s goal of increasing 
transparency of short sale-related information and providing Managers with adequate time to 
implement systems and processes to comply with the Rule 13f-2 reporting requirements.
425
 
The Commission will begin publishing the aggregated short sale related data collected, 
pursuant to Rule 13f-2, three months after the above stated compliance date of 12 months after 
the effective date of this release. The three-month window for the Commission to publish 
aggregated Form SHO data is intended to ensure that Commission systems are operating as 
designed in order to publish the aggregated data. 
Consistent with a suggestion by the commenter, the compliance date for the CAT 
amendments will be 18 months after the effective date of this release, as there were not 
modifications to that requirement from proposal. This will allow CAT reporting firms adequate 
time to update systems to facilitate reporting to CAT.
426
 An 18-month compliance period for the 
amendment to CAT strikes the appropriate balance between improving the Commission’s 
administration of short sale regulations and providing CAT reporting firms adequate time to 
implement changes to their respective systems and processes to accommodate the reporting of 
BFMM locate exception information to CAT, and is reasonable given that the information to be 
 
425
  In addition, with respect to the compliance date, several commenters requested the Commission to consider 
interactions between the proposed rule and other recent Commission rules. In determining compliance 
dates, the Commission considers the benefits of the rules as well as the costs of delayed compliance dates 
and potential overlapping compliance dates. For the reasons discussed throughout the release, to the extent 
that there are costs from overlapping compliance dates, the benefits of the rule justify such costs. See infra 
Parts VIII.B, VIII.C.6.f, and VIII.D.2 for a discussion of the interactions of the final rule with certain other 
Commission rules. 
426
  For discussion of the compliance date for the adopted amendment to the CAT NMS Plan to require the 
reporting to the CAT of reliance on the bona fide market making exception in Regulation SHO, see Notice 
of the Text of the Amendment to the National Market System Plan Governing the Consolidated Audit Trail 
for Purposes of Short Sale-Related Data Collection, Exchange Act Release No. 34-98739 (Oct. 13, 2023), 
published elsewhere in this issue of the Federal Register, which will have an effective date of 60 days 
after date of publication in the Federal Register and a compliance date of 18 months after the effective date. 

142 
reported is, or should be, readily available to the market maker at the time they effect a short 
sale.
427
 
VII. Paperwork Reduction Act Analysis 
A.  Background 
Certain provisions of Rule 13f-2, Form SHO, and the Amendment to CAT impose 
“collection of information” requirements within the meaning of the Paperwork Reduction Act of 
1995 (“PRA”).
428
 The title for the collection of information is: “Amendments to Enhance Short 
Sale Data” (OMB Control No. 3235-0804). An agency may not conduct or sponsor, and a person 
is not required to respond to, a collection of information unless it displays a current valid control 
number. The requirements of this collection of information are mandatory for Managers under 
Rule 13f-2 and Form SHO, and Plan Participants and CAT reporting firms under the 
Amendment to CAT. 
In accordance with the PRA, the Commission is submitting the final amendments to the 
rules to the Office of Management and Budget (OMB) for review. The Commission published a 
request for comments on these collection of information requirements in the Proposing 
Release,
429
 and submitted the proposed requirements to the Office of Management and Budget 
(OMB) for review in accordance with the PRA.
430
 The Commission received some comments 
regarding the Commission’s estimates of paperwork burdens and costs associated with 
anticipated compliance of Rule 13f-2, Form SHO, and the Amendment to CAT, which are 
addressed in this section. 
 
427
  See supra Part IV.B. See also infra Part VII.C for discussion of costs and burden estimates related to 
compliance with the amendment to CAT.  
428
  44 U.S.C. 3501 et seq. 
429
  See Proposing Release, at 14980-81. 
430
  44 U.S.C. 3507(d); 5 CFR 1320.11. 

143 
As discussed above, Rule 13f-2 and related Form SHO are designed to provide greater 
transparency of short sale-related data to regulators, investors, and other market participants by 
requiring certain Managers to file monthly on Form SHO, through EDGAR in Form SHO-
specific XML, certain short position and activity data. Under Rule 13f-2 and Form SHO, only 
those Managers that meet a specified Reporting Threshold for an equity security will be required 
to file Form SHO. Such information will provide additional context to the Commission and other 
regulators regarding the lifecycle of short sales, assist in reconstructing market events, and 
improve Commission oversight of short selling. 
The Amendment to CAT is intended to supplement the short sale-related data that will be 
reported by certain broker-dealers to the Commission pursuant to Rule 13f-2 and Form SHO. 
The Commission’s amendment to CAT requires, for original receipt or origination of an order 
for equities, the Participants’ Compliance Rules require their broker-dealer members record and 
report whether the order is a short sale for which the BFMM locate exception in Rule 203 under 
Regulation SHO for the reported short sale is being claimed. This information will provide 
valuable data to both the Commission and other regulators regarding the use of the BFMM locate 
exception. Given the differences in the information collections applicable to these parties, the 
burdens applicable to Managers and broker-dealers are separated in the analysis below. 
B.  Burdens for Managers under Rule 13f-2 and Form SHO 
1. Applicable Respondents 
As discussed above, Rule 13f-2 and Form SHO require Managers that trigger a Reporting 
Threshold to file monthly via EDGAR, on Form SHO, certain short position and activity data. 
Under section 13(f)(6)(A) of the Exchange Act and for purposes of Rule 13f-2, Managers 
include any person, other than a natural person, investing in or buying and selling securities for 

144 
its own account, and any person (including a natural person) exercising investment discretion 
with respect to the account of any other person.
431
 Thus, the requirements of Rule 13f-2 could 
apply, for example, to investment advisers that exercise investment discretion over client assets, 
including investment company assets; broker-dealers; insurance companies; banks and bank trust 
departments; and pension fund managers or corporations that manage corporate investments or 
employee retirement assets. 
In the Proposing Release, the Commission stated that it believed that the burden 
associated with Proposed Rule 13f-2 and the related Proposed Form SHO reporting in EDGAR 
would be similar to a Manager’s reporting requirements under former Form SH. In October 
2008, the Commission adopted interim final temporary Rule 10a-3T, which required institutional 
investment managers that exercise investment discretion with respect to accounts holding section 
13(f) securities having an aggregate fair market value of at least $100 million to file Form SH 
with the Commission following a calendar week in which it effected a short sale in a section 
13(f) security, with some exceptions. Form SH included information on short sales and positions 
of section 13(f) securities, other than options.
432
 The Commission estimated in the Proposing 
Release, that based on Form SH data, each month, approximately 1,000 Managers w ould trigger 
a Reporting Threshold for at least one security, and therefore be required to file a Proposed Form 
SHO.
433
 The Commission did not receive any comments regarding the estimated number of 
 
431
  See also Instructions to Form 13F. 
432
  Disclosure of Short Sales and Short Positions by Institutional Investment Managers, 73 FR 61678. The rule 
extended the reporting requirements established by the Commission’s Emergency Orders dated September 
18, 2008, September 21, 2008, and October 2, 2008, with some modifications. See supra n.103.  
433
  This estimate is similar to the estimate provided in the Disclosure of Short Sales and Short Positions by 
Institutional Investment Managers, Exchange Act Release No. 58785 (Oct. 15, 2008), 73 FR 61678 (Oct. 
17, 2008). However, the number of estimated Form SHO filers represents a monthly, as opposed to weekly, 
filing, and therefore the Commission estimates fewer overall filings per month. Additionally, the estimate 
accounts for the estimate by the Commission staff that 252 Form SH filers would have been required to file 
 

145 
Managers that would be required to file a Form SHO, or an alternative estimated number of 
Managers that commenters believed would be more appropriate. 
As discussed above, the Commission is adopting aspects of the Proposal with certain 
modifications to Form SHO reporting requirements. For example, the modified reporting 
threshold for the U.S . dollar value-based prong of Threshold A for reporting company issuer 
securities is being adopted as a monthly average rather than a daily end-of-day calculation, 
which could result in fewer Managers being subject to Form SHO reporting requirements under 
Threshold A than under the Proposed Reporting Thresholds. However, the Commission 
continues to believe that 1,000 Managers is an accurate estimate when considering (1) Managers 
with discretion over less than $100 million, which were not required to file Form SH; (2) the fact 
that Form SH was only required to be filed for 13(f) securities that are included on the 13F List 
as opposed to all equity securities of both reporting and non-reporting company issuers; and (3) 
the fact that Form SH did not include a second, lower threshold (Threshold B) for short positions 
in securities of non-reporting company issuers. As such, the Commission continues to estimate 
that, each month, approximately 1,000 Managers w ill trigger a Reporting Threshold for at least 
one security, and therefore be required to file a Form SHO. 
2. Burdens and Costs 
The Commission explained in the Proposing Release that it believed that the burden 
associated with Proposed Rule 13f-2 and the related Proposed Form SHO reporting in EDGAR 
 
had a threshold of 2.5% of shares outstanding or $10 million monthly average gross short position in an 
equity security been imposed during the analyzed time period. The estimate of 1,000 is higher than the 252 
estimated Form SH filers to account for: (1) Managers with discretion over less than $100 million, which 
were not required to file Form SH; (2) the fact that Form SH was only required to be filed for 13(f) 
securities as opposed to all equity securities of both reporting and non-reporting company issuers; and (3) 
the fact that Form SH did not include a second, lower threshold (Threshold B) for short positions in 
securities of non-reporting company issuers. 

146 
would be similar to a Manager’s reporting requirements for former Form SH.
434
 The 
Commission continues to believe that the burden associated with Rule 13f-2 and related Form 
SHO reporting in EDGAR is similar to a Manager’s reporting requirements for former Form SH. 
With respect to each applicable section 13(f) security, the Form SH filing identified the issuer 
and CUSIP number of the relevant security and required the Manager’s start of day short 
position, the number and value of securities sold short during the day, the end of day short 
position, the largest intraday short position, and the time of the largest intraday short position.
435
 
In adopting interim temporary Rule 10a-3T, which required certain Managers to file weekly non-
public reports via Form SH, the Commission estimated that Managers would spend 
approximately 20 hours to prepare and file each Form SH.
436
 The Commission estimated in the 
Proposing Release for Form SHO that the burden associated with preparing and filing Form SHO 
in EDGAR would be approximately 20 hours per filing, consistent with that of former Form 
SH.
437
 
Some commenters were concerned about the Commission’s reliance on prior Form SH 
data in estimating Form SHO reporting burdens, as well as the estimated time burden of 20 hours 
for preparing and filing each required Form SHO.
438
 One commenter stated that the estimated 20 
hours to file Form SHO was “not realistic” and felt that reliance on Form SH for Form SHO 
 
434
  See Proposing Release, at 14972-73. 
435
  Form SH was adopted in the wake of the 2008 financial crisis and remained in effect until July 2009. 
436
  See Disclosure of Short Sales and Short Positions by Institutional Investment Managers, 73 FR 61686 
(stating that, “[t]he 20 hour per filing estimate is based on data received from a small sample of actual filers 
and a random sample of filings conducted by our Office of Economic Analysis.”). 
437
  See Proposing Release, at 14973-74. 
438
  See, e.g., MFA Letter, at 15; Two Sigma Letter, at 5-7. 

147 
burden estimates was not adequately justified in the Proposing Release.
439
 Specifically, some 
commenters stated that the Proposing Release underestimated the costs of preparing proposed 
Information Table 2 in relying on the Form SH and Rule 10a-3T estimates, emphasizing the 
complexity of Form SHO as compared to Form SH.
440
 One commenter stated that the Proposing 
Release’s estimate of 20 hours needed to process and file Form SHO per month may be too low, 
and even if accurate, will impose a “substantial ongoing burden.”
441
 However, these commenters 
did not provide the Commission with alternative burden estimates for reporting Form SHO, or 
alternative sources of data for which to base Form SHO burden estimates. 
In contrast, one commenter believed that Managers were not being genuine about their 
concerns regarding costs and burdens of complying with Form SHO reporting requirements, 
stating that they were able to comply with Form SH requirements.
442
 The commenter also stated 
that the requirements of Form SHO should be less burdensome than the requirements of Form 
SH due to the decreased frequency of reporting. 
Regarding comments of Form SHO’s complexity as compared to Form SH, the adopted 
Form SHO, as described above, does not include the proposed requirement to report hedging 
status, which several commenters thought would be particularly burdensome or operationally 
difficult to implement.
443
 A s adopted, Form SHO also includes a streamlined Information Table 
2, which reduces the granularity of the information reported, decreasing the costs and burdens 
 
439
  Two Sigma Letter, at 5-7 (citing letters received by the Commission that it had underestimated the burden 
of Form SH and describing the complexity of Form SHO as compared to Form SH). 
440
  See, e.g., MFA Letter, at 15; Two Sigma Letter, at 5-7. 
441
  Anonymous Fund Manager Letter, at 8. 
442
  See WTI Letter, at 2 (“The protests of the industry in terms of the effort required to comply with the 
Proposal ring hollow given the Commission’s experience with interim temporary Rule 10a-3T – firms had 
no problem complying and the data provided was useful to the Commission. Indeed, the Proposal is easier 
to comply with, given the monthly rather than weekly reporting of interim temporary Rule 10a-3T.”). 
443
  See, e.g., T. Rowe Price Letter, at 3-4; Virtu Letter, at 3; MFA Letter, at 4. 

148 
that more detailed reporting of daily activity data as proposed would have imposed, further 
reducing complexity from the proposed rule and form. 
As the Commission acknowledged in the Proposing Release, and continues to 
acknowledge, the information required under former Form SH differs from that required under 
Form SHO. However, the Commission continues to believe that Form SH is an appropriate basis 
for Form SHO burden estimates. Form SH involved the same type of entities (Managers) and the 
same activity (short positions) as Form SHO. While recognizing that the information required 
under former Form SH differs from that required under Form SHO, the Commission continues to 
believe that both forms require the reporting of short sale-related data of similar depth and 
complexity.
444
 Notably, Rule 13f-2 requires monthly reporting if certain conditions are met, as 
opposed to the weekly reporting required by Form SH for Managers that effected short sales 
within the preceding week,
445
 which is anticipated to decrease the overall volume of reports 
required to be filed by Managers under Form SHO in comparison to Form SH. 
As such, and since the Commission did not receive comments citing alternative sources 
of data that commenters believed would result in more accurate Form SHO burden estimates, the 
Commission continues to believe that Form SH is an appropriate basis for which to estimate 
Form SHO burdens. The Commission continues to estimate that the burden associated with 
preparing and filing Form SHO in EDGAR will be approximately 20 hours per filing, consistent 
with the corresponding burdens for former Form SH, and consistent with estimates in the 
 
444
  Under Form SH, Managers who met the applicable threshold and effected a short sale in a section 13(f) 
security in the preceding week were required to file a report identifying the open short position, closing 
short position, largest intraday short position, and the time of the largest intraday short position, for that 
security during each calendar day of the prior week. See Emergency Order Pursuant to Section 12(k)(2) of 
the Securities Exchange Act of 1934 Taking Temporary Action To Respond to Market Developments, 
Exchange Act Release No. 58591 (Sept. 18, 2008), 73 FR 55175, 55176 (Sept. 24, 2008). 
445
  See id. 

149 
Proposing Release.
446
 Accordingly, the Commission estimates that the burden associated with 
preparing and filing Form SHO across all managers collectively is approximately 240,000 hours 
per year.
447
 
The Commission received one comment regarding the approximate overall cost of 
$217.55 per Form SHO filing from the Proposing Release. This commenter stated that this cost 
was “not realistic,” but, again, did not provide a more accurate cost estimate, or alternative data 
source for which to base a cost estimate.
448
 The Commission believes that the hourly cost of 
internal expertise required for each filing will be $251.36, which includes a blended calculation 
of the estimated hourly rate for a compliance attorney, senior programmer, and in-house 
compliance clerk, an increase from the Proposing Release’s estimated $217.55 to account for 
inflation.
449
 Taken together, the estimated burden hours and hourly rate for the filing of Form 
 
446
  Proposing Release, at 14973. 
447
  20 hours per filing x 1,000 filings by Managers each month x 12 months = 240,000 hours. In the Proposing 
Release PRA, the Commission estimated that 346 Form SH filers would have been required to file Form 
SHO had a threshold of 2.5% of shares outstanding or $10 million position dollar value been imposed 
during the analyzed time period. Due to the change in the Threshold A calculation of the dollar value prong 
of the Reporting Threshold for equity securities of reporting company issuers to be based on a monthly 
average gross short position rather than the proposed daily calculation, the estimated number of Form SH 
filers that would have been required to file a Form SHO decreased from 346 to 252. However, the 
Commission continues to estimate that 1,000 Managers will be subject to Form SHO reporting per month. 
448
  See Two Sigma Letter, at 5-7. 
449
  The $251.36 wage rate reflects current estimates of the blended hourly rate for an in-house compliance 
attorney ($425), a senior programmer ($386) and in-house compliance clerk ($82). $251.36 is based on the 
following calculation: (($425) + ((($386 + $82) ÷ 2) x 10)) ÷ 11) = $251.36. The estimated proportion of 
compliance attorney (1/11
th
) to senior programmer and in-house compliance clerk (10/11
th
) time burden is 
based on commenter input and computation of the estimated burden for the filing of Form 13F-HR. See 
Electronic Submission of Applications for Orders, Exchange Act Release No. 93518 (Nov. 4, 2021), 86 FR 
64839 (Nov. 19, 2021) at 64860-61 (“Electronic Submission of Applications for Orders”). The $425 per 
hour and $386 per hour figures for a compliance attorney and a senior programmer, respectively, are based 
on salary information for the securities industry compiled by the Securities Industry and Financial Markets 
Association’s Office Salaries in the Securities Industry 2013 (“SIFMA Report”), modified by Commission 
staff to account for an 1800-hour work year and inflation, and multiplied by 5.35 to account for bonuses, 
firm size, employee benefits, and overhead. The $82 per hour figure for a compliance clerk is based on 
salary information from the SIFMA Report, modified by Commission staff to account for an 1800-hour 
work-year and inflation, and multiplied by 2.93 to account for bonuses, firm size, employee benefits, and 
overhead. See also Form PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund 
 

150 
SHO result in an estimated annual cost to the industry of $60,326,400.
450
 The Commission, 
however, recognizes that advances in technology over time could result in Managers spending 
less time preparing and filing Form SHO than is estimated above.
451
 
Consistent with its estimates in the Proposing Release, the Commission also anticipates 
that most Managers will file Form SHO directly in the structured XML-based data language for 
Form SHO,
452
 rather than using the fillable web form provided by EDGAR, resulting in some 
limited additional costs for each filing. While the Commission received comments about the use 
of Form SHO-specific XML generally,
453
 it did not receive comments regarding the PRA burden 
estimates of using Form SHO-specific XML. The Commission estimates that Managers that file 
Form SHO using a structured XML-based data language could incur an additional burden of 2 
hours of work by a programmer,
454
 at an estimated cost of $772.
455
 The Commission further 
 
Advisers; Requirements for Large Private Equity Fund Adviser Reporting, Release No. IA-6297, 88 FR 
38146, 38195-98 (June 12, 2023). 
450
  20 hours per filing x 1,000 filings by Managers each month x 12 months x $251.36 per hour = $60,326,400. 
451
  See Electronic Submission of Applications for Orders, 86 FR 64859 (stating that “[c]ommenters stated that 
the advances in technology have made the process of completing and filing Form 13F highly automated, 
reducing the time and external costs to managers in complying with this requirement.”). 
452
  Most Managers will be familiar with other EDGAR Form-specific XML data languages, the use of which is 
required for the filing (by Managers that exercise investment discretion with respect to accounts holding 
13(f) securities having an aggregate fair market value on the last trading day of any month of any calendar 
year of at least $100 million) of Form 13F. See Frequently Asked Questions About 13F, available at 
https://www.sec.gov/divisions/investment/13ffaq.htm. The Commission estimates that all of the 1,000 
Managers estimated to file Form SHO each month will do so directly using the structured XML-based data 
language rather than the fillable web form provided by EDGAR. 
453
  See XBRL Letter; Comment from An Investor (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm. Comments regarding the use of 
XML are addressed in Part II.A.4. 
454
  The 2-hour estimated burden is consistent with similar estimates for the use of structured XML data 
formats for the filing of Form N-CR and Form 24F-2. See Money Market Fund Reforms; Form PF 
Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and 
Form N-1A, Exchange Act Release No. 34-97876 (July 12, 2023), 88 FR 51404, 51514 (Aug. 3, 2023); see 
also Securities Offering Reform for Closed-End Investment Companies, Exchange Act Release No. 88606 
(Apr. 8, 2020), 85 FR 33290, 33329 n.439 (June 1, 2020) (stating that “[w]e assume that the burden of 
tagging Form 24F-2 in a structured XML format would be 2 hours for each filing.”). 
455
  The $386 per hour figure for a senior programmer is based on salary information from the SIFMA Report.2 
hours x $386 = $772. 

151 
estimates that Managers will collectively spend up to approximately 24,000 hours and 
$9,264,000 per year to file Form SHO directly in a structured XML-based data language.
456
 The 
Commission also estimates that a similar, additional burden of 2 hours of work by a programmer 
per filing will apply to Managers filing an amended Form SHO directly in a structured XML-
based data language. 
Also consistent with the estimates in the Proposing Release, the Commission estimates 
that approximately 3.5 percent of the Managers that file Form SHO each month will also file an 
amended Form SHO, resulting in an additional burden and cost for an estimated 35 Managers 
each month.
457
 The additional burden could take up to the original 20 hours to process and file, 
as it will require the filing of an entirely new Form SHO.
458
 The associated wage rate for filing 
the amended Form SHO is consistent with the cost of expertise required to file the original Form 
SHO, estimated to be $251.36 per hour.
459
 The Commission also estimates that each amended 
Form SHO will be filed directly using a structured XML-based data language, resulting in a 
corresponding additional burden of 2 hours of work by a programmer per amended Form SHO 
filing. The Commission did not receive any comments regarding the estimated percentage of 
Managers that will file an amended Form SHO each month, or the costs and burden estimates of 
filing an amended Form SHO. 
 
456
  2 hours per filing x $386 per hour x 1,000 filings each month x 12 months = $9,264,000. 
457
  The estimate of 3.5% of Regulation SHO filers that are anticipated to file an amended Form SHO is based 
on the frequency of recent filings of amended Form 13F. For the reporting period of Dec. 31, 2022, there 
were 6,924 holdings reports for Form 13F-HR submitted, 244 of which were amended. (244 ÷ 6,924 = 
3.5%). 
458
  See Form SHO, Special Instructions, at 4. 
459
  See Proposing Release, at 14974. 

152 
PRA Table 1: 
Estimated Manager Burden and Costs Associated with Form SHO Reporting  
 
Managers 
(Monthly) 
Form 
SHO 
Reports 
Processed 
and Filed 
(Annual) 
Hours 
Needed to 
Process 
and File 
Form 
SHO 
(Avg.) 
Total 
Industry 
Burden 
Hours to 
Process and 
File Form 
SHO 
(Annual) 
 Wage 
Rate 
(Avg.) 
Total 
Industry 
Cost Burden  
(Annual) 
Form 
SHO 
Filings  
1,000 12,000 20 240,000 $251.36 $60,326,400 
Use of 
Structured 
XML-
Based 
Data 
Language 
in Form 
SHO 
Filings 
1,000 12,000 2 24,000 $386 $9,264,000 
Amended 
Form 
SHO 
Filings 
35 420 20 8,400 $251.36 $2,111,424 
Use of 
Structured 
XML-
Based 
Data 
Language 
in 
Amended 
Form 
SHO 
Filings 
35 420 2 840 $386 $324,240 
Total    273,240  $72,026,064 
 
Consistent with estimates in the Proposing Release, in addition to the costs associated 
with the reporting burden, Managers could incur an initial technology-related burden of 325 

153 
hours, at an hourly estimated wage rate of $366,
460
 for an estimated total cost of $118,950 per 
Manager,
461
 to update their current systems to capture the required information and automate and 
facilitate the completion and filing of Form SHO. The Commission generally believes that the 
type of Managers that will trigger a Reporting Threshold will likely have sophisticated 
technologies and be able to implement systems to help automate the reporting requirements of 
Rule 13f-2. As discussed in the Proposing Release, the estimate of 325 initial technology-related 
burden hours for Managers filing Form SHO was based on the estimated initial filing burden 
(325 hours) for large hedge fund advisers to fulfill amendments to the reporting requirements for 
Form PF,
462
 and is similar to the initial technological infrastructure-related burden (355 hours) 
for the proposed security-based swap position reporting requirements of proposed Rule 10B-
1(a).
463
 While Managers most likely have other existing reporting obligations, the Commission 
recognizes that Managers may need to update their systems to ensure timely and accurate filing 
of the specific information required under Form SHO. 
 
460
  The Commission estimates that, of a total estimated burden of 325 hours, approximately 195 hours will 
most likely be performed by compliance professionals and 130 hours will most likely be performed by 
programmers working on system configuration and reporting automation. Of the work performed by 
compliance professionals, we anticipate that it will be performed equally by a compliance manager at a cost 
of $360 per hour and a senior risk management specialist at a cost of $416 per hour. Of the work performed 
by programmers, we anticipate that it will be performed equally by a senior programmer at a cost of $386 
per hour and a programmer analyst at a cost of $280 per hour. ((($360 per hour x 0.5) + ($416 per hour x 
0.5)) x 195 hours) + ((($386 per hour x 0.5) + ($280 per hour x 0.5)) x 130 hours) ÷ 325 = $366. See Form 
PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers; Requirements for 
Large Private Equity Fund Adviser Reporting, Release No. IA-6297 (May 3, 2023), 88 FR 38146, 38195 
(June 12, 2023). See also SIFMA Report. 
461
  325 initial technology-related burden hours x $366 per hour = $118,950. 
462
  See Form PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers; 
Requirements for Large Private Equity Fund Adviser Reporting, Release No. IA-6297 (May 3, 2023), 88 
FR 38146, 38195 (June 12, 2023). (The Commission recognizes that adopted Rule 13f-2 will cover persons 
other than large hedge fund advisers, and that large hedge fund advisers may generally be more accustomed 
to existing Commission reporting requirements than some other persons that will be covered by adopted 
Rule 13f-2.). 
463
  See Rule 10B-1 Proposal. 

154 
One commenter stated that the estimated 325 hours initial technology-related burden was 
“not realistic” but did not provide an alternative estimate.
464
 One commenter stated that the 
initial estimated costs for initial technology projects per Manager represented a “significant 
portion” of a smaller Manager’s information technology budget but did not state that the estimate 
was inaccurate.
465
 A s a result of not adopting the proposed hedging requirement, which a number 
of commenters thought would be operationally difficult to implement,
466
 the technology-related 
burden will likely be reduced from that which was estimated in the Proposing Release. 
The Commission did not receive any comments that provided an alternative hourly 
estimate for the initial technology related burden for Managers filing Form SHO, or an 
alternative, more accurate source for which to base the initial technology related burden for 
Managers filing Form SHO. Additionally, in response to the comment that the Commission 
generally underestimated the initial technology-related burden,  and that the technology-related 
burden is likely reduced from the Proposing Release given the Commission’s decision not to 
adopt the proposed hedging requirement, the Commission continues to believe that an   estimate 
of 325-hours for the initial technology-related burden is appropriate. 
 
464
  See Two Sigma Letter, at 5.  
465
  See Anonymous Fund Manager Letter, at 6-7. 
466
  See Virtu Letter, at 3. 

155 
PRA Table 2: 
Estimated Manager Burden and Costs Associated with Form SHO Initial Technology Projects 
 
Managers 
with 
Proposed 
Form SHO 
Reportable 
Short 
Interest 
Positions 
Number of 
Hours Needed 
for Initial 
Technology 
Projects 
(Avg.) 
Industry 
Burden 
Hours for 
Initial 
Technology 
Projects 
 Wage 
Rate 
(Avg.) 
Total 
Industry Cost 
Burden  
Form SHO 
Initial 
Technology 
Projects  
1,000 325 325,000  $366 $118,950,000 
 
C. Burdens and Costs Associated with the Amendment to CAT 
1.   Summary of Collections of Information 
The amendment to the CAT NMS Plan requires Participants to update their Compliance 
Rules to require reporting by Industry Members of whether an original receipt or origination of 
an order to sell an equity security is a short sale for which a market maker is claiming the bona 
fide market making exception to the locate requirement in Rule 203(b)(2)(iii) of Regulation 
SHO.
467
 
2.   Use of Information 
As discussed above, reporting of certain short sale information to the CAT provides 
valuable information for the Commission and other regulators in investigations and 
reconstruction of market events. Requiring Industry Members to identify short sales for which 
they are claiming the BFMM locate exception will provide the Commission staff and other 
regulators an additional tool to determine whether such activity qualifies for the exception, or 
instead is indicative of, for example, proprietary trading instead of bona fide market making. 
 
467
  See supra Part IV. 

156 
3. Respondents 
a. National Securities Exchanges and National Securities 
Associations 
The respondents for the amendment to CAT include the 25 Plan Participants (the 24 
national securities exchanges and one national securities association (FINRA)).
468
 
b.   Members of National Securities Exchanges and National 
Securities Associations 
The respondents for the Amendment to CAT also include the Participants’ broker-dealer 
members, that is, Industry Members. The Commission understands that there are currently 3,501 
registered broker-dealers;
469
 however, not all broker-dealers are expected to have new CAT 
reporting obligations under the Amendment to CAT.
470
 B ased on an analysis of CAT data from 
May 2023, conducted by Commission staff, the Commission estimates that approximately 100 
broker-dealers will be required to report for the original receipt or origination of an order to sell 
an equity security whether the order is a short sale effected by a market maker in connection with 
bona fide market making activities in the security for which the BFMM locate exception in Rule 
203(b)(2)(iii) of Regulation SHO is claimed. This is a decrease from the Commission’s estimate 
in the Proposing Release of 104 broker-dealers that would be required to report for the original 
receipt or origination of an order to sell an equity security whether the order is a short sale 
 
468
  The Participants are: BOX Options Exchange LLC; Cboe BZX Exchange, Inc.; Cboe BYX Exchange, Inc.; 
Cboe C2 Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX, Inc.; Cboe Exchange, Inc.; Financial 
Industry Regulatory Authority, Inc.; Investors Exchange Inc.; Long-Term Stock Exchange, Inc.; MEMX, 
LLC; Miami International Securities Exchange LLC; MIAX PEARL, LLC; MIAX Emerald, LLC; 
NASDAQ BX, Inc.; NASDAQ GEMX, LLC; NASDAQ ISE, LLC; NASDAQ MRX, LLC; NASDAQ 
PHLX LLC; The NASDAQ Stock Market LLC; New York Stock Exchange LLC; NYSE MKT LLC; and 
NYSE Arca, Inc., NYSE Chicago Stock Exchange, Inc., NYSE National, Inc. 
469
  This is based on FOCUS quarterly filings for 2023 Q1. 
470
  See supra Part IV.B. 

157 
effected by a market maker in connection with bona-fide market making activities in the security 
for which the exception in Rule 203(b)(2)(iii) of Regulation SHO is claimed, because there were 
104 CAT reporters listed as equity market makers in CAT in November 2021, and 100 CAT 
reporters listed as equity market makers in CAT in May 2023.
471
 The Commission also included 
an estimate of 1,218 broker-dealers that would have been required to report “buy to cover” 
information on buy orders for equity securities to CAT in the Proposing Release,
472
 but since the 
Commission is not adopting the proposed “buy to cover” reporting requirement, such estimate is 
not included here. The Commission did not receive any comments on the estimated number of 
respondents under the proposed amendments to CAT. 
4. Total Initial and Annual Reporting and Recordkeeping Burdens 
The Commission received comments regarding the costs and burdens of the proposed 
amendments to CAT generally
473
 but did not receive specific comments regarding the Proposing 
Release’s PRA estimates related to the proposed CAT amendments. General comments 
regarding costs and burdens of the proposed CAT amendments are addressed in Part IV. The 
Commission’s total burden estimates in this Paperwork Reduction Act section reflect the total 
burden on all Participants and Industry Members. The burden estimates per Participant or 
Industry Member are intended to reflect the average paperwork burden for each Participant or 
Industry Member, but some Participants or Industry Members may experience more burden than 
the Commission’s estimates, while others may experience less. The burden figures set forth in 
this section are based on a variety of sources, including Commission staff’s experience with the 
development of the CAT and estimated burdens for other rulemakings. Because the CAT NMS 
 
471
  See Proposing Release, at 14977. 
472
  Id. 
473
  See, e.g., SIFMA Letter, at 25; FIA PTG Letter, at 3; Virtu Letter, at 6. 

158 
Plan applies to and obligates the Participants and not the Plan Processor, the Commission 
believes it is appropriate to estimate the Participants’ external cost burden based on the estimated 
Plan Processor staff hours required to comply with the proposed obligations.
474
 Put another way, 
pursuant to the Amendment to the CAT NMS Plan, the Participants will be obligated to make 
changes to the CAT, but the CAT is managed by the Plan Processor pursuant to contractual 
agreement, and so the Participants will be required to engage the Plan Processor to make any 
required changes. 
a. Participant Burdens 
The Amendment to CAT will require the Participants to engage the Plan Processor to 
modify the Central Repository to accept and process the new BFMM locate exception 
information on order receipt and origination reports. The Commission estimates that the 
Participants will incur an initial, one-time burden of 130 hours, or 5.2 hours per Participant, of 
staff time required to supervise and implement the changes necessary for the Plan Processor to 
accept and process the new data elements, and an initial, one-time, external cost of $113,800, or 
a per Participant expense of approximately $4,552 to compensate the Plan Processor for staff 
time required to make the initial necessary programming and systems changes to accept and 
process the new data elements, based on an estimate that it will take 300 hours of Plan Processor 
staff time to implement these changes.
475
 The Commission did not receive comment on these 
estimates. 
 
474
  The Commission derives estimated costs associated with Plan Processor and Industry Member staff time 
based on per hour figures from the SIFMA Report, modified by Commission staff to account for an 1800-
hour work-year and inflation, and multiplied by 5.35 to account for bonuses, firm size, employee benefits 
and overhead. 
475
  The estimated 300 hours of Plan Processor staff time include 200 hours by a Senior Programmer, 40 hours 
by a Senior Database Administrator, 40 hours for a Senior Business Analyst, and 20 hours for an Attorney. 
The Commission estimates that the initial, one-time external expense for Participants will be $113,800 = 
 

159 
The Commission continues to believe that other Paperwork Reduction Act burdens that 
will apply to the Participants, including ongoing burdens and external expenses for the Plan 
Processor’s acceptance and processing of the new data elements, are already accounted for in the 
existing Paperwork Reduction Act estimate that applies for Rule 613 and the CAT NMS Plan 
Approval Order, submitted under OMB number 3235-0671.
476
 The prior Paperwork Reduction 
Act analysis incorporates any other potential Paperwork Reduction Act burdens for the 
Participants, because the existing Paperwork Reduction Act analysis accounts for initial and 
ongoing costs for, among other things, operating and maintaining the Central Repository, 
including the cost of systems and connectivity upgrades or changes necessary to receive and 
consolidate the reported order and execution information from Participants and their members, 
the cost to store data and make it available to regulators, the cost of monitoring the required 
validation parameters, and management of the Central Repository.
477
 In addition, the 
Commission anticipates that each exchange and national securities association will file one Form 
19b–4 filing to implement updated Compliance Rules. While such filings may impose certain 
costs on the exchanges, those burdens are already accounted for in the comprehensive Paperwork 
Reduction Act Information Collection submission for Form 19b-4.
478
 The Commission does not 
expect the baseline number of 19b-4 filings to increase as a result of the Amendment to CAT, 
 
(Senior Programmer for 200 hours at $386 an hour = $77,200) + (Senior Database Administrator for 40 
hours at $379 an hour = $15,160) + (Senior Business Analyst for 40 hours at $305 an hour = $12,200) + 
(Attorney for 20 hours at $462 an hour = $9,240). 
476
  See CAT NMS Plan Approval Order, 81 FR 84911-43; see also OMB Control No. 3235-0671, 85 FR 
37721 (June 23, 2020) (notice of submission of request for approval of extension). 
477
  See CAT NMS Plan Approval Order, 81 FR 84918. 
478
  See OMB Control No. 3235–0045 (Aug. 19, 2016), 81 FR 57946 (Aug. 24, 2016) (Request to OMB for 
Extension of Rule 19b-4 and Form 19b-4 PRA). 

160 
nor does it believe that the incremental costs exceed those costs used to arrive at the average 
costs and/or burdens reflected in the Form 19b–4 PRA submission. 
b.   Broker-Dealer Burdens 
The Commission anticipates that certain Industry Members will have initial, one-time 
burdens and costs relating to the Amendment to CAT, to update systems and processes as 
necessary to capture and report use of the BFMM locate exception to CAT. The Commission has 
estimated these initial burdens and costs below. 
The Amendment to CAT will impose an ongoing annual burden relating to, among other 
things, personnel time to monitor each broker-dealer’s reporting of the required data and the 
maintenance of the systems to report the required data and implementing changes to trading 
systems that might result in additional reports to the Central Repository. However, the 
Commission estimates that the ongoing burden imposed by the Amendment to CAT related to 
reporting to the CAT is already accounted for in the existing information collections burdens 
associated with Rule 613 and the CAT NMS Plan Approval Order submitted under OMB 
number 3235-0671.
479
 Specifically, the CAT NMS Plan Approval Order takes into account 
requirements on broker-dealer members to comply with the CAT NMS Plan, including the 
requirement to maintain the systems necessary to collect and transmit information to the Central 
Repository,
480
 provides aggregate burden hour and external cost estimates for the broker-dealer 
data collection and reporting requirement of Rule 613, and did not quantify the burden hours or 
 
479
  See CAT NMS Plan Approval Order, 81 FR 84911-43. While there is no recordkeeping requirement related 
to reporting use of the BFMM locate exception, brokers or dealers should be prepared to monitor for 
compliance with conditions and maintain records documenting such compliance. See Regulation SHO 
Adopting Release, 48011 n.27 (“As with any rule, broker-dealers relying on [an] exception should be 
prepared to monitor for compliance with its conditions, and maintain records documenting such 
compliance.”). There would be a minimal additional ongoing burden for such brokers or dealers to record 
that they have determined such eligibility for each transaction reported to CAT. 
480
  See, e.g., CAT NMS Plan Approval Order, 81 FR 84930. 

161 
external cost estimates for each individual component of the broker-dealer’s data collection and 
reporting responsibility.
481
 The Amendment to CAT will not require any Industry Member to 
submit new reports to the CAT, but to add limited additional information to existing reports in 
certain circumstances for certain Industry Members. The Commission does not believe that this 
will alter the estimates of ongoing burden and external costs in the existing Paperwork Reduction 
Act Analysis and the ongoing burden associated with these new collection requirements are 
accounted for in the existing Paperwork Reduction Act Analysis. 
The Amendment to CAT will impose additional burdens on Industry Members that trade 
equity securities and rely upon or plan to rely upon the BFMM locate exception. Based on an 
analysis of data reported to the CAT in May 2023, and specifically the identification of all 
unique CAT Reporters that were identified as equity market makers (including different classes 
of market makers such as “designated” or “lead” market makers, and secondary liquidity 
providers), approximately 100 CAT Reporters will be subject to the new reporting obligation. 
Some broker-dealers that rely upon this exception may retain records regarding their eligibility 
for this exception for specific orders or for orders originated by specific desks or units of their 
business. 
Regarding the obligation to report the BFMM locate exception information to the CAT, 
the Commission believes that it is appropriate to divide the 100 Industry Members, i.e., the CAT 
reporters listed as equity market makers in CAT as of May 2023, that will be required to report 
this information into two categories: (i) Industry Members that report directly to the CAT; and 
(ii) Industry Members that use third-party reporting agents for CAT reporting. For purposes of 
this Paperwork Reduction Act analysis, the Commission estimates that of the 100 Industry 
 
481
  See CAT NMS Plan Approval Order, 81 FR 84930. 

162 
Members that will be required to report this information, 58 Industry Members w ill be reporting 
this information directly to the CAT, and 42 Industry Members will be reporting this information 
through third-party reporting agents. The Commission believes this is a reasonable estimation 
because the majority of Industry Members that are identified as market makers in the CAT have 
developed their own systems and technology to report directly to the CAT. The Commission 
believes that the majority of market makers handle reporting themselves because they likely 
submit a sufficient number of reportable events. The Commission did not receive any comments 
regarding the estimated number of broker-dealers that would be required to report for the original 
receipt or origination of an order to sell an equity security whether the order is a short sale 
effected by a market maker in connection with bona-fide market making activities in the security 
for which the exception in Rule 203(b)(2)(iii) of Regulation SHO is claimed, or about the 
estimated proportion of insourcing vs. outsourcing Industry Members. As such, the Commission 
is keeping the proportion of insourcing vs. outsourcing Industry Members the same as in the 
Proposing Release, but reflective of the estimated 100 broker-dealers rather than 104 broker-
dealers from the Proposing Release. 
The Commission estimates that the 58 insourcing Industry Members that report directly 
to the CAT will incur an initial, aggregate, one-time burden of 15,080 hours, or that each of these 
CAT Reporters will incur an initial, average one-time burden of 260 hours, and that each of these 
58 insourcing Industry Members will incur an initial, aggregate, one-time external expense of 
approximately $870,000 for software and hardware to facilitate reporting of the new data 
elements to CAT, or that each insourcing Industry Member will incur an initial, average one-time 

163 
external expense of approximately $15,000.
482
 The Commission did not receive any comments 
about the cost and burden estimates for insourcing Industry members. 
The Commission estimates that the 42 outsourcing Industry Members that use third-party 
reporting agents to report to the CAT will incur an initial, aggregate, one-time burden of 420 
hours, or that each of these outsourcing Industry Members will incur an initial, one-time burden 
of 10 hours on average, and that these 42 outsourcing Industry Members will incur an initial, 
aggregate, one-time external expense of approximately $42,000 for software and hardware to 
facilitate reporting use of the BFMM locate exception to CAT, or that each outsourcing Industry 
Member will incur an initial, average one-time external expense of approximately $1,000.
483
 The 
Commission did not receive any comments about the cost and burden estimates for outsourcing 
Industry Members. 
As discussed above, the Commission continues to believe that the ongoing burden 
associated with reporting to the CAT is already accounted for in the existing information 
collections burdens associated with Rule 613 and the CAT NMS Plan Approval Order submitted 
under OMB number 3235-0671.
484
 Because this information is already collected and maintained 
 
482
  The Commission is basing this figure on the estimated burden and external costs for a broker-dealer that 
handles orders subject to customer specific disclosures required by Rule 606(b)(3) to update their systems 
to capture the data and produce a report to comply with Rule 606. See Disclosure of Order Handling 
Information, Exchange Act Release No. 84528 (Nov. 2, 2018), 83 FR 58338, 58383 (Nov. 19, 2018). This 
is a reasonable proxy for estimating the burdens and costs associated with updating data capture systems 
for reporting purposes here because in both rulemakings broker-dealers were required to update in-house 
data reported for pre-existing reporting obligations. 
483
  The Commission believes that the estimated burden and external costs for outsourcing Industry Members is 
reasonable because the burden on individual Industry Members should be significantly lower than 
insourcing Industry Members because of the difference in how these firms report to the CAT. Outsourcing 
Industry Members will not be required to change internal CAT reporting systems, but instead will be 
responsible for making any updates necessary for CAT reporting agents to report this information to the 
CAT. The outsourcing Industry Members will have external costs associated with paying CAT reporting 
agents for any additional fees relating to the change, but because CAT reporting agents can report on behalf 
of numerous outsourcing Industry Members at the same time, the costs of any updates to their systems can 
be distributed amongst outsourcing Industry Members.  
484
  See supra n.476. 

164 
by market makers that engage in equity trading and claim the exception pursuant to 17 CFR 
240.17a-3 (“Rule 17a-3 of the Exchange Act”), there is no new ongoing burden associated with 
collecting or recording the information necessary to effectuate CAT reporting of this new 
element. 
PRA Table 3:  
Summary of Estimated Initial One-Time Burdens Related to CAT BFMM Amendment 
Name of 
Information 
Collection 
Type of Burden 
Number of 
Entities 
Impacted 
Initial 
One-
Time 
Hourly 
Burden  
Aggregate 
One-Time 
Hourly 
Burden 
Initial 
One-
Time 
Cost  
Aggregate 
One-Time 
Cost 
CAT: Central 
Repository - 
Short Sale 
Data 
Recordkeeping 25 5.2 130 
$4,552 $113,800 
CAT: 
Reporting of 
Bona Fide 
Market 
Making 
Exception – 
Insourcers 
Direct Report 58 260 15,080 
$15,000 $870,000 
CAT: 
Reporting of 
Bona Fide 
Market 
Making 
Exception – 
Outsourcers 
Third Party 
Disclosure 
42 10 420 
$1,000 $42,000 
 
D.  Collection of Information is Mandatory 
The information collections are required under Rule 13f-2 and Form SHO for Managers 
that meet the Reporting Threshold and the Amendment to CAT for Plan Participants to collect 
and process new CAT reportable information and for CAT Industry Members that engage in 
certain short sale activity. 
E. Retention Period of Recordkeeping Requirement 
Pursuant to 17 CFR 240.17a-4(b)(7) (“Exchange Act Rule 17a-4(b)(7)”), a broker-dealer 
must preserve for a period of not less than three years, the first two years in an easily accessible 

165 
place, all written agreements (or copies thereof) entered into by such member, broker or dealer 
relating to its business as such, including agreements with respect to any account. 
Pursuant to 17 CFR 240.17a-4(e)(7), a broker-dealer must maintain and preserve in an 
easily accessible place each compliance, supervisory, and procedures manual, including any 
updates, modifications, and revisions to the manual, describing the policies and practices of the 
member, broker or dealer with respect to compliance with applicable laws and rules, and 
supervision of the activities of each natural person associated with the member, broker or dealer 
until three years after the termination of the use of the manual. 
Pursuant to 17 CFR 240.17a-1, every national securities exchange and national securities 
association shall keep and preserve at least one copy of all documents, including all 
correspondence, memoranda, papers, books, notices, accounts, and other such records as shall be 
made or received by it in the course of its business as such and in the conduct of its self-
regulatory activity for a period of not less than five years, the first two years in an easily 
accessible place, subject to the destruction and disposition provisions of 17 CFR 240.17a-6 
(“Rule 17a–6”). 
F.  Confidentiality 
As discussed above, Rule 13f-2 requires certain Managers to file monthly in EDGAR, on 
Form SHO, certain short sale volume data and short interest position data. However, the 
Commission will aggregate the information reported by Managers on Form SHO prior to 
publication to protect the identity of reporting Managers. 
To the extent that the Commission receives—through its examination and oversight 
program, through an investigation, or by some other means—records or disclosures from a 
broker-dealer that relate to or arise from the Rule that are not publicly available, such 

166 
information will be kept confidential, subject to the provisions of applicable law. 
With respect to the Amendment to CAT, Rule 613, and the CAT NMS Plan, information 
collected and electronically provided to the Central Repository will only be available to the 
national securities exchanges, national securities association, and the Commission. Further, the 
CAT NMS Plan includes policies and procedures designed to ensure the security and 
confidentiality of all information submitted to the Central Repository, and to ensure that all 
SROs and their employees, as well as all employees of the Central Repository, shall use 
appropriate safeguards to ensure the confidentiality of such data. The Commission will receive 
confidential information pursuant to this collection of information, and such information will be 
kept confidential, subject to the provisions of applicable law.
 
VIII. Economic Analysis 
A. Introduction 
The Commission is adopting a new rule and related form as well as an amendment that 
introduce new reporting requirements in connection with short sales. Rule 13f-2, Form SHO, and 
the amendment to CAT (collectively, the “adoptions”) will improve the transparency of short 
selling activity to regulators, market participants and the investing public. The data provided by 
these adoptions will close informational gaps in the currently available data, which in turn will 
benefit market participants and help foster fair and orderly markets. The a doptions will also 
improve regulatory oversight and enhance regulators’ examination of market behavior and 
recreation of significant market events. These improvements may, in turn, discourage market 
manipulation to the extent that it occurs.
485
 
 
485
 See infra Part VIII.C.1 for additional discussion on potential market manipulation. 

167 
The Commission is mindful of the economic effects that may result from the adoptions of 
Rule 13f-2, Form SHO, and the amendment to CAT, including the benefits, costs, and the effects 
on efficiency, competition, and capital formation.
486
 The Commission recognizes that the 
adoptions might impose significant compliance costs on market participants. Requiring 
Managers
487
 to report large positions and short sale activity will likely impose significant initial 
and ongoing costs on Managers. The amendment to CAT will also impose compliance costs on 
broker-dealers. The Commission is cognizant of these costs and has modified the Proposals in a 
way that is intended to reduce the burdens incurred by market participants without sacrificing the 
transparency that is expected to result from the adoption of the Proposals. Modifications from the 
proposed rule and form that are likely to reduce reporting costs to Managers relative to the 
Proposals include: revising a key reporting threshold based on a monthly average calculation 
instead of a daily calculation, which is expected to reduce the number of reporting entities; 
streamlining the reporting requirements of Forms SHO; not adopting the “buy to cover” CAT 
reporting requirement; a nd not adopting Rule 205. Overall, the Commission has sought to 
balance the costs of the adoptions against the benefit to transparency that will be provided to 
regulators and the public.  
The Commission recognizes that the a doptions may lead to tradeoffs in market quality, 
with a risk of negative effects on price efficiency.
 
A potential reduction in market manipulation 
 
486
 Exchange Act section 3(f) requires the Commission, when it is engaged in rulemaking pursuant to the 
Exchange Act and is required to consider or determine whether an action is necessary or appropriate in the 
public interest, to consider, in addition to the protection of investors, whether the action would promote 
efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). In addition, Exchange Act section 
23(a)(2) requires the Commission, when making rules pursuant to the Exchange Act, to consider among 
other matters the impact that any such rule would have on competition and not to adopt any rule that would 
impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the 
Exchange Act. See 15 U.S.C. 78w(a)(2). 
487
  See infra note 506 and the accompanying discussion in the text on the definition of “Manager”. 

168 
through improved regulatory oversight stemming from the adoptions may have a positive impact 
on market quality. Furthermore, the adoptions will provide market participants with improved 
transparency into short selling activity, which might also lead to improved price efficiency. On 
the other hand, Rule 13f-2 and the disclosures Form SHO requires will increase the costs and 
risks of implementing large short positions, which might reduce price efficiency by reducing 
short selling and the positive effects of such short selling. Furthermore, public disclosure of 
information resulting from Rule 13f-2 and Form SHO might facilitate short squeezes, which in 
turn might also reduce market quality.
488
  
The Commission has considered the economic effects of the adoptions and wherever 
possible, has quantified their likely economic effects. The Commission is providing both a 
qualitative assessment and quantified estimates of the adopted rule and CAT amendment’s 
economic effects where feasible. The Commission has received comments on the Proposals and 
has addressed commenters’ concerns with the economic analysis. The Commission has 
incorporated data and other information to assist it in the analysis of the economic effects of the 
adoptions. However, as explained in more detail below, because the Commission does not have, 
and in certain cases does not believe it can reasonably obtain data that may inform the 
Commission on certain economic effects, the Commission is unable to quantify certain economic 
effects. Further, even in cases where the Commission has some data, quantification is not 
practicable due to the number and type of assumptions necessary to quantify certain economic 
effects, which render any such quantification unreliable. Our inability to quantify certain costs, 
 
488
 See infra Part VII.C.1. The Commission expects that for many securities, a limited number of Manager 
positions may surpass the reporting requirement thresholds. Given the eventual public release of the 
aggregate position sizes, there is a risk that other market participants will be able to potentially identify the 
Managers with large short positions and orchestrate short squeeze efforts against them (should they seem 
vulnerable against a short squeeze). Nevertheless, the Commission maintains the ability of identifying such 
behavior using CAT data, which could mitigate initiation of such behavior.  

169 
benefits, and effects does not imply that the Commission believes such costs, benefits, or effects 
are not significant.  
The Commission is adopting the Manager reporting and disclosures to implement the 
statutory mandate of section 929X of the Dodd-Frank Act. Accordingly, many of the costs and 
benefits of Rule 13f-2 and Form SHO stem from the Commission’s implementation of the 
statutory mandate. In addition, the Commission is exercising discretion in its design and 
implementation of Rule 13f-2 and Form SHO and recognizes that this discretion has economic 
effects. Specifically, the Commission is using this discretion to ensure that the disclosures are 
additive to currently available data and will be useful to both market participants and regulators, 
with a focus on addressing data limitations exposed by market events, especially the market 
volatility in January 2021. Additionally, the Commission is adopting a Proposed CAT 
amendment in order to address such data limitations outside of the context of the statutory 
mandate of section 929X. 
The Commission has access to several sources of data that provide some short selling 
information, one of which is CAT. CAT data can be used by regulators for regulatory purposes, 
including analysis and reconstruction of broad-based market events; in market analysis in 
support of regulatory decisions; in market surveillance, investigations, and other enforcement 
activities. At times, these regulatory functions can benefit from information on short sale 
positions of market participants and how these positions change over time. CAT does not include 
data that can be used to track such positions, and as discussed further above, Commission staff 
experience in reconstructing the events of January 2021 provided insights into the challenges of 
using existing CAT data for this purpose. Other existing data sources, including public data 
sources, are also limited for these purposes as well as for informing members of the public and 

170 
market participants. Specifically, current data fail to distinguish the type of trader engaged in 
short selling or identify individual short positions, as well as the fluctuation in those positions, 
even for regulatory use. Furthermore, current data do not track the use of the bona fide market 
maker exemption when short selling without the “locate”.
489
 The adopted rule will serve to 
increase the Commission’s awareness and understanding of short sale activity by Managers with 
large short sale positions by requiring reporting of their reliance on the bona fide marker maker 
locate exception. The adopted amendment will serve the Commission in its regulatory capacity. 
Existing data sources fail to accurately represent economic short positions of Managers 
due to several limitations.
490
 While FINRA publishes aggregate short interest on a bimonthly 
basis, these data do not reflect the timing with which short positions expand or shrink in the two-
week period between reporting dates.
491
 Some other data sources report daily short sale 
volume
492
 without distinguishing between short sale transactions that affect economic short 
 
489
  See supra note 10 for description of the locate requirement of Rule 203 of Regulation SHO. 
490
  One commenter stated that the data reported from Form SHO would only provide very limited additional 
relevant insight relative to FINRA short interest data. See SBAI Letter at 2. The Commission reiterates that 
Form SHO data are additive to existing data, including FINRA short interest data. More specifically, 
publicly released Form SHO data will indicate which equities have large short positions held by 
institutional investment managers. This is different from seeing large short interest, which may indicate 
many smaller positions, including those held by retail investors. Large short positions accumulated by 
Managers are often based on fundamental research, in contrast to smaller positions which more likely stem 
from hedging or arbitrage strategies. Therefore, information on the magnitude of aggregate large short 
positions, especially in relation to overall short interest, may highlight the degree to which short sales of a 
particular security are concentrated among Managers guided by fundamental research relative to hedging or 
arbitrage strategies. Thus, Form SHO will provide novel information on short sale behavior relative to other 
short sale data sources. 
491
 FINRA requires all members to report settled short positions in equities of all customer and proprietary 
accounts twice per month. According to the schedule it has adopted, FINRA publishes the short sale data 
about a week after each reporting due date. See, e.g., Short Interest Reporting, available at 
https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest.  
492
 FINRA reports daily off-exchange short sale volume data that aggregate, for each exchange-listed security, 
short sale transactions reported to a FINRA TRF or ADF. See Short Sale Volume Data, FINRA, available 
at https://www.finra.org/finra-data/browse-catalog/short-sale-volume-data. Registered exchanges also 
report daily short sale volume aggregated at the security level, often charging a fee. See, e.g., TAQ Group 
Short Sales & Short Volume, New York Stock Exchange, available at https://www.nyse.com/market-
data/historical/taq-nyse-group-short-sales. 

171 
positions and short sale transactions meant for purposes such as liquidity provision or hedging of 
long positions. As such, these existing short volume data may not be combined with the 
bimonthly short interest data to construct aggregate daily short positions of any particular 
Manager. Securities lending data, bolstered by the recently adopted 17 CFR 240.10c-1a 
(“Exchange Act Rule 10c-1a”), will offer a clearer picture of the relationship between short 
interest and securities being lent;
493
 however, this does not allow the Commission or the public 
to observe and monitor large short positions of Managers.
494
 No existing data identify short 
positions of individual traders. Even though some regulatory data, e.g., CAT data, identify short 
transactions of individual traders, they may not be utilized to reconstruct short positions because 
economic short positions may change in the absence of any short sale transactions. Thus, the 
Commission is adding to the existing data sources to further illuminate the short selling 
market.
495
 
These data limitations inhibit regulators from performing functions such as market 
surveillance and market reconstruction. For example, the Commission does not have regular 
access to information about Managers who hold large short positions, even if those positions are 
held for a long period of time. If the positions are sufficiently large and prices move against the 
 
493
  Specifically, one will be able to look at a particular securities lending data to see if changes in short interest 
correspond to many smaller lending transactions or a smaller quantity of large securities loans, which may 
indicate market sentiment towards the particular company. However, it is impossible to discern whether 
these securities loans are being borrowed by numerous short sellers or instead concentrated among a small 
number of large short sellers. This information will be covered by Rule 13f-2 if the short seller(s) crosses 
the Report Thresholds. In addition, unlike FINRA short interest data, Rule 13f-2 data will incorporate 
Managers that are not FINRA members. Furthermore, while fees are required to access exchanges’ short 
volume and short transaction data, market participants will not have to pay a fee to view publicly released 
Form SHO data.  
494
  Unlike the Commission, however, the public will observe anonymized, aggregated data covering gross 
short sale positions of Managers that exceed at least one of the Reporting Thresholds.  
495
 One commenter stated that Form SHO data collected by the Commission would not fully capture the short 
selling market. See SBAI Letter at 3. The Commission has not stated that Form SHO data provides a 
complete perspective of the short selling market. However, Form SHO data will reveal large short positions 
of Managers, which is not readily available from any other data source. 

172 
positions, the Commission currently cannot efficiently assess the risk that these positions impose 
on the market more broadly.
496
 Further, with existing data, the Commission may have difficulty 
reconstructing significant market events, thereby inhibiting the Commission from quickly 
understanding market events and providing efficient market oversight.  
B. Baseline  
The baseline against which the costs, benefits, and the effects on efficiency, competition, 
and capital formation of the final rule are measured consists of the current state of the equity 
market, current practices of Managers and broker-dealers, and the current regulatory framework. 
The economic analysis considers existing regulatory requirements, including recently adopted 
rules, as part of its economic baseline against which the costs and benefits of the final rule are 
measured.
497
 
Several commenters requested the Commission consider interactions between the 
economic effects of the proposed rule and other recent Commission proposals.
498
 Commenters 
 
496
  See infra Part VIII.C.1 for discussion of how the Commission might use Form SHO data for understanding 
market events. 
497
  See, e.g., Nasdaq v. SEC, 34 F.4th 1105, 1111-15 (D.C. Cir. 2022). This approach also follows SEC staff 
guidance on economic analysis for rulemaking. See Staff’s “Current Guidance on Economic Analysis in 
SEC Rulemaking” (March 16, 2012), available at 
https://www.sec.gov/divisions/riskfin/rsfi_guidance_econ_analy_secrulemaking.pdf (“The economic 
consequences of proposed rules (potential costs and benefits including effects on efficiency, competition, 
and capital formation) should be measured against a baseline, which is the best assessment of how the 
world would look in the absence of the proposed action.”); Id. at 7 (“The baseline includes both the 
economic attributes of the relevant market and the existing regulatory structure.”). The best assessment of 
how the world would look in the absence of the proposed or final action typically does not include recently 
proposed actions, because doing so would improperly assume the adoption of those proposed actions. 
498
  See, e.g., MFA Letter 2, at 3-4 (“We believe the Commission should take into account the sheer scope of 
all its recently proposed rules when determining whether to adopt any final rules or in setting compliance 
dates for any of the new requirements”); Eric J. Pan, President and CEO, and Susan Olson, General 
Counsel, Investment Company Institute (Aug. 17, 2023), at 3, available at 
https://www.sec.gov/comments/s7-04-22/s70422-246959-547222.pdf (“ICI Letter 2”) (“we request that the 
Commission . . . publish a thorough analysis of the cumulative effects of the Interconnected Rules that 
accounts for interconnections and dependencies among them”).  

173 
indicated there could be interactions between this rulemaking and five proposals
499
 that have 
since been adopted: Rule 10c-1a,
500
 Beneficial Ownership Reporting,
501
 Private Fund 
 
499
  Reporting of Securities Loans, Release No. 34-93613 (Nov. 18, 2021), 86 FR 69802 (Dec. 8, 2021) (see Jiří 
Król, Deputy CEO, Global Head of Government Affairs, Alternative Investment Management Association 
Ltd (Aug. 11, 2023), at 4, available at https://www.sec.gov/comments/s7-08-22/s70822-243880-
514482.pdf) (“AIMA Letter 2”); Modernization of Beneficial Ownership Reporting, Release No. 33-11030 
(Feb. 10, 2022), 87 FR 13846 (Mar. 10, 2022) (see MFA Letter 2, at 3; Jennifer Han, Executive Vice 
President, Chief Counsel and Head of Regulatory Affairs, Managed Funds Association, and National 
Association of Private Fund Managers (July 21, 2023), at 14-15, available at 
https://www.sec.gov/comments/s7-08-22/s70822-233179-486723.pdf) (“NAPFM Letter”); ICI Letter 2, at 
7 n. 13); Amendments to Form PF to Require Current Reporting and Amend Reporting Requirements for 
Large Private Equity Advisers and Large Liquidity Fund Advisers, Release No. IA-5950 (Jan. 26, 2022), 87 
FR 9106 (Feb. 17, 2022) (see MFA Letter 2, at 3; NAPFM Letter 10-12); Private Fund Advisers; 
Documentation of Registered Investment Adviser Compliance Reviews, Release No. IA-5955 (Feb. 9, 
2022), 87 FR 16886 (Mar. 24, 2022) (see MFA Letter 2, at 3; NAPFM Letter 10-12); Shortening the 
Securities Transaction Settlement Cycle, Release No. 34-94196 (Feb. 9, 2022), 87 FR 10436 (Feb. 24, 
2022) (see ICI Letter 2 at 7 n. 13).  
500
  See Reporting of Securities Loans, Release No. 34-98737 (Oct. 13, 2023) (“Rule 10c-1a”). The securities 
loan reporting rule requires any person who loans a security on behalf of itself or another person to report 
information about securities loans to a registered national securities association (namely, FINRA) and 
requires FINRA to make certain information it receives available to the public. The covered persons will 
include market intermediaries, securities lenders, broker-dealers, and reporting agents. The final rule’s 
compliance dates require that FINRA propose its rules within four months of the effective date of final 
Rule 10c-1a, or approximately May 2024, and finalize them no later than 12 months after the effective date 
of final Rule 10c-1a, or approximately January 2025; that FINRA implement data retention and availability 
requirements for reporting 24 months after the effective date of final Rule 10c-1a, or approximately 
January 2026; that covered persons report Rule 10c-1a information to FINRA starting on the first business 
day thereafter; and that FINRA publicly report Rule 10c-1a information within 90 calendar days thereafter, 
or approximately May 2026. See Rule 10c-1a, Part VIII. 
501
  See Modernization of Beneficial Ownership Reporting, Release No. 33-11253 (Oct. 10, 2023) (“Beneficial 
Ownership Reporting”). Among other things, the amendments generally shorten the filing deadlines for 
initial and amended beneficial ownership reports filed on Schedules 13D and 13G, and require that 
Schedule 13D and 13G filings be made using a structured, machine-readable data language. The new 
disclosure requirements and filing deadlines for Schedule 13D are effective 90 days after publication in the 
Federal Register. The new filing deadline for Schedule 13G takes effect on September 30, 2024, and the 
rule’s structured data requirements have a one-year implementation period ending December 18, 2024. See 
Beneficial Ownership Reporting, Part II.G. 

174 
Advisers,
502
 Settlement Cycle,
503
 and the May 2023 SEC Form PF Amending Release.
504
 These 
rules were not included as part of the baseline in the Proposing Release because they were not 
adopted at that time. In response to commenters, this economic analysis considers potential 
economic effects arising from any overlap between the compliance period for the final 
amendments and each of these recently adopted rules.
505
 
 
502
  See Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews, Release 
No. IA-6383 (Aug. 23, 2023), 88 FR 63206 (Sept. 14, 2023) (“Private Fund Advisers Adopting Release”). 
The Private Fund Advisers Adopting Release includes new rules designed to protect investors who directly 
or indirectly invest in private funds by increasing visibility into certain practices and restricting other 
practices, along with amendments to the Advisers Act books and records rule and compliance rule. The 
amended Advisers Act compliance provision for registered investment advisers has a November 13, 2023 
compliance date. The compliance date is March 14, 2025 for the rule’s quarterly statement and audit 
requirements for registered investment advisers with private fund clients. For the rule’s adviser-led 
secondaries, restricted activity, and preferential treatment requirements, the compliance date is September 
14, 2024 for larger advisers and March 14, 2025 for smaller advisers. See Private Fund Advisers Adopting 
Release, Parts IV, VI.C.1. 
503
  See Settlement Cycle Adopting Release. Settlement Cycle Adopting Release shortens the standard 
settlement cycle for most broker-dealer transactions from two business days after the trade date to one 
business day after the trade date (“T+1”). With certain exceptions, the rule has a compliance date of May 
28, 2024. See Settlement Cycle Adopting Release, Parts VII, VII.B.3. 
504
  See Form PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers; 
Requirements for Large Private Equity Fund Adviser Reporting, Release No. IA-6297 (May 3, 2023), 88 
FR 38146 (June 12, 2023) (“May 2023 SEC Form PF Amending Release”). The Form PF amendments 
require large hedge fund advisers and all private equity fund advisers to file reports upon the occurrence of 
certain reporting events. For new sections 5 and 6 of Form PF, the compliance date is December 11, 2023; 
for the amended, existing sections, it is June 11, 2024. See May 2023 SEC Form PF Amending Release, 
Part II.E. 
505
  In addition, commenters indicated there could also be overlapping compliance costs between the final 
amendments and proposals (or in the case of Release No. 34-93784, a portion of the proposal) that have not 
been adopted. Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, 
and Business Development Companies, Release No. 33-11028 (Feb. 9, 2022), 87 FR 13524 (Mar. 9, 2022) 
(see MFA Letter 2, at 3; NAPFM Letter 18-19); Outsourcing by Investment Advisers, Release No. IA-6176 
(Oct. 26, 2022), 87 FR 68816 (Nov. 16, 2022) (see MFA Letter 2, at 3; NAPFM Letter 17-18); Enhanced 
Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and 
Governance Investment Practices, Release No. 33-11068 (May 25, 2022), 87 FR 36654 (June 17, 2022) 
(see MFA Letter 2, at 3; NAPFM Letter 19-20); Safeguarding Advisory Client Assets, Release No. IA-6240 
(Feb. 15, 2023), 88 FR 14672 (Mar. 9, 2023) (see MFA Letter 2, at 3; NAPFM Letter 9-10); Prohibition 
Against Fraud, Manipulation, or Deception in Connection With Security-Based Swaps; Prohibition Against 
Undue Influence Over Chief Compliance Officers; Position Reporting of Large Security-Based Swap 
Positions, Release No. 34-93784 (Dec. 15, 2021), 87 FR 6652 (Feb. 4, 2022) (see MFA Letter 2, at 3; 
NAPFM Letter 13-14; AIMA Letter 2, at 3; ICI Letter 2, at 7 n. 13); Prohibition Against Conflicts of 
Interest in Certain Securitizations, Release No. 33-11151 (Jan. 25, 2023), 88 FR 9678 (Feb. 14, 2023) (see 
MFA Letter 2, at 3; NAPFM Letter at 21-22); Further Definition of “As a Part of a Regular Business” in 
the Definition of Dealer and Government Securities Dealer, Release No. 34-94524 (Mar. 28, 2022), 87 FR 
23054 (Apr. 18, 2022) (see NAPFM Letter 12-13); Standards for Covered Clearing Agencies for U.S. 
 

175 
1. Institutional Investment Managers 
The potential universe of persons who meet the definition of Manager is broad and 
diverse. Exchange Act section 13(f)(6)(A) defines the term “institutional investment manager” as 
“includ[ing] any person, other than a natural person, investing in or buying and selling securities 
for its own account, and any person exercising investment discretion with respect to the account 
of any other person.”
506
 Exchange Act section 3(a)(9) states that “[t]he term ‘person’ means a 
natural person, company, government, or political subdivision, agency, or instrumentality of a 
government.” “‘Company’ means a corporation, a partnership, an association, a joint-stock 
company, a trust, a fund, or any organized group of persons whether incorporated or not; or any 
receiver, trustee in a case under title 11 of the United States Code or similar official or any 
liquidating agent for any of the foregoing, in his capacity as such.”
  507
 As a result, Managers 
exercising discretion over the accounts of others include but are not limited to investment 
advisers exercising investment discretion over client assets, including investment company assets 
such as mutual funds, ETFs, and closed-end funds; banks and bank trust corporations offering 
investment management services; pension fund managers; firms, including broker-dealers and 
insurance companies, managing corporate or employee investment assets; and individuals 
exercising investment discretion over the accounts of others. Also, as a result of the definition of 
 
Treasury Securities and Application of the Broker-Dealer Customer Protection Rule With Respect to U.S. 
Treasury Securities, Release No. 34-95763 (Sept. 14, 2022), 87 FR 64610 (Oct. 25, 2022) (see NAPFM 
Letter 16-17); Amendments Regarding the Definition of “Exchange” and Alternative Trading Systems 
(ATSs) That Trade U.S. Treasury and Agency Securities, National Market System (NMS) Stocks, and Other 
Securities, Release No. 34-94062 (Jan. 26, 2022), 87 FR 15496 (Mar. 18, 2022) (see NAPFM Letter 22-
23). To the extent those proposals are adopted, the baseline in those subsequent rulemakings will reflect the 
existing regulatory requirements at that time. 
 
506
  See also Exchange Act section 3(a)(35) defining when a person exercises “investment discretion” with 
respect to an account.  
507
  See section 2(a)(8) of the Investment Company Act. The term “company” in the Exchange Act “ha[s] the 
same meaning[] as in the Investment Company Act of 1940.” Exchange Act section 3(a)(19). 

176 
Manager, the set of Managers excludes natural persons buying and selling securities only for 
their own account but does include natural persons exercising discretion over the account of 
another person.
508
 
Notwithstanding the broad statutory definition of Manager, it is the Commission’s 
understanding that only a fraction of Managers is believed to engage in short selling and fewer 
still engage in any substantial short selling. Registered broker-dealers’ market making 
operations, for example, engage in short selling but, with the exception of option market makers, 
generally do not hold large positions overnight. The Commission is also aware, for example, that 
advisers to both hedge funds and registered investment companies engage in short selling to 
varying degrees. However, with the exception of hedge funds, institutional investors are viewed 
as “largely absent” from the short selling portion of the financial markets.
509
 Using actual 
investment strategies employed by registered investment companies
510
 as a proxy for the number 
of Managers in the public fund markets engaged in short selling, the number of such Managers is 
 
508
  To the extent that a natural person exercising discretion over the account of another person has a short 
position exceeding the thresholds, that natural person would be subject to the costs associated with Rule 
13f-2 and the Form SHO. We expect such a natural person would likely use the fillable web form provided 
by EDGAR to input Form SHO disclosures. Few Managers that are natural persons would be likely to have 
short positions large enough to exceed the threshold. See infra Part VIII.C.6 for more information on 
Managers’ costs. 
509
 Peter Molk Frank Partnoy, Institutional Investors as Short Sellers?, 99 B.U. L. REV. 837, 839 (2019). Molk 
and Partnoy’s paper “identif[ies] the regulatory and other barriers that keep key categories of 
institutions, specifically, mutual funds, insurance companies, pension funds, banks, sovereign wealth funds, 
endowments, and foundations, from acquiring significant short positions.” Id. at 844. 
510
 As of Dec. 20212, there were 9,050 mutual funds (excluding money market funds) with approximately 
$22,652 billion in total net assets, 2,819 ETFs organized as an open-end fund or as a share-class of an 
open-end fund with approximately $5,910 billion in total net assets, 680 registered closed-end funds with 
approximately $363 billion in total net assets, 701 unit investment trusts with approximately $2,184 billion 
in total net assets, and 15 variable annuity separate accounts registered as management investment 
companies on Form N-3 with $237 billion in total net assets. Estimates of the number of registered 
investment companies and their total net assets are based on an analysis of Form N-CEN filings as of July 
31, 2023. For open-end management funds, closed-end funds, and management company separate 
accounts, total net assets equals the sum of monthly average net assets across all funds in the sample during 
the reporting period. See Item C.19.a (Form N-CEN). For UITs, we use the total assets as of the end of the 
reporting period, and for UITs with missing total assets information, we use the aggregated contract value 
for the reporting period instead. See Item F.11 and F.14.c in Form N-CEN. 

177 
likely to be relatively small. A Division of Economic and Risk Analysis White Paper survey of 
all mutual fund Form N-SAR filings in 2014 found that “[w]hile 64 percent of all funds were 
allowed to engage in short selling, only 5 percent of all funds actually did so.”
511
 As of 
December 2022, there were 7,164 registered investment companies with total equity positions 
valued at approximately $14.7 trillion. Of those, 138 funds had short positions with a total short 
position value of approximately $15 billion. Of the funds with short positions, only 15 funds held 
positions equal to or greater than $10 million.
512
 Additionally, according to an analysis of 
publicly available Form PF data, approximately sixteen percent of single-strategy hedge funds 
employ strategies involving short selling.
513
 
While information about Managers’ investments other than from funds managed by 
investment advisers is limited, the Commission understands that such other Managers, other than 
options market makers due to their routine use of hedging transactions, do not frequently 
establish short positions that would be large enough to be subject to the rule’s reporting 
requirement.
514
 O ne possible proxy for the number of Managers that might potentially have a 
 
511
 Daniel Deli et. al., Use of Derivatives By Registered Investment Companies at 8, DERA White Paper 
(2015), available at https://www.sec.gov/files/derivatives12-2015.pdf. 
512
 This is based on an analysis of data provided by registered investment companies to the Commission on 
Form N-PORT filings received through July 31, 2023. 
513
 As of 2022 Q4, there are 1,107 hedge funds out of 6,553 Equity Single-Strategy hedge funds (excluding 
fund-of-funds hedge funds) that employ short selling in an Long/Short and Short Bias strategy. Assets 
under management (AUM) in these types of hedge funds total approximately $1.165 trillion. 2022 Q2 
Private Fund Statistics, Division of Investment Management Analytics Office, available at 
https://www.sec.gov/divisions/investment/private-funds-statistics.shtml. Data includes both U.S. and non-
U.S. domicile hedge funds managed by SEC-registered investment advisers with at least $150 million in 
private fund assets under management. The data do not include hedge funds that were classified as multi-
strategy on Form PF. These hedge funds could employ short selling as part of their multi-strategy. Data for 
non-U.S. domicile hedge funds with an equity short-bias strategy is not publicly available for 2022 Q2. In 
this case the last publicly available values were used (7 funds with a total AUM of $1 billion) from 2019 
Q3. As of the end of 2021, hedge fund assets totaled approximately $4 trillion. Global Hedge Fund Industry 
Assets Top $4 Trillion for the First Time, Reuters (Jan. 20, 2022) (retrieved from Factiva database). 
514
  For example, according to Molk and Partnoy “insurance companies generally are not active short sellers. 
Short selling by insurance companies is used almost exclusively to hedge positions, and generally is not 
 

178 
reporting obligation is a fraction of the number of Managers reporting positions on Form 13F 
because such persons by definition manage accounts holding section 13(f) securities having an 
aggregate fair market value of at least $100 million, making such Managers more likely to have 
the resources to engage in short selling that exceeds Rule 13f-2’s thresholds.
 
As of March 31, 
2023, 8,551 Managers
515
 with investment discretion over approximately $38.79 trillion reported 
holdings on Form 13F in Section 13(f) securities.
516
 The Commission also believes that 
registered investment advisers, particularly those managing hedge funds, are the primary 
Managers likely to be affected by Rule 13f-2. Though the Commission lacks data to quantify the 
exact number affected parties, the Commission estimates that the total number of Managers with 
reporting obligations will be between 252 and 1,000.
517
 
2. Short selling 
Short selling is a widely used market practice, which allows investors to profit if an asset 
declines in value or to hedge risks. Market participants can build an economic short position 
using traditional means (i.e., borrowing shares and selling them into the market to buy back later) 
 
used with respect to equity positions at all.” Supra note 509, at 850. See also Molk and Partnoy discussion 
about banks and trusts. “Trust administrators ... have a history of adopting conservative investment 
strategies. Although shorting can be used to reduce risk when matched with similar long positions, using 
short selling as an income generation tool is not consistent with the overall conservative investment 
tradition.” Id. at 854. 
515
  A portion of these filings are Form 13Fs filed to declare that the filer’s holdings are reported on another 
filer’s Form 13F. Thus, not all 8,551 Managers’ Form 13Fs represent unique holdings. 
516
  The statistic is computed by the Commission from data filed on Form 13F.  
517
  See supra Part VII.B.1 for more information on the estimates of how many Managers would have reporting 
obligations. The Commission estimated the number of reporting Managers using the short sale activity of 
Managers that submitted Form SH. Only Managers that exercised investment discretion over accounts with 
aggregate fair market values of at least $100,000,000 in securities described in Rule 13f-1(c) under the 
Exchange Act, and effected short sales of those securities, were required to file Form SH. Given that 
Managers included in the Form SH data may be a subset of Managers with obligations under Rule 13f-2, 
the estimate of 252 Managers is likely lower than the number who will ultimately report Form SHO. 
However, the Commission lacks data to better estimate the universe of Managers with obligations under 
13f-2. See also infra Part VIII for a discussion of the applicability of Form SH data to estimating the 
number of Managers affected by Rule 13f-2. 

179 
or they can gain short exposure using derivatives. This section provides an overview of the 
current state of obtaining short exposure to equities and the different means of short selling – i.e., 
traditional means and using derivatives.  
a. Short Selling Equities 
A short sale is the sale of a security that the seller does not own or any sale that is 
consummated by the delivery of a security borrowed by, or for the account of, the seller.
518
 In 
general, short selling is used to profit from an expected downward price movement, to provide 
liquidity in response to unanticipated demand, or to hedge the risk of an economic long position 
in the same security or in a related security.
519
 To short sell a stock, the short seller borrows 
shares of a stock from a lender – typically a long-term investor such as a mutual fund or pension 
fund – and sells those shares into the market. Later, the short seller purchases the same number 
of shares and returns them to the lender. The profit on the transaction for the short seller is the 
difference between the price at which the shares were initially sold and the price at which the 
investor re-purchased the shares – less any fees such as securities lending fees. If the price of the 
stock goes down then this difference will be positive and the short seller will make money. Short 
selling contributes to price efficiency when short sellers trade to incorporate negative 
information into stock prices. 
In addition to short selling based on negative sentiment, market participants also short 
sell to hedge existing positions. Hedging is a particularly potent motive to short sell a stock for 
options market makers who can hedge the risk of writing a call option by short selling the 
underlying stock in the stock market. Other investors use short selling to hedge out an unwanted 
 
518
 See Rule 200(a) of Regulation SHO, 17 CFR 242.200(a). See also Regulation SHO Adopting Release. 
519
  One commenter supported this statement, stating that short selling provides liquidity and is an important 
hedging tool. See SBAI Letter at 2. 

180 
component of a stock’s return. For example, an investor who wants to buy a particular stock to 
trade on stock specific information but does not want to expose itself to industry risk can hedge 
industry risk by short selling an industry index ETF while purchasing the underlying security. 
Market makers also use short selling extensively to maintain two sided quotes in the temporary 
absence of inventory. Lastly, traders may use short selling as part of algorithmic trading 
strategies attempting to benefit from temporary pricing anomalies. While short selling to trade on 
information or to hedge generally results in short positions that are held for some time, registered 
broker-dealers engaged in market making operations and algorithmic technical traders generally 
close their positions by the end of the day and thus their short positions generally do not show up 
in existing measures of short interest.
520
 
Short selling generally entails more risk than holding a long position. At worst, a buyer of 
a long position can lose its entire investment. This is not true for a short seller. If the stock price 
increases from the short sale price, the investor loses money and since prices could potentially 
rise indefinitely, the short seller could lose more than the value of its original investment. 
Additionally, margin requirements for short selling are typically 150 percent – including the 
proceeds of the short sale plus an additional 50 percent of the value of the short position.
521
 If the 
stock price goes up, the investor may receive a margin call, which would require the investor to 
commit additional assets to meet margin requirements. To protect itself from losses, if an 
investor is unable to meet margin requirements, the broker-dealer may close the short position at 
a significant loss to the short seller. These dynamics can make it difficult for investors to 
maintain short positions in highly volatile stocks. 
 
520
 See infra Part VIII.B.4.i for a discussion of existing short interest data. 
521
  Regulation T specifies that in most situations margin requirements for equity short sales must be 150 %. 
See 12 CFR 220.12. 

181 
Short selling is facilitated by the securities lending market. Borrowing shares generally 
occurs two days after the short sale is executed. This is because stock market transactions 
normally settle two business days after the transaction occurs, while securities lending 
transactions settle on the same day.
522
 Consequently, a short seller (or its broker-dealer) will 
gauge the ability to borrow shares prior to executing the short sale, referred to as obtaining a 
“locate,” but would actually borrow the share on the day that it is required to deliver the share to 
settle the stock market transaction.  
Short selling is prevalent in equity markets in general. A common ratio used to capture 
the amount of short selling is the short interest ratio, which measures the fraction of shares sold 
short at a given point in time divided by the total shares outstanding for that security. Figure 1 
below presents the time series average for short interest outstanding for equities with different 
characteristics. This Figure shows that short interest tends to be higher for small-cap stocks than 
for mid- or large-cap stocks.
523
 
Another way to measure the prevalence of short selling in financial markets is by 
analyzing the fraction of transactions that involve a short seller. Short sellers are involved in 
nearly 50 percent of trading volume, while only about 2 percent of shares outstanding are held 
short in the U.S. equity markets.
524
 This average volume of short selling tends to be much higher 
than the typical changes in short interest,
525
 suggesting that a significant fraction of short selling 
 
522
  On Feb. 15, 2023, the Commission adopted a rule to shorten the settlement cycle to one business day; 
compliance by broker-dealers will be required as of May 28, 2024. See Settlement Cycle Adopting Release. 
523
  One commenter stated that biotechnology companies, 90% of which have market capitalizations that would 
qualify as small-cap or micro-cap stocks, face an outsized proportion of short positions. See infra note 593. 
524
 See DERA 417(a)(2) Study. Figure F.1 in the DERA 417(a)(2) Study (showing that the level of short 
selling as a percentage of trading volume grew from 2007 to 2013 to about 50 %). See also D. Rapach, M. 
C. Ringgenberg, and G. Zhou, Short Interest and Aggregate Stock Returns, J.
 OF FIN. ECON. 46-65 (2016). 
525
 The Commission analyzed trading volume for common shares during the year 2019. This analysis revealed 
that the average common share during this period traded approximately 5% of shares outstanding each 
 

182 
volume is reversed very quickly. Such short selling is indicative of the fact that short selling is a 
key component of modern market making strategies and technical algorithmic trading.
526
 
Figure 1: Short Interest Ratio for Non-Financial Common Stocks, Jan. 2005 – Feb. 2023 
 
This figure plots the weighted average short interest ratio for three groups of stocks based on market capitalization 
on a bi-weekly basis from for January 2005 to April 2023. Large cap stocks are defined as having a market 
capitalization of greater than $10 billion, mid cap as $2 billion to less than $10 billion, and small cap as less than $2 
billion. We estimate the short interest ratio for each stock as the number of shares in short interest reported by the 
exchanges on a bi-weekly basis and obtained from the Compustat North America Supplemental Short Interest File 
(for NYSE-  and Nasdaq-listed stocks), divided by shares outstanding obtained from the Center for Research in 
Security Prices, LLC (CRSP) daily stock files. Since short interest is reported as of the settlement date, we match 
short interest to the trading date two days prior to the short interest report date. The sample includes non-financial 
(i.e., excluding stocks with SIC code between 6000 and 6999) and common stocks (i.e., CRSP share code of 10 or 
 
week, with approximately half of all trades involving short sellers. Consequently, total short selling volume 
amounts to approximately 5% of shares outstanding every two weeks for a typical stock. In contrast, from 
2015 through 2019, absolute changes in short interest approximately every two weeks have equaled about a 
half of a percent of shares outstanding. Thus, the total amount of short selling volume occurring is an order 
of magnitude larger than the changes in short interest over the same time period. These statistics suggest 
that the majority of short selling transactions likely do not involve long term traders building short 
positions. Additionally, the correlation coefficient for bimonthly changes in short interest and short selling 
volume in 2019 is only about 0.018. This low correlation suggests that the economic forces driving total 
short selling volume and changes in short interest are likely different.  
526
 See infra Part VIII.C.3 for a more detailed discussion of short selling and liquidity provision. 

183 
11). Following Blocher & Ringgenberg (2019), we discard stocks whose short interest ratio and adjusted short 
interest ratio (where the adjusted short ratio is adjusted for stock splits, buybacks, etc.) differ by more than 10%, in 
order to exclude potential asynchronous adjustments for stock splits in the shares outstanding and short interest 
datasets. Furthermore, stock-date observations for which a stock has multiple gvkey’s (Compustat identifier) or 
permno’s (CRSP identifier) per date are removed. We then take the value-weighted average short interest ratio 
within a group, using market capitalization as weights. Market capitalization is calculated as shares outstanding 
multiplied by the closing price (obtained from the CRSP daily stock files) two days prior to the short interest record 
date. S&P 500 values are obtained from the CRSP Index file. See Jesse Blocher, Matthew C. Ringgenberg, et al., 
When Do Short Sellers Exit Their Positions?, SSRN (Aug. 27, 2018), available at 
https://ssrn.com/abstract=2634579. 
 
b. Taking Short Positions via Derivatives 
Trading in derivatives affects short selling in two key ways. First, derivatives offer 
investors an alternative means to express negative sentiment rather than short selling the stock. 
For instance, an investor wishing to profit from the decline of a security’s value can also trade in 
various derivative contracts, including options and security-based swaps. Providing evidence of 
this alternative means of short selling, academic research shows that investors do indeed use 
options as an alternative means to obtain short-like economic exposure when standard short 
selling is restricted.
527
 
Among the most popular derivative contracts are options, specifically put and call 
options. Call options give the owner of the option the right but not the obligation to purchase a 
stock at a specific price on a future date. Put options are similar but give the owner of the option 
the right but not the obligation to sell a stock at a specific price at a future date. In a put option 
the seller of the option is taking a long position in the underlying security while the purchaser of 
the put is taking a short position. The opposite is true for a call option. 
 
527
 See Robert Battalio and Paul Schultz, Regulatory Uncertainty and Market Liquidity: The 2008 Short Sale 
Ban's Impact on Equity Option Markets, 66 J. OF FIN.  2013-2053 (2011); B.D. Grundy, B. Lim, and P. 
Verwijmeren, Do Option Markets Undo Restrictions on Short Sales? Evidence from the 2008 Short-Sale 
Ban, 106 J. OF FIN. ECON. 331-348 (2012). See also G.J. Jiang, Y. Shimizu, and C. Strong, Back to the 
Futures: When Short Selling is Banned (2019), available at 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3420275.  

184 
In addition to options, convertible securities (in which the security can be converted into 
an equity security) and security-based swaps can be used to create the same economic exposure 
as a short position.
528
 Convertible debt securities offer the owner a stream of payments and the 
ability to convert the security into equity should the owner’s strategy deem this beneficial.
529
 
Security-based swaps include total-return swaps in which two counterparties agree to exchange 
or “swap” payment with each other as a result of changes in a security characteristic, such as its 
price.
530
 As with options, in each of these derivative contracts one party is inherently long and 
the other party is inherently short. These derivatives, and other more exotic derivatives, tend not 
to be as standardized as options, and are traded over-the-counter. Security-based swap 
transactions are reported to and publicly disseminated by security-based swap data 
repositories.
531
 
In addition to providing an alternative means of expressing a bearish sentiment, trading in 
derivatives frequently leads to related trading in the stock market as derivatives’ counterparties 
 
528
 On Sept. 19, 2019, the Commission approved the “Recordkeeping and Reporting Requirements for 
Security-Based Swap Dealers, Major Security-based Swap Participants, and Broker-Dealers” which 
established a regulatory regime for security-based swaps under Title VII of the Dodd-Frank Act. See 
Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap 
Participants, and Broker-Dealers, Exchange Act Release No. 87005 (Sept. 19, 2019), 84 FR 68550 (Dec. 
16, 2019), available at https://www.sec.gov/rules/final/2019/34-87005.pdf. 
529
  Convertible debt securities are also employed in hedging strategies whereby the equity is sold short while 
the convertible security of that equity is held long. 
530
 On July 9, 2012, the Commission approved rules and definitions of Security based swaps. See 17 CFR parts 
230, 240, and 241; Further Definition of “Swap,” “Security-Based Swap,” and “Security-Based Swap 
Agreement”; Mixed Swaps; Security-Based Swap Agreement Recordkeeping, Commodity Futures Trading 
Commission and Securities and Exchange Commission, 77 FR 48208 (Aug. 13, 2012), available at 
https://www.sec.gov/rules/final/2012/33-9338.pdf.  
531
  See, e.g., 2015 Regulation SBSR Adopting Release, supra note 97; Security-Based Swap Data Repository 
Registration, Duties, and Core Principles, Exchange Act Release No. 74246 (Feb. 11, 2015), 80 FR 14437 
(Mar. 19, 2015); Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, 
Exchange Act Release No. 78321 (July 14, 2016), 81 FR 53545 (Aug. 12, 2016) (“2016 Regulation SBSR 
Adopting Release”). See also Order Approving Application for Registration as a Security-Based Swap 
Data Repository, 86 FR 8977 (Feb. 10, 2021), available at https://www.sec.gov/rules/other/2021/34-
91798.pdf.  

185 
seek to hedge their risk. For example, an options market maker who sells a put has taken on long 
exposure to the underlying security and may hedge this position by opening a short position in 
the underlying security. Thus, option market makers who sell large quantities of put options may 
amass large short positions in the underlying equities to hedge their options exposure.  
3. Current Short Selling Regulations 
The Commission adopted Regulation SHO
532
 to update short sale regulation in light of 
numerous market developments since short sale regulation was first adopted in 1938 and to 
address concerns regarding persistent failures to deliver and potentially abusive “naked” short 
selling.
533
 
In adopting Regulation SHO, the Commission recognized that short sales can provide 
important pricing information
534
 and liquidity to the market.
535
 However, the Commission was 
also concerned with the negative effect that failures to deliver may have on shareholders and the 
markets. For example, large and persistent failures to deliver may deprive shareholders of the 
benefits of ownership, such as voting and lending, and sellers that fail to deliver securities on 
 
532
 See Regulation SHO Adopting Release. 
533
 In a “naked” short sale, the seller does not borrow or arrange to borrow the securities in time to make 
delivery to the buyer within the standard two-day settlement cycle. As a result, the seller fails to deliver 
securities to the buyer when delivery is due (also known as a “failure to deliver”). 
534
 Efficient markets require that prices fully reflect all buy and sell interest. Market participants who believe a 
stock is overvalued may engage in short sales in an attempt to profit from a perceived divergence of prices 
from true economic values. Such short sellers add to stock pricing efficiency because their transactions 
inform the market of their evaluation of future stock price performance. This evaluation is reflected in the 
resulting market price of the security. See Exchange Act Release No. 48709 (Oct. 28, 2003), 68 FR 62972 
(Nov. 6, 2003), available at https://www.sec.gov/rules/proposed/34-48709.htm#P179_15857.  
535
 Market liquidity is generally provided through short selling by market professionals, such as market 
makers, who offset temporary imbalances in the buying and selling interest for securities. Short sales 
effected in the market add to the selling interest of stock available to purchasers, and reduce the risk that 
the price paid by investors is artificially high due to a temporary contraction of selling interest. Short sellers 
covering their sales also may add to the buying interest of stock available to sellers. See Exchange Act 
Release No. 48709 (Oct. 28, 2003), 68 FR 62972 (Nov. 6, 2003), available at 
https://www.sec.gov/rules/proposed/34-48709.htm#P179_15857.  

186 
settlement date may attempt to use their failures to engage in trading activities to improperly 
depress the price of a security. 
Due to continued concerns regarding failures to deliver, and to promote market stability 
and preserve investor confidence, the Commission has amended Regulation SHO on several 
occasions. For example, the Commission eliminated certain original exceptions to Regulation 
SHO’s close-out requirements,
536
 strengthened those same close-out requirements by adopting 
Rule 204,
537
 and reintroduced a short sale price test restriction by adopting Rule 201.
538
 In 
addition, the Commission adopted a targeted antifraud rule, Rule 10b-21, to further address 
failures to deliver in securities that have been associated with “naked” short selling.
539
 
 
536
 As initially adopted, Regulation SHO included two major exceptions to its then existing close out 
requirements: the “grandfather” provision and the “options market maker” exception. Due to continued 
concerns regarding failures to deliver, and the fact that the Commission continued to observe certain 
securities with failures to deliver that were not being closed out consistent with its then existing close out 
requirements, the Commission eliminated the “grandfather” provision in 2007 and the “options market 
maker” exception in 2008. See Exchange Act Release No. 56212 (Aug. 7, 2007), 72 FR 45544 (Aug. 14, 
2007) (eliminating the “grandfather” provision to Regulation SHO’s close out requirement), available at 
https://www.sec.gov/rules/final/2007/34-56212fr.pdf; Exchange Act Release No. 58775 (Oct. 14, 2008), 73 
FR 61690 (Oct. 17, 2008) (eliminating the “options market maker” exception to Regulation SHO’s close 
out requirement), available at https://www.sec.gov/rules/final/2008/34-58775fr.pdf. 
537
 In 2008, the Commission adopted 17 CFR 242.204T (“temporary Rule 204T”), and in 2009 adopted Rule 
204. Rule 204 further strengthens Regulation SHO’s close out requirements by making those requirements 
applicable to failing to deliver results from sales of all equity securities, while reducing the time-frame 
within which failures to deliver must be closed out. See Exchange Act Release No. 60388 (July 27, 2009), 
74 FR 38266 (July 31, 2009), available at https://www.sec.gov/rules/final/2009/34-60388fr.pdf. 
538
 In 2004, the Commission initiated a year-long pilot to study the removal of short sale price tests for 
approximately one-third of the largest stocks. After review of the pilot’s data, the Commission proposed the 
elimination of all short sale price tests. In June 2007, the Commission adopted a rule that eliminated all 
short sale price tests, including Rule 10a-1, a predecessor to Regulation SHO. The rule became effective in 
July 2007. In 2010, the Commission reinstituted a short sale price test restriction by adopting Rule 201. See 
Exchange Act Release No. 61595 (Feb. 26, 2010), 75 FR 11232 (Mar. 10, 2010), available at 
https://www.sec.gov/rules/final/2010/34-61595fr.pdf. 
539
 Rule 10b-21 is an antifraud provision that supplements existing antifraud rules, including 17 CFR 240.10b-
5 (“Rule 10b-5”), and was adopted to further evidence the liability of short sellers. Specifically, Rule 10b-
21 applies to short sellers, including broker-dealers acting for their own accounts, who deceive specified 
persons about their intention or ability to deliver securities in time for settlement, while failing to deliver 
securities by settlement date. Among other things, the rule highlights the specific liability of short sellers 
who deceive their broker-dealers about their source of borrowable shares for purposes of complying with 
Regulation SHO’s locate requirement, or who misrepresent to their broker-dealers that they own the shares 
being sold and subsequently fail to deliver shares. See supra note 14, available at 
https://www.sec.gov/rules/final/2008/34-58774.pdf. 

187 
Regulation SHO requires broker-dealers to properly mark sale orders as “long,” “short,” 
or “short exempt,” to locate a source of shares prior to effecting a short sale (also known as the 
locate requirement), and to close out failures to deliver that result from long or short sales. In 
addition, if the price of an equity security has experienced significant downward price pressure, 
Regulation SHO temporarily restricts the price at which short sales may be effected.  
Regulation SHO imposes certain recordkeeping obligations on broker-dealers. However, 
the Commission does not have market-wide information on how often the bona fide market 
making exception is used. Furthermore, bona fide market making information is not reported on 
a regular basis, instead the Commission must request bona fide market making records on a 
broker-dealer by broker-dealer basis.
540
 
In addition, regulations currently do not require market participants to record, report, or 
track when short sellers “buy to cover” their short sales. This makes it difficult for regulators to 
assess compliance with Rule 105 and with close out requirements in Rule 204. 
4. Existing short selling data 
There are several sources of short selling data that are available both publicly and for 
regulatory purposes. In general, these data sources lack information about levels of and the 
timing of changes in economic short positions for specific Managers in specific securities. Some 
sources report aggregate short positions at the security level, but their content is not granular 
enough to further the understanding of short selling strategies. Other sources provide granular 
short volume information, but they are unable to distinguish short transactions that impact short 
positions from those that do not and do not contain all activity that can change short positions. 
 
540
 See supra Part IV.B for a discussion on the use of the bona fide market making locate exception. 

188 
Some regulatory data sources report short transactions at the individual investor level, but using 
these data to estimate short positions would be significantly inaccurate and inefficient.  
a. Bimonthly Short Interest Data 
One of the primary data sources for aggregate short selling data is the bimonthly short 
interest data collected by FINRA.
541
 FINRA collects aggregate short interest information in 
individual securities on a bimonthly basis as the total number of shares sold short in a given 
stock as of the middle and end of each month. Then the exchange that lists the given stock, or 
FINRA itself in the case of OTC stocks, distributes the collected data.
542
 FINRA computes short 
interest using information it receives from its broker-dealer members pursuant to FINRA Rule 
4560 reflecting all trades cleared through clearing broker-dealers.
543
 FINRA Rule 4560 requires 
generally that broker-dealers that are FINRA members report “short positions” in customer and 
proprietary firm accounts in all equity securities twice a month through FINRA’s web-based 
Regulation Filing Applications (RFA) system.
544
 FINRA defines “short positions” for this 
purpose simply as those resulting from “short sales” as defined in Rule 200(a) of Regulation 
SHO under the Exchange Act.
545
 Member firms must report their short positions to FINRA 
 
541
 See DERA 417(a)(2) Study at 17-18, supra note 6. 
542
 See Short Interest – What It Is, What It Is Not, FINRA INV’R INSIGHTS (Apr. 12, 2021), available at 
https://www.finra.org/investors/insights/short-interest.  
543
 Id. (Short interest for a listed security at any date reported by FINRA is “a snapshot of the total open short 
positions in a security existing on the books and records of brokerage firms on a given date.”). 
544
 FINRA Rule 4560 excludes short sales in “restricted equity securities,” as defined in Securities Act Rule 
144, from the reporting requirement. 
545
 See FINRA Rule 4560(b)(1). 

189 
regardless of position size.
546
 The process of gathering and validating short interest data takes 
approximately two weeks.
547
 Thus the data are available with approximately a two week lag. 
FINRA short interest data are widely available and are used by academics and other 
market participants.
548
 Furthermore, these short interest data are found to predict future stock and 
market returns over the monthly and annual horizons, suggesting that the bimonthly short interest 
data capture the economic short selling based on fundamental research.
549
 However, these data 
face two major limitations. First, the information does not provide insight into the timing with 
which short positions are established or covered over the two-week reporting period. This 
precludes the possibility of understanding the behavior of aggregate economic short selling in the 
two weeks leading up to the reporting date.
550
 Second, given that short interest is aggregated at 
the security-level, the aggregation does not provide an understanding of certain aspects of the 
underlying short selling activity. For example, the data cannot inform on whether short sentiment 
is broadly or narrowly held or held by persons with larger positions. The data also does not 
inform on the extent to which short interest has been hedged.     
 
546
 See FINRA Market Regulation Department, General for Short Interest Reporting Instructions (Dec. 18, 
2008) (reporting instructions to FINRA member firms), available at 
https://www.finra.org/Industry/Compliance/RegulatoryFilings/ShortInterestReporting/P037072.  
547
 See DERA 417(a)(2) Study at 17-18, supra note 6. 
548 
See supra note 491. FINRA and the listing exchanges make these data publicly available with biweekly 
updates. 
549
 See, e.g., Peter N. Dixon and Eric K. Kelley, Business Cycle Variation in Short Selling Strategies: Picking 
During Expansions and Timing During Recessions, 57(8) J.
 OF FIN. AND QUANTITATIVE ANALYSIS 3018-
3047 (2022); see also Ekkehart Boehmer, Zsuzsa R. Huszar, and Bradford D. Jordan, The Good News in 
Short Interest, 96 (1) Journal of Financial Economics 80-97 (2010); Stephen Figlewski, The Informational 
Effects of Restrictions on Short Sales: Some Empirical Evidence, 16 (4) J. OF FIN. AND QUANTITATIVE 
ANALYSIS 463-476 (1981). 
550
  For example, the public will not have information on stock-specific volatility in real-time that may relate to 
short selling of the particular stock. Such volatility may be explained, though only through assumption, 
once the bimonthly short interest data becomes available. Assumption is necessary because the data are still 
not at the daily level. 

190 
b. Short Selling Volume and Transactions from SROs 
Since 2009, many SROs have been publishing two short selling data sets, including same 
day publication of daily aggregated short sale volume in individual securities
551
 and publication 
of short sale transaction information on no more than a two-month delay.
552
 Some SROs make 
the historical daily short volume data available to market participants for a fee.
553
 The fact that 
market participants and academic users pay these subscription fees indicate that these data are 
utilized. In addition to these daily short volume data, several SROs provide intraday short sale 
transaction information for the orders that execute on their respective venues. As an example, 
FINRA provides information from FINRA’s Trade Reporting Facility (“TRF”) and Alternative 
Display Facility (“ADF”)
554
 (the TRF and ADF are together referred to herein as “FINRA’s 
 
551
 See Short Sale Volume and Transaction Data, available at 
https://www.sec.gov/answers/shortsalevolume.htm (showing hyperlinks to the websites where SROs 
publish this data). See also supra note 492. See, e.g., FINRA’s Daily Short Sale Volume Files (which 
provide aggregated volume by security on all short sale trades executed and reported to a FINRA reporting 
facility during normal market hours). See FINRA Information Notice, Publication of Daily and Monthly 
Short Sale Reports (Sept. 29, 2009), available at 
https://www.finra.org/sites/default/files/NoticeDocument/p120044.pdf. 
552
 See FINRA’s Monthly Short Sale Transaction Files (which provide detailed trade activity of all short sale 
trades reported to a consolidated tape. See supra note 492. See also Short Sale Volume and Transaction 
Data, available at https://www.sec.gov/answers/shortsalevolume.htm. Additional transaction data has been 
available at various times, including transaction data from the Regulation SHO Pilot, which has been 
discontinued by most exchanges in July 2007 when the uptick rule was removed. See Exchange Act 
Release No. 55970 (June 28, 2007), 72 FR 36348 (July 3, 2007), available at 
https://www.sec.gov/rules/final/2007/34-55970.pdf. The Pilot data comprised short selling records 
available from each of nine markets: American Stock Exchange, Archipelago Exchange, Boston Stock 
Exchange, Chicago Stock Exchange, NASD, Nasdaq Stock Market, New York Stock Exchange, National 
Stock Exchange, and the Philadelphia Stock Exchange. See SEC Division of Trading and Markets, 
Regulation SHO Pilot Data FAQ, available at https://www.sec.gov/spotlight/shopilot.htm#pilotfaq. 
553
 See, e.g., TAQ Group Short Sale & Short Volume, New York Stock Exchange, available at 
https://www.nyse.com/market-data/historical/taq-nyse-group-short-sales (for short sale data relating to all 
NYSE owned exchanges). See Short Sale Volume and Transaction Reports from Nasdaq Trader, available 
at https://nasdaqtrader.com/Trader.aspx?id=shortsale (for short sale data for Nasdaq exchanges); see also 
Short Sale Daily Reports, Chicago Board Options Exchange (for Cboe exchanges), available at 
https://datashop.cboe.com/us-equity-short-volume-and-trades.  
554
 Each TRF provides FINRA members with a mechanism for the public reporting of transactions effected 
otherwise than on an exchange. See FINRA, Market Transparency Trade Reporting Facility, available at 
https://www.finra.org/Industry/Compliance/MarketTransparency/TRF/.  

191 
Reporting Facilities”). Overall, these different sources of daily and intraday short volume data 
provide greater, though different, levels of granularity relative to the bimonthly short interest 
observations discussed earlier. 
Despite offering higher granularity than bimonthly short interest data, these existing short 
volume data provided by the SROs, including FINRA, have a number of limitations. First, the 
data do not provide insight into the activities of either individual traders, or different trader types. 
Consequently, it is not possible with existing short selling data provided by the SROs to separate 
trading volume associated with market makers, algorithmic traders, investment managers, or 
other trader types. Form SHO will address this limitation by providing data on the gross short 
sale positions and activity of investment managers with large short sale positions. 
Additionally, the data do not provide insight into activities that may reduce exposure, 
making the use of these data to estimate investor sentiment fraught with potential bias. 
Moreover, these data provide information only on short sales, whereas short positions could also 
change because investors can increase or decrease their positions in ways other than short selling 
the stock. For example, investors can increase their short positions by exercising put options and 
delivering borrowed shares or by delivering borrowed shares when they are assigned call 
options. Investors can reduce their short positions in an equity when they, for example, “buy to 
cover” their positions, purchase shares in a secondary offering,
555
 convert bonds to stock, or 
redeem ETF shares containing the equity. As a result, the short selling volume and transactions 
data cannot easily explain changes in short interest, exposing a gap between these two types of 
existing data. 
 
555
  See supra note 285. 

192 
Aggregate short selling statistics and short selling transactions data have different lags 
with which they are available. Aggregate short selling volume statistics are usually made 
available by the SROs by the end of the following business day. For the transactions data, the lag 
can be much longer, and in some cases the data are released with a one-month lag – implying 
that some short selling transactions data are not available for two months.
556
 
There is also a concern that these data may over-represent the total volume of short sales 
occurring in the market. This is because Regulation SHO provides specific criteria regarding 
what is a long sale.
557
 If a market participant is unclear whether its trade will meet all the 
requirements at settlement to be marked a long sale, then it may choose to mark the trade as short 
to not run afoul of Regulation SHO requirements, even if the trade is likely an economic long 
sale.
558
  
c. Securities Lending 
Securities lending data provide information on stock loan volume, lending costs, and the 
percentage of available stock out on loan. In the equity market, a primary reason for end 
borrowers to engage in a securities loan is to facilitate a short sale,
559
 leading to a close 
 
556
  For example, a short sale transaction that takes place in late June could be released in a dataset in the month 
of August.  
557
 See Rule 200(g) of Regulation SHO specifies when an order can be marked as long. See also Part IV.B; 
Regulation SHO Adopting Release. An economic long sale is a sale of an owned, not borrowed, security. 
558
 See 2009 letter from Securities Industry and Financial Markets Association (“SIFMA”) commenting on an 
alternative short sale price test, expressing concern that compliance with Regulation SHO short selling 
marking requirements “will result in a substantial over-marking of orders as “short” in situations where 
firms are, in fact, “long” the securities being sold.” Letter from Securities Industry and Financial Markets 
Association (“SIFMA Letter”), available at https://www.sec.gov/comments/s7-08-09/s70809-4654.pdf. 
559
  One reason for this is that the “permitted purpose requirement” of the Board of Governors of the Federal 
Reserve System’s Regulation T, which broadly governs the lending activities of broker-dealers, specifies 
that a broker dealer may generally borrow or lend U.S. securities from or to a (non-broker-dealer) customer 
solely “for the purpose of making delivery of the securities in the case of short sales, failure to receive 
securities required to be delivered, or other similar situations,” unless an exemption applies. See 12 CFR 
220.10(a).  

193 
correlation between information about certain loan volumes and short interest. Therefore, some 
market participants use securities lending data as a measure of short sale positions.
560
 Since the 
proposing release, the Commission has adopted Rule 10c-1a. Below, we describe the baseline 
securities lending data – commercial securities lending data as well as forthcoming Rule 10c-1a 
data.
561
 
 
i.  Commercial Securities Lending Data 
The securities lending industry appears to use commercial securities lending data 
widely,
562
 though these data are generally available only by subscription.
563
 The use of 
commercial security lending data as proxy for economic short interest has several limitations. 
These include the fact that commercial vendors of the securities lending data often impose access 
restrictions via give-to-get models. In addition, the data are not comprehensive and are based on 
voluntary contributions, which leads to self-selection bias. In this setting, the entities 
contributing data are mindful of whether other entities can access the data. As such, participation 
 
560
 Some research has used stock lending data as a proxy for actual short sales. See, e.g., Oliver Wyman, The 
Effects of Short Selling Public Disclosure of Individual Positions on Equity Markets, Alternative 
Investment Management Association (Feb. 2011), available at https://www.managedfunds.org/industry-
resources/industry-research/the-effects-of-short-selling-public-disclosure-of-individual-positions-on-
equity-markets/. 
561
  While the adoption of Rule 10c-1a occurred before the adoption of Rule 13f-2, and Rule 10c-1a has certain 
intermediate compliance dates related to FINRA rulemaking that precede Rule 13f-2 compliance dates, we 
expect that the reporting and publication of Rule 13f-2 information will occur before the reporting and 
publication of Rule 10c-1a information. See supra Part VI and infra note 585. Rule 10c-1a is thus part of 
the baseline for Rule 13f-2, but significant aspects of Rule 10c-1a will be implemented later. 
562
 Several commercial entities sell data on securities lending to clients. See, e.g., 2011 Letter from Data 
Explorers (hereafter “Data Explorers Letter”) in response to the request for comment relating to the 
proposed study of the cost and benefits of short selling required by Dodd Frank Act section 417(a)(2) 
available at https://www.sec.gov/comments/4-627/4627-152.pdf. As some commenters have stated, stock 
lending facilitates short selling. See, e.g., Speech by Chester Spatt, former Chief Economist of the SEC 
(Apr. 20, 2007), available at https://www.sec.gov/news/speech/2007/spch042007css.htm. The information 
sold by vendors may include volume of loans, lending costs, and the percentage of available stock out on 
loan. 
563
 See DERA 417(a)(2) Study at 22-23. See also Rule 10c-1a, Part IX.B.5.  

194 
rates in data sharing reflects strategic considerations that may lower the extent of data shared by 
each entity, reducing the information content of the pool of data collected by each vendor.  
The data for securities lending is potentially biased
564
 – either containing information 
about the wholesale market or the customer market, but not both, making it difficult for a given 
market participants to obtain comprehensive security lending information from one source. 
Furthermore, even the cumulative data provided by vendors is still not be comprehensive, 
primarily because it is based on voluntary data contributions.
565
 The reliance on voluntary data 
contributions increases the likelihood that data are missing in a non-random manner which can 
introduce biases into the data. To this end, the existing data accessible by an individual market 
participant may not accurately proxy short selling activity. 
Existing commercial securities lending data only provide a noisy proxy of short 
sentiment. This is because current commercial securities lending data originates from either 
surveys of a subset of asset managers about their securities lending experience, or it comes from 
give-to-get arrangements where those involved in securities lending must give data to the data 
providers in order to be able access data from the data providers. Because the survey data are not 
comprehensive it can only provide a noisy proxy of actual short sentiment. The give-to-get data 
also provides only a noisy proxy because it too relies on voluntary data submissions. It is also 
 
564
  For example, while the Commission believes that certain currently available securities lending data 
products may be biased due to missing observations, the extent of the biases cannot be quantified as the 
data that would be needed to assess the extent of the bias are missing. 
565
  Voluntary data contributions are provided either through customer market surveys or using a give-to-get 
model. The Commission believes that both give-to-get and customer market survey data lack 
comprehensiveness, as it is unlikely that the full universe of lending programs and borrowers contribute all 
data to any given data vendor. The voluntary nature of submissions to both give-to-get and customer 
market survey data may mean that some data may be withheld. Market participants that choose not to 
disclose their data to the commercial data vendors likely make that choice because it is in their strategic 
interest not to disclose, resulting in nonrandom omissions. These omissions likely insert bias into the 
commercial databases. 

195 
generally limited to information about loans from lending programs to broker dealers 
(“Wholesale Loans”), which are made largely to facilitate clearing and settlement on a net basis 
at a clearing broker, rather than by transaction or position.
566
 Thus, Wholesale Loans are not 
traceable to individual short sellers. Further, the Commission understands that broker-dealers 
will usually source shares to meet their net clearing and settlement requirements from other 
sources, such as their own inventory or customer margin accounts, before engaging in Wholesale 
Loans. Thus, current commercial securities lending data serve only as an imperfect measure of 
short sentiment. 
ii. Rule 10c-1a Data 
On October 13, 2023, the Commission adopted Rule 10c-1a.
567
 Rule 10c-1a requires that 
the data elements in paragraph (c) of Rule 10c-1a, except for the size of the loan, are required to 
be made publicly available by an RNSA not later than the morning of the business day 
immediately after the covered securities loan is effected. Rule 10c-1a requires that the size of the 
loan be made publicly available by an RNSA on the twentieth day immediately after the covered 
securities loan is effected. In addition, Rule 10c-1a requires covered persons to report to an 
RNSA the legal name of each party to the loan (lender, borrower, and intermediary) and that an 
RNSA keep such information confidential. Next-day summary volume information will indicate 
the magnitude but not the direction of the activity, such that loan decreases are added to, not 
subtracted from, loan increases. Therefore, these data will not allow a viewer to discern between 
increases in aggregate short positions and decreases of aggregate short positions. 
 
566
  See Rule 10c-1a, Part IX.B.2 for a more detailed discussion. 
567
  Rule 10c-1a will provide the Commission and market participants with access to comprehensive securities 
lending data market data. See Rule 10c-1a; see also supra note 561. 

196 
Because loans to end-borrowers are usually made to facilitate short sales,
568
 these loans 
relate very closely to those customers’ short positions. By aggregating the total amount of shares 
on loan in the “customer” category, market participants could likely estimate outstanding short 
interest with considerable accuracy, though with an approximately one-month delay.
569
 
Additionally, since each loan likely relates to a unique market participant, the Rule 10c-1a data 
will provide an indication of the distribution of short sentiment – that is, whether short interest is 
concentrated on a few short sellers with large positions, or whether it is spread out over many 
short sellers.
570
 Examining the change in the size of a loan from the reported data can also 
indicate when individual market participants increased or decreased their short positions, albeit 
with an approximate one-month delay.  
Pursuant to Rule 10c-1a,  persons will be required to identify the legal name of all the 
parties to a securities loan without any delay to the RNSA. Consequently, regulators can use the 
data to track the size of shares on loan, and thus approximate an individual entity’s short position 
with little delay, potentially even if that entity uses multiple broker-dealers to source shares. 
Because loan modifications, such as increases, decreases, or terminations of loans, must be 
 
568
  See infra Part VIII.C.2. 
569
  While most loans that facilitate short sales likely come from this category of ‘customer’ loans, not all will. 
Some large market participants do not use broker dealers as an intermediary when sourcing loans, rather 
they maintain relationships directly with lending programs to source shares when they wish to short sale. 
These transactions would show up in the data as loans to “Other” entities. Lastly, to the extent that a broker 
dealer borrows shares to facilitate their own short selling, the loan would show up in the data as a loan to a 
broker dealer. However, by summing up all ‘customer’ and ‘other’ loans, market participants could likely 
estimate aggregate short interest with considerable accuracy. However, only publicly released Form SHO 
data will isolate large gross short sale positions of Managers. The delay of 21 days is due to the settlement 
of the loan occurring in T+1 manner plus the publication of the data 20 days after settlement. 
570
 The ability to identify changes in customer short positions is reduced to the extent that some short sellers, 
such as large institutions, have relationships with and are able to spread their borrowing across multiple 
prime brokers, which would make short interest appear less concentrated. 

197 
reported, regulators can produce running estimates of changes in individual entity’s estimated 
short positions. 
d. CAT Data 
Regulators can also extract short sale information from CAT data, which provide order 
lifecycle information for stocks and options.
571
 The data contain an order mark that is a part of 
the “material terms of the trade” that indicates whether an order is a short sale. This order mark 
allows regulators to identify traders who are short selling and to see the order entry and 
execution times of these short sales. However, CAT was not designed to track traders’ positions 
or changes in those positions, but rather collects information to analyze trading and order 
lifecycles. As such, using CAT data to estimate positions and changes in those positions can be 
challenging.  
Theoretically, one could use the order execution information in CAT data to estimate 
trader positions and track how those positions change over time. However, such estimates could 
be inaccurate due to several circumstances. First, CAT data do not include information on the 
long or short positions held in each account at the time that an Industry Member initially begins 
reporting to CAT. Thus, CAT does not provide an appropriate starting point for building short 
positions using investor-specific transaction information. Second, some investors may establish 
or cover short positions via other means that are not CAT-reportable events, for example: 
secondary offering transactions; option assignments; option exercises; conversions; or ETF 
creations and redemptions. Thus, there are activities that affect positions that are not contained in 
CAT in any capacity. 
 
571
 It is important to note that only regulators have access to CAT data. 

198 
While CAT is not designed to track positions, CAT data can be used in very limited and 
specific circumstances to offer rough position estimates. When focused on one or few accounts, 
estimating positions, though potentially inaccurate, can be manageable. However, using 
transaction information to track positions across a broad set of positions is inefficient. Even in 
situations in which the above limitations do not apply, the use of CAT data to estimate short 
positions and changes in those positions for all or a large set of accounts is inefficient and would 
require a considerable amount of processing power, which would take time and reduce the 
processing power available for other CAT queries. This hinders the Commission’s estimation of 
short positions in a timely fashion. 
Other than the inefficient means of estimating positions described above, CAT does not 
distinguish buy orders that establish a long position from those that cover, and therefore reduce, 
a short position. While Commission staff were able to identify some short covering activity 
during the volatile period in January 2021, due to the difficulties described above, the staff 
analyzing the volatility associated with meme stocks could not easily identify short covering 
activity using CAT data alone and was thus hindered in their reconstruction of key events.
572
 
Finally, even though CAT data identify short selling by market makers, the data do not 
provide information as to whether a broker-dealer is claiming use of the exception for bona fide 
market making from Regulation SHO’s locate requirement. Rather, the Commission has to make 
individual document requests to obtain such information currently. The adopted amendment will 
make this information readily available to regulators in a uniform electronic format and 
consolidate it with the other material terms of orders required to be reported to CAT. 
 
572
  See Staff Report on Equity and Options Market Structure Conditions in Early 2021, SEC (Oct. 14, 2021), 
available at https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-
2021.pdf. 

199 
There are 24 national securities exchanges and one national securities association 
(FINRA) that are CAT Plan Participants. There are also 3,501 broker-dealers who have reporting 
obligations to CAT as Industry Members.
573
 These Industry Members often use third-party 
reporting agents such as service bureaus for CAT reporting. 
e. Exchange Act Form SH 
For a ten-month period in 2008 and 2009,
574
 the Commission required certain Managers 
to file confidential weekly reports of their short positions in section 13(f) securities, other than 
options, on Exchange Act Form SH, through temporary Rule 10a-3T.
575
 De minimis short 
positions of less than 0.25 percent of the class of shares with a fair market value of less than $10 
million were not required to be reported.
576
 Additionally, only Managers that exercise investment 
discretion with respect to accounts holding section 13(f) securities having an aggregate fair 
market value of at least $100 million were required to report. The investment manager was 
required to report short positions to the Commission on Form SH on a nonpublic basis on the last 
business day of each calendar week immediately following any calendar week in which it 
 
573
  See supra Part VII.C.4.b for discussion of PRA costs for broker-dealers due to the CAT amendment. Not 
all 3,501 broker-dealers will bear the same costs due to the CAT amendment. 
574
 See DERA 417(a)(2) Study at 18, supra Part II.A.3 at 6. 
575
 With respect to each applicable section 13(f) security, the Form SH filing was required to identify the 
issuer and CUSIP number of the relevant security and reflect the manager’s start of day short position, the 
number and value of securities sold short during the day, the end of day short position, the largest intraday 
short position, and the time of the largest intraday short position. The reporting requirement was 
implemented via a series of emergency orders followed by an interim final temporary rule, Rule 10a-3T.
 
Exchange Act Release No. 58591 (Sept.18, 2008), 73 FR 55175 (Sept. 24, 2008); Exchange Act Release 
No. 58591A (Sept. 21, 2008), 73 FR 58987 (Sept. 25, 2008); Exchange Act Release No. 58724 (Oct. 2, 
2008), 73 FR 58987 (Oct. 8, 2008); Exchange Act Release No. 58785 (Oct. 15, 2008), 73 FR 61678 (Oct. 
17, 2008). 
576
 See Exchange Act Release No. 58591 (Sept.18, 2008), 73 FR 55175 (Sept. 24, 2008). 

200 
effected short sales,
577
 a more frequent disclosure interval than the quarterly public reporting of 
long positions required on Exchange Act Form 13F.
578
 
In addition to the limited and temporary time period during which disclosure of short 
positions was required to be reported on Exchange Act Form SH, even at the regulatory level, the 
reporting requirements and data had several drawbacks and limitations. One drawback was that 
only Managers who exercised investment discretion with respect to accounts holding section 
13(f) securities having an aggregate fair market value of at least $100 million were required to 
file Form SH, which excluded short-only funds and other large short sellers who did not file 
Form 13F. Additionally, the report was costly as Managers filing Form SH had a weekly 
reporting requirement. Additionally, data fields in Form SH including start of day short position, 
gross number of securities sold short during the day, and end of day short position were each 
subject to the de minimis reporting threshold, which resulted in unreported data points when only 
a subset of the fields exceeded the de minimis threshold. Furthermore, Form SH data were 
difficult to work with because they were not validated for errors such as duplicate entries, 
missing fields, or positions that were below the de minimis threshold and therefore did not need 
to be reported.
579 
5. Competition 
Many Managers operate in the investment management industry.
580
 In broad terms, 
investment management is a highly competitive industry. Investment managers compete for 
investors and investor funds. Among the bases on which Managers compete are returns, fees and 
 
577
 See Exchange Act Release No. 58785, 73 FR 61678. 
578
 Id. 
579
  See Proposing Release, at 14963 for information on the methodology and caveats of using Form SH data. 
580
  See supra Part VIII.B.1 for discussion of Institutional Investment Managers. 

201 
costs, trading strategies, risk management, and the ability to gather information. It is costly for 
investment managers to do market research to gain an informational advantage. Investment 
managers who own a security have an advantage over those who do not in that a security owner 
can trade more cheaply on negative information by simply selling whereas investment managers 
not owning the same security must establish some form of short exposure, such as selling a 
security short, to capitalize on any negative information that they have uncovered. Academic 
research suggests that when the cost of short selling increases, a security owner’s advantage in 
terms of being able to profitably trade on gathered information increases, leading investors not 
owning a security to engage in less fundamental research.
581
 The Commission is cognizant of 
such research and has taken steps to help ensure that the impact of published data will be 
minimized by delaying publication by approximately one month and anonymizing and 
aggregating reporting Managers’ short position data.  
Investment managers, like other investors that could be subject to Rule 13f-2, also 
compete by using proprietary trading strategies. They typically seek to trade in ways that would 
not expose their strategies because, if their strategies became known to others, the strategies 
could lose value and such Managers could also suffer higher trading costs. More specifically, 
other traders could use copycat trading strategies to try to mimic the Managers’ strategy, 
potentially competing away the profitability of the strategy or other traders could anticipate when 
the Manager might trade, which could result in higher trading costs for the Manager. Some 
 
581
 This occurs because if an investor not owning the asset engages in fundamental research and discovers 
evidence that a stock may be overpriced, then it is costly for that investor to act on that information. This is 
not true for investors who own the asset as they can simply sell the shares that they own. See, e.g., Peter N. 
Dixon, Why Do Short Selling Bans Increase Adverse Selection and Decrease Price Efficiency?, 11 (1) THE 
REV. OF ASSET PRICING STUDIES 122-168 (2021).  

202 
Managers also compete for returns by engaging in securities lending whereby assets are lent to 
other investors, often short sellers, for a fee. These fees in aggregate can be substantial.
582
  
The Commission estimates there are 3,501 broker-dealers. These broker-dealers also 
compete with each other for order flow. The broker-dealer industry is a competitive industry 
with reasonably low barriers to entry to many segments of the industry. Most trading activity is 
concentrated among a small number of large broker-dealers, with thousands of small broker-
dealers competing for niche or regional segments of the market. To limit costs and make 
business more viable, the small broker-dealers often contract with bigger broker-dealers to 
handle certain functions, such as clearing and execution, or to update technology. Larger broker-
dealers often enjoy economies of scale over smaller broker-dealers and compete with each other 
to service the smaller broker-dealers who are both their competitors and customers.
583
 Broker-
dealers compete in multiple ways: reputation, convenience, and fees. Broker-dealers typically 
pass operating costs down to their customers in the form of fees. 
C. Economic Effects
584
 
1. Investor Protection and Market Manipulation 
The adopted Rule 13f-2 and CAT amendment will enhance the Commission’s ability to 
protect investors and investigate market manipulation by providing a clearer view into the short 
selling market and improving the Commission’s reconstruction of significant market events. This 
 
582
 The securities lending market is large and complex. See Parts IX.B.1-IX.B.4 of Rule 10c-1a for a more 
detailed description of this market and players.  
583
  See Rule 613 Adopting Release. 
584
  In preparing this economic analysis, the Commission accounted for the various types of Managers that 
could be subject to the reporting requirements. In general, the Commission believes that the economic 
effects of the rule are more influenced by the Managers’ investment strategy and motivation for short 
selling rather than by the type of Manager that is reporting. Any exceptions are noted in the analysis. See 
supra Part VIII.C.1. 

203 
in turn may lead to improved identification of manipulative short selling strategies which may 
also serve as a deterrent to would-be manipulators and thus may help prevent manipulation. It 
will also improve the Commission’s observation of short sale activity that potentially poses a 
systemic risk. The Commission believes that the adoption of Rule 13f-2 and the CAT 
amendment will benefit investors by facilitating the Commission’s observation of short selling 
and will thus help protect investors and help ensure the sufficiency of information related to 
short selling in the market. 
The Commission believes that the Rule 13f-2, Form SHO, and the CAT Amendment will 
improve regulators’ oversight of markets and enhance the Commission’s and SROs’ 
reconstruction of significant market events by providing a clearer view into the role that short 
selling plays in market events of interest. Specifically, the Commission could have used Form 
SHO data combined with other data to reconstruct market events and better understand the link 
between trading activity of large short seller and contemporaneous price volatility during the 
recent volatility associated with meme stocks. For example, while short sellers as a whole were 
exiting their positions during the period of heightened volatility, large short sellers may have 
been engaging in trading behavior that was distinct from other short sellers. 
The recent adoption of Rule 10c-1a will further enhance the usefulness of adopted Form 
SHO.
585
 As another source of data covering the short selling market, the Commission may use 
Rule 10c-1a data combined with Form SHO data in an attempt to match securities lending with 
actual short positions taken. While the timing of the data being received may be asynchronous, 
 
585
  Rule 10c-1a, which was adopted prior to Rule 13f-2, includes multiple compliance dates, and certain 
disclosures required by Rule 13f-2 may be implemented before certain of Rule 10c-1a’s compliance dates. 
Due to this uncertainty, the Commission describes the effects of Rule 13f-2 and the CAT amendment as 
coming into existence prior to those associated with Rule 10c-1a but acknowledges that there may be a 
period in which this is not true. The beneficial combined effects will not materialize until the disclosure 
requirements of both rules are implemented. See infra note 615. 

204 
Form SHO and Rule 10c-1a data sources will have a natural relationship with each other. This 
combination of data can be useful for market reconstructions, but also useful in detecting 
activities such as naked short selling or other potential violations. 
Hypothetically, if Form SHO data had been available to the Commission at the time of 
the market events of January 2021, the Commission could have used these data to examine the 
short selling behavior of individual large short sellers. Additionally, because short positions often 
take some time to create, the Commission could have attempted to identify individual short 
sellers with large short positions in the various meme stocks in January 2021 based on the most 
recent reports; the Commission could then have used CAT data to better understand how these 
short sellers traded during the heightened volatility.
586
 One commenter stated that the lack of 
transparency into short positions did not just hamper the SEC’s understanding of these events as 
they unfolded but, “...may also be interfering with the SEC’s and market observers’ ability to 
say with confidence what happened in retrospect.”
587
 The Commission agrees that more data, as 
is being generated by the adoption of this rule, would have aided the Commission in analysis of 
the events of January 2021. 
As noted above in Part V III.B, Form SHO data will provide the Commission with data 
that are additive rather than duplicative.
588
 After implementation of Rule 13f-2, the activity data 
provided in Form SHO will allow the Commission to observe how large short sellers respond to 
 
586
 Some academics have critiqued the Commission Staff’s GameStop report, the Report on Equity and 
Options Market Structure Conditions in Early 2021, available at https://www.sec.gov/files/staff-report-
equity-options-market-struction-conditions-early-2021.pdf, and some of its methods, which were driven by 
data availability. See Joshua Mitts, Robert Battalio, Jonathan Brogaard, Matthew Cain, Lawrence Glosten, 
and Brent Kochuba, A Report by the Ad Hoc Academic Committee on Equity and Options Market Structure 
Conditions in Early 2021 (working paper) (2022), available at 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4030179. 
587
  See Better Markets Letter at 7. 
588
  See supra Part VIII.B for discussion. 

205 
the heightened volatility, albeit with a time lag, due to the filing deadline. Specifically, the 
Commission will be able to observe more precisely which days reporting short sellers most 
actively increase or decrease their short positions and correlate this activity to market conditions 
on those days.  
Analysis of Form SHO data during periods of high volatility might help the Commission 
maintain fair and orderly markets by highlighting key economic channels and mechanisms 
through which short selling could both impact and be impacted by periods of volatility. This 
information can, in turn, allow the Commission to more specifically tailor responses to similar or 
related events in the future. While the data provided by the CAT amendment will be visible to 
the Commission relatively quickly, the Form SHO data will only be available following a lag of 
at least two weeks.
589
 Thus, while Form SHO data will be useful in market reconstruction, it will 
have limitations in its timeliness. 
The bona fide market making information from the CAT A mendment will facilitate 
regulatory analysis of the use of the bona fide market making exceptions to Regulation SHO.
590
 
In particular, this information will provide regulators investigating potential Regulation SHO 
violations with clearer evidence regarding whether a market maker was relying on a bona fide 
market making exception. This might save a significant amount of time during an investigation. 
 
589
  Form SHO is required to be reported 14 days after the end of the month. Thus, trades happening in the first 
two weeks of the month will not be reported for more than a month. 
590
 Two Regulation SHO rules include exceptions for bona fide market making. Rule 203(b)(2)(iii) exempts 
market makers selling short in connection with bona fide market making activities from the requirement 
that a short seller must either borrow or have reasonable grounds to believe he can borrow a security in 
time for delivery prior to effecting a short sale. See 17 CFR 242.203(b)(2)(iii). Rule 204(a)(3) provides that 
a failure to deliver positions attributable to bona fide market making activities by registered market makers, 
options market makers, or other market makers obligated to quote in the over-the-counter markets, must be 
closed out by no later than the beginning of regular trading hours on the third consecutive settlement day 
following the settlement date (T+4), rather than the settlement day following the settlement date (T+1). See 
17 CFR 242.204(a)(3).  

206 
Having regular access to these data will provide the Commission with further insight into 
whether the exceptions for bona fide market making in Regulation SHO Rules 203 and 204 are 
being used appropriately, which may assist in assessing compliance with Regulation SHO. 
The bona fide market making information might improve regulators’ ability to interpret 
certain information in market reconstructions. Market reconstructions can sometimes benefit 
from regulators knowing when certain activity is either directional or market neutral because the 
motives and profitability of such trading types are different. The bona fide market making 
information will help regulators separate short selling that represents market makers’ liquidity 
provision to facilitate investor demand from other short selling, including other market maker 
short selling. Since such short selling is more likely to be in response to customer demand, it is 
less likely to signify that the short seller anticipates a price decline, relative to cases in which the 
short seller is trading directionally.  
Additionally, the data provided by adopted Rule 13f-2 and the CAT amendment may 
improve the Commission’s ability and effectiveness in detecting certain types of fraud. Form 
SHO data will provide the Commission flags that may signal potential fraud during an 
examination. Additionally, the enhanced CAT data will provide the Commission with regular 
access to improved information with which to examine potential instances of fraud without 
needing to ask broker-dealers for information. 
Enhanced fraud detection by the Commission may also help deter fraud, resulting in 
improved price efficiency and market quality. Some market participants and academics have 
raised concerns that short selling may in some instances offer the potential for stock price 

207 
manipulation, including “short and distort” campaigns.
591
 In “short and distort” strategies, which 
are illegal, the goal of manipulators is to first short a stock and then engage in a campaign to 
spread unverified bad news about the stock with the objective of panicking other investors into 
selling their stock in order to drive the price down.
592
 If a “short and distort” campaign is 
suspected, then detecting this behavior using the position and activity data in Form SHO will be 
easier than using current data.  
Short and distort campaigns are more likely to occur in stocks with lower market 
capitalizations with less public information.
593
 Consequently, among these stocks, it may not 
take a very large short position in dollar terms to reach the daily average 2.5 percent of shares 
outstanding over the preceding calendar month threshold for smaller reporting issuers or the 
 
591
 See, e.g., comment letters submitted with regards to Short Sale Reporting Study Required by Dodd-Frank 
Act section 417(a)(2): Naphtali M. Hamlet (May 6, 2011); Jan Sargent (May 6, 2011); Lee R. Donais, 
President and CEO, L.R. Donais Company (May 8, 2011); Joseph A. Scilla (May 9, 2011); Jane M. 
Reichold (May 17, 2011); John Gensen (May 18, 2011); Victor Y. Wong (May 20, 2011); Kevin Rentzsch 
(May 24, 2011); Lynn C. Jasper (May 27, 2011); Donald L. Eddy (May 28, 2011); Al S. (June 10, 2011); 
Jeffrey D. Morgan, President and CEO, National Investor Relations Institute, at 3 (June 21, 2011) 
(“NIRI”); Professor James J. Angel, at 2 (June 24, 2011); and Dennis Nixon, CEO and Chairman, 
International Bancshares Corporation, at 1 (July 18, 2011). All letters are available at 
https://www.sec.gov/comments/4-627/4-627.shtml. 
592
 If successful, the scheme can drive down the price, allowing the manipulators to profit when they “buy to 
cover” their short position at the reduced price. Short sellers could also engage in price manipulations by 
systematically taking short positions in one firm while taking long positions in the competitor. See Bodie 
Zvi, Alex Kane, and Alan J. Marcus, Investments and Portfolio Management, McGraw Hill Education 
(2011). See also Rafael Matta, Sergio H. Rocha, and Paulo Vaz, Predatory Stock Price Manipulation, 
available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3551282. 
593
 One commenter stated that biotechnology companies, 90% of which have market capitalizations that would 
qualify as small-cap or micro-cap stocks, face a disproportionately high share of short positions. The 
commenter believes that biotechnology firms are disproportionately targeted by short sellers for multiple 
reasons. First, because biotechnology companies cannot disclose interim data until validated, the time gap 
between milestone announcements makes these stocks targets for “short-and-distort” campaigns. Second, 
the commenter stated that short sellers of biotechnology firms will challenge patent claims in order to drive 
their stock prices lower, which makes short positions on these stocks more valuable. The commenter 
supports the Commission’s inclusion of the 2.5% threshold, which would be reached before the $10 million 
daily average threshold for the majority of biotechnology firms. See Bio Letter at 5-8. 

208 
$500,000 or more at the end of a settlement day threshold for non-reporting company issuers.
594
 
As a result, it is likely that an entity engaging in such a practice will be required to report Form 
SHO data.
595
 Consequently, if “short and distort” type behavior is suspected, then the 
Commission will be more likely to identify Managers with large short positions and thus quickly 
focus their inquiries on entities that could potentially profit from manipulation. The Commission 
could then match estimated “buy to cover” trading on individual days to statements or other 
actions of the investor which may indicate that the investor was engaging in such behavior.
596
 In 
addition, the Commission could use CAT data to further investigate the trading activity of the 
alleged manipulator. CAT data would be used to corroborate Form SHO reporting to CAT 
reported transactions. Using the identified manager’s data in CAT, the Commission could see all 
CAT reportable activity, but will not be able to see other activity such as options exercises or 
participation in secondary offerings from an issuer.  
Enhanced oversight due to the adopted rule and amendment could also provide increased 
protection from other sources of harm caused by manipulative short sale activity. First, if firm 
manager decision-making is influenced by shifts in stock prices, as one theoretical study 
 
594
 Academic research has found that the average short interest in stocks targeted by activist short sellers is 
about 10%, while it is only 4% for non-targeted firms. Consistent with high information asymmetries, 
targeted firms also appear to have wider bid-ask spreads and higher disagreement among analysts. See W. 
Zhao, Activist Short-Selling and Corporate Opacity (Working Paper) (2020), available at 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2852041.  
595
 See, e.g., Y. T. F. Wong and W. Zhao, Post-Apocalyptic: The Real Consequences of Activist Short-Selling. 
(Working Paper) (2017), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2941015. 
Several commenters agreed that the 2.5% threshold for Rule 13f-2 was important because it protects firms 
with lower market capitalizations. See, e.g., BIO Letter at 9. 
596
  “Buy to cover” activity would be inferred from position changes reported on Form SHO. This method is 
only a proxy for “buy to cover” information. Specifically, the Commission would be assuming that changes 
in position came from “buy to cover” activity, though there are other mechanisms which could change a 
Manager’s net position that do not occur from “buy to cover” transactions. Further, Form SHO will not 
show intraday short sales and buying to cover if the amounts are equal, as the net position will not change. 

209 
suggests,
 597
 then short sellers could seek to drive down stock prices when profitable projects are 
announced, which may cause firm managers to reassess these projects. Doing so may lead to 
worse managerial decision making and lower stock prices. Second, another theoretical study 
argues that due to high levels of leverage and interconnectedness in the finance industry, even 
small declines in stock prices due to manipulative short sellers could ripple through the financial 
system with large effects.
598
 While manipulation is difficult to verify, should it be suspected, 
such activity might be more easily identified with Form SHO positions and activity data. The 
positions data will allow the Commission to more quickly identify individuals with large short 
positions and then use the activity to identify what data to gather, including CAT data to 
investigate their trading behavior to look for signs of manipulation. Improved detection capacity 
may also deter manipulative behavior due to increased fear of detection, potentially leading to an 
overall decline in fraudulent activity.
599
 
Publicly releasing aggregated information about large short positions may, in some 
instances, increase the risk of trading behavior that is harmful to short sellers, including 
orchestrated short squeezes. More specifically, to the extent that Managers are still holding their 
short positions when the data becomes public, the Commission believes that the information 
 
597
 See I.  Goldstein and A. Guembel, Manipulation and the Allocational Role of Prices, 75 (1) THE REV. OF 
ECON. STUDIES 133-164 (2008). 
598
 See Markus K. Brunnermeier and Martin Oehmke, Predatory Short Selling, 18 (6) REV. OF FIN. 2153-2195 
(2014). Similarly, some have also stated that short sellers may have played a role in the stock market crash 
at the beginning of the Great Depression. See, e.g., Jonathan R. Macey, Mark Mitchell, and Jeffry Netter, 
Restrictions on Short Sales: An Analysis of the Uptick Rule and its Role in View of the October 1987 Stock 
Market Crash, 74 C
ORNELL L. REV. 799, 801-802 (1989) (collecting reports of such allegations). 
599
 See letters from Christine Lambrechts (hereafter “Lambrechts Letter”), available at 
https://www.sec.gov/comments/4-627/4627-14.htm; see also International Association of Small Broker 
Dealers and Advisor, available at https://www.sec.gov/comments/4-627/4627-109.pdf. See NIRI Letter, 
available at https://www.sec.gov/comments/4-627/4627-134.pdf. 

210 
disclosed pursuant to Rule 13f-2 and the disclosures Form SHO requires also might, in some 
cases, potentially facilitate manipulative strategies targeting short sellers, such as short squeezes.  
However, the Commission has sought to reduce this risk by releasing only aggregated 
and anonymized data. Several commenters agreed that only aggregated and anonymized data 
should be published by the Commission in order to reduce the likelihood of short squeezes and 
chilling short sale activity, the latter of which could harm stock price efficiency and market 
liquidity.
600
 In contrast, however, multiple commenters stated that individual Manager’s 
positions should be publicly disclosed in order to uncover hidden short positions, which one 
commenter stated pose risks to investors and the markets.
601
 The Commission has sought to 
balance the costs and benefits of Rule 13f-2 and Form SHO by collecting Manager-specific data, 
which should provide the Commission with improved detection of manipulative and potentially 
destabilizing activity, while publicly releasing only aggregated, anonymized data, which should 
reduce the likelihood of short squeezes and copycat behavior but still increase the transparency 
of large short sale activity.
602
  
The Commission recognizes that the position size thresholds that underlie publicly 
released information may lead to the risk of Managers being identified by the public. The 
Commission estimates that 39 percent of stocks reported on Form SHO would only have one 
 
600
 For discussion of data aggregation, see supra Part II.C. See also MFA Letter, at 18; SIFMA Letter, at 22; 
AIMA Letter, at 5 comment letters of supporters. 
601
 This commenter stated that reducing or eliminating the reporting thresholds to Form SHO would provide 
benefits. See Better Markets Letter, at 13. Several retail investor commenters also said that the reporting 
thresholds to Form SHO should be reduced or eliminated. See supra note 25. 
602
  One commenter stated it was confusing that the Commission believes that the public release of Form SHO 
may give opportunities to orchestrate short squeezes, but at the same time, also help detect short squeezes. 
See Two Sigma Letter, at 10-12. While publicly released Form SHO data may, in some cases, increase the 
opportunity to orchestrate short squeezes, the Commission has reduced this risk by only releasing, 
aggregated, anonymized data. Moreover, this risk is further reduced by the Commission’s ability to utilize 
disaggregated, Manager-identified short sale data in order to increase its detection of short squeezes and 
other manipulative behavior. 

211 
Manager above the reporting Threshold A.
603
 By focusing on stocks in which market participants 
can ascertain that only one Manager exceeded the threshold,
604
 combined with a Manager’s posts 
on social media or information discovered by a private investigator, market participants may be 
able to identify the Manager holding the short position.
605
 As such, the limited number of 
reporters potentially risks shining a spotlight on the few Managers with large short positions.
606
 
However, due to the delay before publicly releasing the data, public Form SHO information will 
not be as up-to-date and thus may not as accurately reflect current short positions.
607
 Thus, 
efforts to orchestrate a short squeeze based on the public Form SHO data could result in losses to 
the initiators of the short squeeze if the short positions they target no longer exist.
608
 Based on 
 
603
 Based on analysis of Form SH data. See Proposing Release, at 14963. Commenters questioned the use of 
Form SH data in this and other contexts. See infra Box 1: Use of Form SH Data for responses to comments 
on the use of these data.  
604
  In some cases, identifying which equity securities reported to the public via Form SHO data had only one 
Manager reporting may not be difficult. For example, if the aggregated short positions reported in an equity 
security were less than $20 million, it could be estimated that one Manager had a short position of at least 
$10 million average over the month. However, this estimation could be incorrect if Managers’ end of 
month gross short position differs significantly from their average gross short position over the month. This 
estimation could be further honed by looking at daily data to see changes in daily short positions to better 
estimate the size of the position, and thus the number of Managers.  
605
 For example, one issuer, upon learning that short sellers had taken a large short position in the issuer, 
reportedly sent a letter to all shareholders urging them to request physical custody of their shares from their 
broker-dealers in an apparent attempt to disrupt securities lending which supports short selling. This 
strategy appeared to work initially as the share price increased by nearly 50% in the subsequent three 
weeks. The issuer also hired private investigators to determine who was behind the short selling and filed 
suit against a well-known short seller. The issuer, however, entered bankruptcy less than a year later. The 
bankruptcy courts ruled that the issuer defrauded investors. See G. Weiss, The Secret World of Short-
Sellers, Business Week, 62a (Aug. 5, 1996). See also Owen A. Lamont, Go Down Fighting: Short Sellers 
vs. Firms, 2 (1) THE REV. OF ASSET PRICING STUDIES 1-30 (2012). 
606
  Though the count of Managers filing Form SHO in any particular equity security may sometimes be able to 
be estimated with some accuracy, the identities of Managers will not be disclosed by Form SHO data.  
607
 Analysis of Form SH data found that short positions were held at or above the $10 million or 2.5% 
thresholds only for an average of 9.85 days after the end of each month. See Proposing Release, at 14963 
for information on the methodology and caveats of using Form SH data. Commenters questioned the use of 
Form SH data in this and other contexts. See infra Box 1: Use of Form SH Data for responses to comments 
on the use of these data. 
608
  That is because the short position has already been closed and the organizers of the short squeeze are 
incorrectly assuming the Manager still has an open short position. Depending on the Manager’s desired 
length of time of the short position, the public version of Form SHO data may still accurately portray the 
 

212 
analysis using Form SH data, the Commission expects that most, but not all, of the short 
positions leading to reporting on Form SHO will be closed by the time that the aggregated Form 
SHO data are released.
609
 An additional factor that may help mitigate the risk of a short squeeze 
due to the public release of Form SHO data is the fact that non-public Form SHO data, in 
coordination with CAT data, will improve the SEC’s ability to detect short squeeze activity, 
which may deter some market participants from seeking to orchestrate a short squeeze.  
Having detailed confidential information about which Managers currently hold large 
positions might also help the Commission observe potential systemic risk concerns regarding 
short selling. Large and concentrated short positions have the potential to increase systemic risk. 
As discussed previously, unlike long transactions, short selling places an investor at risk of 
losing significantly more than the investor’s initial investment, should the value of the 
underlying asset increase significantly. Even temporary spikes in asset value can lead to 
significant losses – by triggering margin calls or even position liquidations if capital 
requirements cannot be met.
610
 If the value of an underlying asset increases, a short seller may be 
required to post additional collateral to meet margin requirements. If the investor is unable to do 
so, then the investor’s broker-dealer may liquidate the investor’s position with existing collateral 
 
aggregated short position in a given equity security. However, those basing their decisions on public Form 
SHO data will not know whether the Managers underlying the aggregated short positions in Form SHO 
data have closed out their positions within the two weeks publication delay. Other data sources, combined 
with Form SHO data, can be used in an attempt to discover if the position is closed out, but those are also 
on a delayed basis. 
609
 See infra note 622 for a discussion on the Commission’s estimates on how long Managers hold short 
positions. See also infra note 629 for more information on short sellers that do hold their positions for 
longer periods of time. Commenters questioned the use of Form SH data in this and other contexts. See 
infra Box 1: Use of Form SH Data for responses to comments on the use of these data. 
610
 Due to imperfect information and market frictions, a short seller who “does not have access to additional 
capital when security prices diverge ... may be forced to prematurely unwind the position and incur a 
loss[.]” See, e.g.,  Mark Mitchell, Todd Pulvino, and Erik Stafford, Limited Arbitrage in Equity Markets, 57 
J. OF FIN.  551-584 (2002). See also, e.g., Andrei Shleifer and Robert W. Vishny, The Limits of Arbitrage, 
52 J. OF FIN. 35 –   55 (1997) and Denis Gromb and Dimitri Vayanos, Limits of Arbitrage, 2 ANNU. REV. 
FIN. ECON.  251-275 (2010) (citations therein). 

213 
leading to steep losses for the short seller. Consequently, it may be more difficult for a short 
seller to ride out periods of turbulence than a long seller. 
One commenter stated they were unaware of cases of short selling causing systemic 
harm.
611
 However, the potential instability that the Commission wishes to detect includes 
spillovers from events in one asset, such as a particular equity security, to the market for another 
asset.  
Manager level short position data of individuals with large short positions might allow 
the Commission to better observe these positions, study, and more appropriately respond to any 
market events that arise. For example, if the Commission had Form SHO data during the meme 
stock events of January 2021 then it would have had a clearer view as to which Managers held 
large short positions prior to the volatility event and thus which Managers could have been at 
greatest risk of suffering significant harm from a short squeeze. However, the ability of the 
Commission to respond to market events is likely impacted by the timeliness of the short sale 
data that it receives. One commenter stated that due to the delay in reporting of Form SHO, the 
data would not be useful to the Commission to respond to market events.
612
 While the delay will 
not aid the Commission in responding in real-time to market events, it does aid the Commission 
in developing responses to events over a longer time horizon. Regulatory changes rarely happen 
in real time and involve careful analysis prior to implementation. The Commission has chosen a 
reporting regime which balances the benefits of more frequent and timely data with the costs 
incurred by Managers having to report more quickly, including higher explicit reporting costs as 
well as heightened risks of short squeezes and copycat trading. 
 
611
 See SBAI Letter at 4. 
612
  See SBAI Letter at 2. 

214 
All the effects, positive and negative, associated with the data collected by Rule 13f-2 
discussed in this section will be limited by data accuracy. Upon filing, Form SHO will be 
checked for technical errors but not for the accuracy of the position and activity data in the Form. 
If Managers make mistakes in their calculations, such mistakes will reduce the utility of the data. 
However, the amendment process will require Managers to amend filings when they discover 
errors, thus promoting the accuracy of the information. 
2. Effects on Stock Price Efficiency 
The Commission believes that Rule 13f-2 and Form SHO may have uncertain effects on 
stock price efficiency.
613
 The uncertain effects on price efficiency stems from increased 
transparency of short sales generally increasing efficiency, whereas increased transparency might 
also discourage potential short sellers from gathering information – which harms price 
efficiency. This section discusses both the concept of price efficiency and the positive and 
negative impacts that adopted Rule13f-2 and the CAT amendment may have on price efficiency. 
a. Comparisons to other public short selling data 
The publicly released aggregated data from Form SHO will provide information to 
market participants about the aggregate activities of large short sellers – with a planned lag of 
approximately fourteen days from the end of the filing deadline, which is fourteen days after the 
last day of the month.
614
 Existing short selling data, such as the FINRA short interest data, is 
timelier than the data that will be filed pursuant to Rule 13f-2 and Form SHO. Forthcoming 
information from Rule 10c-1a data, which could be used to estimate short interest, is also 
 
613
 See infra Part VIII.D.1 for additional discussion of the effect of adopted Rule 13f-2 and the CAT 
amendment on efficiency. 
614
 Thus, it will be a one-month delay after the last day of the month of data being reported. See supra Part 
II.B.3 for more information on the delay of public dissemination of Form SHO data. 

215 
expected to be timelier than Rule 13f-2 and Form SHO data.
615
 
Nevertheless, Rule 13f-2 and 
Form SHO data will provide information on short sale behavior that is not available from other 
short sale data sources. For example, while FINRA short interest data includes short interest for 
all short sales known to clearing broker-dealers, it does not provide the Commission or the public 
with daily information on short sellers’ activities. In contrast, Form SHO data will provide daily 
information on gross short positions of Managers that exceed Reporting Thresholds.
616
 
Moreover, while Rule 10c-1a data will disseminate to the public anonymized transactions-by-
transaction securities lending data by all market participants, it does not allow for an accounting 
of the timing of aggregate short sales conducted by Managers, nor does it reveal aggregate short 
positions of Managers with large short positions, as will the data from publicly available Form 
SHO.
617
 Thus with the adoption of Rule 13f-2 and Form SHO, market participants, who will 
only see anonymized data, will have increased awareness into the activity of Managers with 
large short sale positions.
618
 These benefits are afforded by the adoption of Rule 13f-2 and the 
required reporting of Form SHO.  
There is overlap between the information about stock fundamentals contained in FINRA 
short interest data, forthcoming Rule 10c-1a data, and the data that will be aggregated from Form 
 
615
  We expect that the reporting and publication of Rule 13f-2 information will occur before the reporting and 
publication of Rule 10c-1 information. See supra note 531. Reporting and disclosure under Rule 13f-2 will 
provide more information over current short selling data until reporting and disclosure under Rule 10c-1a 
are fully implemented. This could temporarily magnify the benefits and costs of many of the effects 
discussed in this section and elsewhere in the Economic Analysis. 
616
  The Commission will anonymize these data before they are publicly disseminated. 
617
  For example, a Manager could accumulate a large short position in a particular security using securities 
loans from multiple prime brokers. Each of these loans will be reported as a distinct Rule 10c-1a securities 
loan, and observers may not be able to ascertain whether they are part of a single Manager’s short position. 
As a result, a large securities loan in Rule 10c-1a data may not represent a single large position reportable 
under Rule 13f-2. 
618
  The Commission will have enhanced data regarding Managers and trading activity of stocks in which 
thresholds are triggered. See supra Part VIII.C.1 for discussion. 

216 
SHO filings. However, the information in Form SHO filings provides data on Managers, 
including their aggregated daily net changes in positions.
619
 Thus, Form SHO will increase the 
information available to investors about past bearish sentiment in the market on a specific time 
frame. For example, Form SHO data could be combined with FINRA short interest data to 
calculate the proportion of short interest comprised of Managers with substantial positions. 
Furthermore, the accompanying activity information of Form SHO will provide market 
participants with an enhanced view of short interest and securities lending as well as increased 
insight on how the short sale activity measured by these data series change over time. Further, 
the use of the last day of the month as the reference month for the Form SHO reports will allow 
for a direct comparison of the Form SHO data to the FINRA short interest data. For example, 
market participants might search for correlations between significant increases or decreases in 
short positions found in Form SHO data with corporate events or announcements to gather a 
more precise view of how the market views corporate actions or events and which events 
contributed to the FINRA final short interest tally at the end of the month. While Rule 10c-1a   
data could also be used with FINRA short interest data for such analysis, Form SHO data will 
more clearly reveal how Managers with large gross short positions view these actions or events. 
Thus, market participants and regulators will be able to use Form SHO data along with FINRA 
short interest data to assess the degree to which short interest is concentrated among Managers 
with large positions. It will also allow regulators to better assess which securities face the 
greatest risk of short squeezes and other manipulative strategies. 
 
619
  This is in contrast to other data sources, which only provide data on securities such as the short interest in a 
particular security (i.e., FINRA short interest) or the volume of securities lent (i.e., Rule 10c-1a data). 

217 
Form SHO data could also be combined with forthcoming Rule 10c-1a data in order to 
assess the degree to which securities lending is widely dispersed among market participants or 
concentrated among Managers who filed Form SHO.  
b. Potential improvements to price efficiency 
Rule 13f-2 and Form SHO may also improve price efficiency if they mitigate fraud as 
discussed in Part VIII.C.1. Fraud is inherently non-efficient trading and harms price efficiency 
because a fraudster’s motive is to create a deviation of a firm’s value from fundamentals and to 
profit from this deviation. Thus, to the extent that fraudulent trading, such as short and distort 
campaigns, are limited by regulator’s access to the data provided by Form SHO, Rule 13f-2 will 
result in improved price efficiency.  
More generally, the impact of Form SHO on price efficiency will be commensurate with 
the degree to which aggregated Form SHO data are newer or more timely than other publicly 
available short selling information and useful for valuing stocks. Price efficiency (also known as 
market efficiency) refers to how accurately prices reflect available information relevant to the 
value of the asset.
620
 T his information may allow market participants to more effectively make 
trading decisions and manage risk – increasing price efficiency. For example, if aggregate 
Manager short positions provide better info on bearish sentiment, t  hen prices could react to 
updated Form SHO information on bearish sentiment.
 621
 Although the majority of Managers’ 
short positions may be closed by the time the aggregated data from Form SHO will be made 
public due to the lag in reporting and public dissemination, a portion of the short positions may 
 
620
 See, e.g., Eugene Fama, Efficient Capital Markets II, 46(5) J. FIN. 1575-1617 (1991). 
621
  See, e.g., A. Senchack and L. Starks, Short-Sale Restrictions and Market Reaction to Short-Interest 
Announcements, 28 J.
 OF FIN. AND QUANTITATIVE ANALYSIS 177-194 (1993). 

218 
still be open.
622
 Information on the aggregate size and activity of positions that remain open 
could be combined with FINRA short interest and forthcoming Rule 10c-1a data to estimate the 
proportion of short positions held by large short sellers. If this proportion is not yet reflected in 
prices, prices will adjust upon publication.  
Even if many positions are closed by the time the information is disseminated, Tables 1 
and 2 will still promote price efficiency if the prices do not yet reflect the historical short 
position and activity information. Table 2, for example, will provide information on the 
variability of large short positions in a security and how large short positions changed around 
corporate events. Such information will improve the precision of signals from Table 1 
information and corporate events. 
c. Potential Harms to Price Efficiency 
Rule 13f-2 may harm price efficiency by increasing the cost of short selling.
623
 Academic 
studies, both theoretical and empirical, have shown that when short selling becomes more costly, 
stock prices are less reflective of fundamental information both because costly short selling 
makes trading on information more difficult, and because costly short selling dissuades investors 
from collecting information in the first place.
624
 Short sellers fill the role of incorporating 
 
622
 The Commission estimates that the median number of days that the short position is held above the 
threshold after the end of the month is 0, while the average number of days that a short position is held 
above the threshold is 9.68. This suggests that the majority of positions will be closed while some are held 
longer than the delay in reporting. 
623
  Adopted Rule 13f-2 will have direct impacts on establishing large short positions which may trigger 
reporting obligations. Additionally, there may be lesser effects which dissuade market participants from 
short selling in fear of triggering reporting of Form SHO. 
624
 See supra note 597. See Edward Miller, Risk, Uncertainty, and Divergence of Opinion, 32 J. OF FIN. (1977). 
See Robert F. Stambaugh, Jianfeng Yu, and Yu Yuan, The Short of It: Investor Sentiment and Anomalies, 
104 J. OF FIN. ECON. 288-  302 (2012). 

219 
negative information by making short sales that reflect the short sellers’ beliefs about the true 
value of the company.
625
 
i.    Costs that Impact Price Efficiency 
Rule 13f-2 increases the costs of short selling in at least four ways: (1) Compliance costs, 
(2) potentially revealing short sellers’ information that may have been acquired through 
fundamental research, (3) potentially revealing short sellers’ trading strategies, and (4) increasing 
the threat of retaliation against Managers by other market participants. 
(a) Compliance Cost Effects 
The compliance costs associated with reporting large short positions will result in an 
increase in the cost of short selling.
626
 As many Managers have underlying investors, these costs 
 
625
 Several commenters made statements and cited research on how short selling improves price efficiency. 
See, e.g, NASDAQ Letter at 1, AIMA Letter at 5, which state that short selling promotes efficient price 
formation, enhances liquidity, and facilitates risk management. Furthermore, one comment letter, 
“...urge(d) the Commission to consider the widely-cited academic law and finance literature as part of its 
analysis of the Proposed Short Reporting Rules,” and cited multiple studies that provide evidence that short 
selling contributes to price efficiency. See also “Law and Finance Professors letter” at 2. Cited studies 
include Jonathan M. Karpoff and Xiaoxia Lou, Short Sellers and Financial Misconduct, 65 J.
 OF FIN. 1879-
1913 (2010) and Ekkehart Boehmer, Charles Jones, and Xiaoyan Zhang, Which Shorts Are Informed? 63 J.
 
OF 
FIN. 491-527 (2008), and Lauren Cohen, Karl Diether, and Christopher Malloy, Supply and Demand 
Shifts in the Shorting Market, 62 J.
 OF FIN. 62, 2061-2096 (2007). Other cited studies find evidence that 
constraints on short selling reduce market efficiency, including Joseph E. Engelberg, Adam V. Reed, and 
Matthew C. Ringgenberg, Short Selling Risk, 73 J.
 OF FIN. 755-786 (2018), Ekkehart Boehmer, Charles 
Jones, and Xiaoyan Zhang, 2013, Shackling the Short Sellers: The 2008 Shorting Ban, Review of Financial 
Studies 26, 1363-1400, Pedro Saffi and Kari Sigurdsson, Price Efficiency and Short Selling, Review of 
Financial Studies 24, 821-852 (2011). One cited paper favors reduced regulation of short selling in order to 
avoid undermining the market quality improvements provided by short selling. See Peter Molk and Frank 
Partnoy, The Long-Term Effects of Negative Activism, U
NIV. OF ILLINOIS L. REV., 1-70 (2022). Another 
cited paper favors less regulation of short selling that enhances price efficiency but increased regulation of 
short selling that is aimed at disabling the fundamental value of targeted firms. See Barbara Bliss, Peter 
Molk, and Frank Partnoy, Negative Activism, 97 W
ASH. UNIV. L. REV. 1333-1395 (2020)). The comment 
letter’s suggestion to delay public release of Form SHO data for one year and receive additional input on 
which Form SHO thresholds to apply stem from a concern that Rule 13f-2 could undermine the market 
quality benefits of short selling, of which the above cited studies find evidence. However, the Commission 
is also cognizant of the of the benefits provided by short selling, as noted in supra Part VIII.B.2. 
Furthermore, the Commission discusses in detail below the potential costs to price efficiency stemming 
from Rule 13f-2 and Form SHO. See infra Part VIII.C.2.c.ii. 
626
 See infra Part VIII.D.2 for a discussion of how these direct costs may affect investors in funds that employ 
short selling.  

220 
will likely be passed on to end consumers in the form of lower returns due to limiting the 
strategies that Managers could profitably employ and reducing the profitability of strategies still 
employed. On net, an increase in the cost of short selling will reduce short selling, harming price 
efficiency.
627
  
(b) Potentially Revealing Information of Short 
Sellers 
Publicly releasing aggregated Form SHO data has the potential to reveal some of the 
information that short sellers may have acquired through fundamental research.
628
 Revealing this 
information to the market may cause prices to adjust to the information that the short seller 
uncovered before the short seller is able to acquire their full desired position – decreasing the 
profits to acquiring this information and providing less incentive to produce fundamental 
research. Thus, the publication of Form SHO data represents an additional cost to short selling in 
the form of potentially lower profitability for trading on negative information. Relative to the 
proposed rule, the Commission has modified the final rule’s requirements for publication of 
Form SHO data (from the proposed rule) to decrease the risks of revealing this information by 
requiring much less granular information in Table 2 of Form SHO.  In addition, adopted Rule 
13f-2 will mitigate revealing information by delaying publication at least 14 days from the last 
day of a month and only publishing aggregated data. 
To avoid price impacts, a short seller seeking to build a sizeable position in a firm 
generally does so by building up small positions over time until the desired position is 
 
627
  See supra note 624 and accompanying text. 
628
  Several commenters agreed. See, e.g., SBAI Letter at 2-3, Two Sigma Letter at 1-2, SIFMA Letter at 2. 

221 
accumulated.
629
 Because short positions can take a long time to accumulate, even with a lag, the 
information motivating the trades being reported may not be stale. While aggregation limits the 
precision with which markets can estimate an individual short seller’s motivation, it does not 
eliminate it.
630
 Additionally, the threshold may protect short sellers with smaller short positions 
from having the information in their trades revealed. In contrast, Rule 13f-2 may highlight large 
positions, potentially increasing the likelihood that some of the information contained in the 
trades of large short sellers will be acted on by other market participants before the short seller 
could acquire their optimal position. Thus, the Commission expects that publication of 
aggregated Form SHO data will still represent a cost to short selling.
631
  
Relatedly, Managers who wish to build large short positions may choose to execute their 
transactions at a pace that is faster than what they would have done otherwise to attempt to profit 
from their research before information is disclosed and copycat investors are able to trade based 
 
629
  See Albert S. Kyle, Continuous Auctions and Insider Trading, ECONOMETRICA: J. OF THE ECONOMETRIC 
SOCIETY 1315- 1335 (1985). See Kirilenko, Andrei, Albert S. Kyle, Mehrdad Samadi, and Tugkan Tuzun, 
The Flash Crash: High‐Frequency Trading in an Electronic Market, 72 (3) THE J. OF FIN. 967 -998 (2017) 
(for a discussion of this type of trading); Amir E. Khandani and Andrew W. Lo., What Happened to the 
Quants in August 2007? Evidence from Factors and Transactions Data, 14 (1) J. OF FIN. MARKETS, 1 -
46 (2011) (for a discussion of what happens when investors build large positions without properly 
smoothing their trading). Well-known short seller Gabe Plotkin testified that his firm had built and 
maintained a short position in GameStop for over 5 years prior to the significant volatility experienced in 
January 2021. See Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail 
Investors Collide (Hearing), U.S. House of Representatives Committee Repository (“Game Stopped 
Hearing”), https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=111207; See also Juliet 
Chung and Melvin Capital Says It Was Short GameStop Since 2014, Wall Street Journal (Feb 17, 2021). In 
the Form SH data, 17.9 % of positions were held above the proposed Threshold A for at least a month. 
Commenters questioned the use of Form SH data in this and other contexts. See infra Box 1: Use of Form 
SH Data for responses to comments on the use of these data. 
 
630
 See supra Part VIII.C.1 for a discussion of how market participants may attempt to uncover individual 
identities. 
631
 Consistent with this expectation, research on similar regulations in Europe has documented a similar effect 
there. See Market Impact of Short Sale Position Disclosures, Copenhagen Economics: Office of Global 
Research and Markets at the MFA, available at 
https://www.copenhageneconomics.com/publications/publication/market-impact-of-short-sale-position-
disclosures. 

222 
on the reported data. Executing transactions at a faster speed than would be optimal imposes 
increased transaction costs on Managers than they would have incurred otherwise.
632
 
Additionally, trading faster than is optimal may harm price efficiency by leading prices to over-
react to the aggressive trading.
633
 
(c) Potentially Revealing Trading Strategies of Short 
Sellers 
If Form SHO data provides information about the specific trading strategies or identities 
of certain short sellers, those short sellers could be harmed by actions such as others profiting 
from predicting their trading or copycat trading.
634
 This harm could result in less short selling, 
reducing the price efficiency benefits of short selling. 
While Rule 13f-2 was designed to minimize the possibility of identifying Managers or 
their proprietary information, there are conditions that may arise that would be conducive to 
revealing proprietary trading strategies. For example, in cases where market participants may be 
able to discern that there is only one Form SHO filer,
635
 then market participants might attempt 
to use the activity data to extract information about the specific trading strategies that short 
sellers use to implement their trades. Market participants might then try to identify similar 
patterns in the real time market trading and quote data and alter their trading strategies to attempt 
to profit from any predictability in the short seller’s trading strategy. This behavior would further 
 
632
 See Kyle (1985) at supra note 630.  
633
 See e.g., Albert S. Kyle and Anna A. Obizhaeva, Large Bets and Stock Market Crashes (Mar. 22, 2019), 
available at https://ssrn.com/abstract=2023776 or https://dx.doi.org/10.2139/ssrn.2023776.  
634
  If the identity of the short seller is exposed, then this may also incentivize retaliation against them. See 
infra Part VIII.C.2.i.(d). 
635
  This could partially be achieved through the use of Rule 10c-1a data, depending on the timing of the 
securities loan, among other factors. However, such risk is mitigated by the fact that securities lending 
transaction sizes in Rule 10c-1a data are not publicly disseminated for 20 business days and counterparties 
identities are not publicly disseminated. 

223 
limit the benefit to short selling as it may allow other market participants to game the short 
seller’s trading behavior – increasing the cost of implementing short selling trading strategies. 
The Commission received several comment letters that addressed the risk of copycat trading due 
to public disclosure of Form SHO data.
636
 While the Commission acknowledges this risk, it 
believes that the design of the published activity data will significantly limit this risk. In 
particular, the netting of short selling activity across short sellers will mask much of the trading 
behavior of individual short sellers while still providing information about changes in bearish 
sentiment in the market. By netting trading activity in the aggregations across Form SHO filers, 
market participants viewing the publicly reported Form SHO data will still get a view of changes 
in bearish sentiment while keeping Manager specific trading strategies hidden.  
(d) Retaliation Against Short Sellers 
The public disclosure requirements might also increase short selling costs by exposing 
Managers to the risk of retaliation by other market participants, but the risk may be low.
637
 An 
issuer’s directors or shareholders may have the incentive to retaliate if they believe short sellers 
are inappropriately reducing the value of the stock.
 638
 
 
636
 See, e.g., SBAI letter at 2, Two Sigma letter at 1, David Kwon letter at 3. Furthermore, supporting 
commenters’ views, there is empirical evidence that copycat trading in response to media reports may harm 
price efficiency. See Jiang, George and Strong, Cuyler, Unusual Option Activity: Is it Smart to Follow 
‘Smart Money’? (Aug. 29, 2022). available at https://ssrn.com/abstract=3618427. 
637
 See 2011 MFA Letter; Owen A. Lamont, Go Down Fighting: Short Sellers vs. Firms, 2(1) THE REV. OF 
ASSET PRICING STUDIES 1-30 (2012); Lorien Stice-Lawrence, Yu Ting Wong, Yu Ting Forester Wong, and 
Wuyang Zhao, Short Squeezes After Short-Selling Attacks (Nov. 2021), available at 
https://ssrn.com/abstract=3849581 or https://dx.doi.org/10.2139/ssrn.3849581.  
638
  The motivation behind such retaliation may be strengthened by the belief that the short seller’s aim is to 
profit from reducing the value of the stock rather than uncovering mismanagement or other negative 
information about the firm to shareholders. See generally Barbara Bliss, B., Peter Molk, and Frank Partnoy 
(2020), Negative Activism, Wash. U. Law Review 97:1333-1395 (2020), which distinguishes between 
“informational negative activism,” which serves to uncover, “...the truth about companies whose shares the 
activists believe are overvalued,” and “operational negative activism,” which, “...involves dismantling or 
disabling sources of value at companies.” 

224 
Although aggregating the data before releasing it to the public on a delay will provide 
some protection to Managers from having their identities uncovered, in certain cases motivated 
market participants may still be able to identify individual investors. For instance, in the case that 
the aggregated short position reported to the public is just above the threshold, market 
participants might reasonably assume that only one Manager has a short position large enough to 
report, which may facilitate identifying who that manager is. The Commission believes that even 
if the probability of identifying individual short sellers is low, the threat of this additional 
exposure to retaliation may disincentivize short selling.  
In the event that Managers can be identified from Form SHO disclosures, issuers might 
take retaliatory action against individual short sellers through lawsuits and by forwarding 
information to regulators in attempts to precipitate regulatory investigations, through claims in 
the media, or by applying pressure on the shorting firm through business relationships that may 
exist outside of trading.
639
 One commenter provided further examples of retaliatory behavior that 
short sellers may face the threat of, including short squeezes, nuisance lawsuits, intimidation, and 
physical violence.
640
 There is also evidence that when short sellers’ positions become public, 
market participants strive to orchestrate short squeezes and are successful a significant fraction 
of the time.
641
 Short sellers often face lawsuits when they take their information public or their 
identities otherwise become known – regardless of whether the information the short sellers 
brought forth was legitimate.
642
 Some issuers have even been known to hire private investigators 
 
639
 See 2011 letter from Security Traders Association of New York on the Short Sale Reporting Study 
Required by Dodd-Frank Act section 417(a)(2), available at https://www.sec.gov/comments/4-627/4627-
155.pdf.  
640
  See MFA Letter at 9. 
641
 See infra note 645. 
642
 See Owen A. Lamont, Go Down Fighting: Short Sellers vs. Firms, 2 (1) THE REV. OF ASSET PRICING 
STUDIES 1-30 (2012). 

225 
in an attempt to uncover the identities of individuals short selling their stock.
643
 Some short 
sellers have also expressed that they have experienced threats to their personal safety after their 
short positions were revealed.
644
 
In addition, publicly disclosing that Managers, in aggregate, have amassed large 
aggregate short positions may expose the Managers to increased risk of being the target of 
predatory strategies such as short squeezes. The risk of short squeeze increases if market 
participants are able to identify the individuals with large short positions, as discussed in Part 
VIII.C.1.
645
 In this case, they may be able to better estimate the capital constraints of the short 
seller to identify the likelihood of a squeeze being successful. 
ii. Impact of the Costs 
Because reporting information on Form SHO increases the costs of short selling, the 
adopted rules could have several negative effects on price efficiency. In particular, negative price 
efficiency effects could derive from a reduction in fundamental research,
646
 strategic trading to 
avoid exceeding the thresholds, and reduced liquidity in options markets. Reduced short selling 
could also take place from the effect of negative price efficiency. Rule 13f-2 and Form SHO 
have been designed to reduce the likelihood of these risks occurring to the extent possible while 
still providing market participants and regulators with enhanced transparency of short sale 
 
643
 Id. 
644
 See Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide: 
Hearing Before the H. Comm. on Fin. Serv., 117
th
 Cong. (2021) (statement of Gabriel Plotkin, Founder and 
CEO, Melvin Capital Management), available at 
https://www.congress.gov/117/meeting/house/111207/witnesses/HHRG-117-BA00-Wstate-PlotkinG-
20210218.pdf (stating that after company’s short positions were made known, Reddit users made posts and 
others sent personal text messages that were laced with anti-Semitic slurs and threats of physical harm to 
him and others). 
645
  As noted in Part VIII.C.1, the Commission will also be better able to detect short squeezes. 
646
  Several commenters also stated there could be a possible reduction in fundamental research. See, e.g., MFA 
Letter at 10.   

226 
behavior. To the extent that fundamental research decreases, price efficiency might be harmed as 
prices will not necessarily reflect all available relevant information, only that portion that had 
been discovered by investors continuing to perform fundamental research. 
It is possible that short sellers may strategically select average short position just below 
the threshold in order to avoid reporting. The size of a short position is often related to the 
expected magnitude of the short seller’s negative information, with revelations of larger negative 
information being associated with larger short positions.
647
 Consequently, to the extent that 
Managers may choose to select otherwise sub-optimal short positions to avoid reaching the 
reporting threshold, Rule 13f-2 and Form SHO might result in a sub-optimal allocation of capital 
and may harm price efficiency. To this end, some have argued that stock prices can be viewed as 
a weighted average of investor sentiment. If short sellers limit their positions to avoid disclosure 
requirements, then stock prices may skew towards being overvalued.
648
  
Additionally, Rule 13f-2 might dissuade options market makers from holding large short 
positions and providing liquidity in options markets and, thus, might harm price efficiency in 
equity markets. Research has found that options play an important informational role in stock 
 
647
  See, e.g., supra note 629. 
648
  See, e.g., supra note 625. In contrast, some argue that short selling itself increases the value of assets as it 
provides demand for securities lending and allows owners to collect securities lending fees. From this 
perspective, restricting short selling may decrease stock prices by restricting the demand for securities 
loans. See Darrell Duffie, Nicolae Garleanu, and Lasse Heje Pedersen, Securities Lending, Shorting, and 
Pricing, 66 (2-3) J. OF FIN. ECON.  307-339 (2002). Consistent with statements in the Proposing Release, the 
Commission continues to believe that this effect is the not predominate effect of short selling on asset 
prices, because the average fee earned from securities lending is usually very small relative to the average 
long term stock returns. Thus, it appears that other economic effects tend to dominate the relationship 
between short selling and stock prices and that on net short selling restrictions lead to stock overvaluation. 
Proposing Release at 14996 n. 281. See also letters from OTC Markets, Provable Markets, SIFMA, and 
Chester Spatt responding to FINRA’s regulatory notice 21-19 (arguing that short selling is vital to price 
efficiency), available at https://www.finra.org/rules-guidance/notices/21-19#. In contrast, others have 
argued markets adjust to short selling constraints as to not overvalue stocks. See Douglas Diamond and 
Robert E. Verrecchia, Constraints on Short-Selling and Asset Price Adjustment to Private Information, 18 
J. OF FIN. ECON.  277-311 (1987). 

227 
price discovery, therefore reductions in liquidity in the options market can reduce the price 
efficiency in the equity market.
649
 
d. Limitations on Price Efficiency Effects 
As with the discussion in Part VIII.C.1, many of the economic effects articulated in this 
section relating to the reporting of Form SHO might be limited to the extent that the data 
reported in Form SHO contains factual errors. The EDGAR system will check the data for 
technical errors but not the accuracy of the data entry by filers. Thus, the data reported in Form 
SHO might contain errors. To the extent that these errors exist and meaningfully affect the 
usability of the data, the value of the data and the economic benefits and costs associated with 
collecting the data would be limited. Additionally, the benefits and costs are lessened by the 
delay in the publication of the data. Furthermore, the data will only be available for those 
securities with Managers who have short positions over the threshold, which may not be 
representative of all short positions, and the number of reporting Managers may change from 
month to month. 
3. Effect on Market Liquidity 
The effect of the adopted Rule 13f-2 and CAT amendment on liquidity is uncertain. Part 
VIII.C.2.c discusses the possibility that Rule 13f-2 and Form SHO may harm price efficiency by 
dissuading investors from pursuing fundamental research. Alternatively, Rule 13f-2 and Form 
SHO may help price efficiency by increasing transparency with respect to the actions of large 
short sellers. To the extent that the adopted rule and amendment improve price efficiency, this 
might also indirectly improve liquidity because market makers would be subject to less 
mispricing risk. Mispricing risk leads to lower liquidity because market makers must be 
 
649
  See infra Part VIII.C.3. See also David Easley, Maureen O’Hara, and Pulle Subrahmanya Srinivas, Option 
Volume and Stock Prices: Evidence on Where Informed Traders Trade, 52 J.
 OF FIN.  431-465 (1998). 

228 
compensated in the form of wider bid ask spreads for the potential that there is information 
relevant to the firm that has not yet been discovered and may affect prices. Thus, to the extent 
that the Rule 13f-2 enhances price efficiency, it may also enhance liquidity by mitigating 
mispricing risk. Conversely, if the Rule harms price efficiency, it may also harm liquidity. 
Equity market makers generally do not carry large gross short positions overnight. 
However, adopted Rule 13f-2 and Form SHO may make market makers more concerned that a 
particularly volatile trading day may cross the Reporting Thresholds requiring the filing of Form 
SHO. One commenter described the concern for unintentionally crossing the threshold while 
market making.
650
 While the Commission believes the adopted Reporting Thresholds will 
generally be very difficult for market makers to trigger,
651
 market makers could still choose to 
reduce market making activities during periods of volatility due to concerns over having to report 
Form SHO. To the extent market makers believe high volatility may necessitate a large short 
position, the adopted rule may reduce market liquidity. 
Additionally, in the event that an options market maker might have short equity position 
close to the Reporting Thresholds, Rule 13f-2 might dissuade these option market makers from 
increasing their short position, which may harm their willingness to provide liquidity in options 
markets. Alternatively, Rule 13f-2 might not cause option market makers that exceed the 
Reporting Thresholds to reduce their positions in order to avoid filing Form SHO, in which case 
the additional associated spending on filing Form SHO (and other compliance costs) might result 
in wider spreads if the compliance costs are large enough. 
 
650
 See HSBC Letter at 15. 
651
  Market makers typically use short selling to maintain two sided quotes in the absence of inventory and 
other high frequency traders. While market makers trade in large volumes, they tend to end trading sessions 
fairly flat on inventory in larger stocks. Therefore, while it is possible that market makers may end a single 
trading day holding a gross short position of $10 million, it is highly unlikely that this will occur frequently 
enough for them to end the month with an average daily position of $10 million.  

229 
4. Effect on Corporate Decision Making 
The Commission believes that Rule 13f-2 and Form SHO might have mixed effects on 
corporate decision making. On one hand, research suggests that corporate managers learn from 
market reactions to announcements.
652
 Consequently, Rule 13f-2 and Form SHO may provide 
corporate managers with additional feedback on their decisions, albeit with a delay. Projects 
often take some time to design and implement after announcement, and consequently, even with 
the lag in the reporting time of Form SHO data, a corporate manager might review the data 
around significant announcements to better understand how some Managers viewed a particular 
project or announcement. For example, if large short positions were built shortly after a 
corporate project announcement, then this may help signal to a corporate manager that the 
market viewed that project announcement negatively, and this information could enhance the 
corporate manager’s decision-making on the project. 
In another aspect, short sellers, and particularly large short sellers with the resources to 
perform fundamental research, serve as valuable external monitors of management.
 If a corporate 
manager knows that short sellers are monitoring their actions and financial statements and are 
willing to expose wrongdoing, then they are less likely to engage in fraud or do other things that 
may hurt the value of the company. Historically, short sellers have, at times, through doing 
research, uncovered fraudulent behavior.
653
 Academic research has also shown that even the 
 
652
 See, e.g., James B Kau, James S. Linck, and Paul H. Rubin, Do Managers Listen to the Market?,14 (4) J. 
OF CORPORATE FIN.  347-362 (2008). 
653
 See, e.g., A. Dyck, A. Morse, and L Zingales, Who Blows the Whistle on Corporate Fraud?, 65(6) THE J. 
OF 
FIN.  2213-2253 (2010) (using a large sample of fraud cases between 1996 and 2004, the authors find 
that short sellers uncovered the fraud in nearly 15% of cases.). See also Cassell Bryan-Low and Suzanne 
McGee, Enron Short Seller Detected Red Flags in Regulatory Filings, THE WALL STREET J. (Nov. 5, 2001) 
(discussing an Enron short seller that detected red flags reviewing, among other things, the company’s SEC 
filings) (retrieved from Factiva database). Cf. Nessim Mezrahi et al., More Securities Class Actions May 
Rely on Short-Seller Data, L
AW360 (Jan. 10, 2022, 7:07 PM) available at 
https://www.law360.com/articles/1453499/ more-securities-class-actions-may-rely-on-short-seller-data 
 

230 
threat of short selling serves to discipline managers.
654
 As discussed in Parts VI.C.1 and VI.C.2, 
Rule 13f-2 may discourage Managers from performing fundamental research. If less fundamental 
research is performed by short sellers,
655
 then their role as monitors of the firm diminishes. Less 
monitoring might lead to higher incidences of fraud as managers feel that the likelihood of being 
caught declines.
656
 Thus, to the extent that Rule 13f-2 and Form SHO discourage fundamental 
research it may lead to both an increase in the total amount of corporate fraud in the economy as 
well as decrease the fraction of fraudulent actors that are discovered by investors. 
5. Effect on the Securities Lending Market 
As discussed in Parts VIII.C.1 and VIII.C.2, the adopted rule and related Form SHO will 
increase the cost of short selling, particularly large short positions – potentially leading to less 
overall short selling. As discussed in Part VIII.C.2, short sellers must borrow shares for their 
short position. When short sellers borrow shares, they pay a borrowing fee to the owner of the 
share. These fees can represent a significant source of revenue for pension funds, mutual funds, 
and others who engage in securities lending.
657
 Consequently, to the extent that the adoptions 
discourage short selling, they may also lower overall portfolio returns, including for institutional 
investors that engage in securities lending.
658
 
 
(authors’ “analysis of 131 Rule 10b-5 securities class actions indicates that plaintiffs continue to rely on 
short-seller research to substantiate fraud-on-the-market claims”).  
654
 See, e.g., Massimo Massa, Bohui Zhang and Hong Zhang, The Invisible Hand of Short Selling: Does Short 
Selling Discipline Earnings Management? 28 (6) T
HE REV. OF FIN. STUDIES 1701-1736 (2015).  
655
  See supra Part VIII.C.2 for a discussion of the potential for the final rule to reduce the incentives for short 
sellers to conduct fundamental research.  
656
 See, e.g., Paul Povel, Rajdeep Singh, and Andrew Winton, Booms, Busts, and Fraud, 20 (4) THE REV. OF 
FIN. STUDIES 1219-1254 (2007) (linking variations in monitoring intensity to the incidence rate of financial 
fraud.). 
657
 See supra note 563. 
658
 Commenters on the Short Sale Reporting Study Required by Dodd-Frank Act section 417(a)(2) argue that 
increased public short selling disclosure may result in reduced short selling, thereby lowering revenues to 
 

231 
6. Compliance Costs 
The Commission believes that there will be direct costs associated with adopted Rule 
13f-2, Form SHO, and the CAT amendment. These costs include Managers reporting position 
and activity data, broker-dealers updating CAT reporting processes, and the Commission 
processing and releasing the Manager reports through EDGAR. Rule 13f-2, related Form SHO, 
and the amendment to CAT in aggregate, will result in an estimated maximum of $119,975,800 
in initial costs and $72,026,064 in annual costs.
659
 
The Commission received several comments from industry groups concerned about the 
cost of implementing Rule 13f-2, Form SHO, and the CAT amendment. One commenter stated 
that Managers currently do not have systems in place to comply with Rule 13f-2, Form SHO, and 
the CAT amendment. Multiple commenters stated that there would be high costs associated with 
tracking positions for the purpose of seeing if they had crossed the Reporting Thresholds.
660
 
Another commenter stated that the Commission’s estimated costs in the proposing release, in 
general, were “materially understated”.
661
 However, the Commission has attempted to use the 
applicable resources available to it to estimate the costs of implementing adopted Rule 13f-2, 
Form SHO, and the CAT amendment. The Commission did not receive any information from 
 
institutions that maintain long positions in equities for extended periods (such as pension funds). See, e.g., 
2011 Letter from Alternative Investment Management Association, available at 
https://www.sec.gov/comments/4-627/4627-138.pdf.  
659
  See supra Table 1, Table 2, and Table 3 in Part VII. These costs assume 1,000 Managers would file Form 
SHO annually and 35 Managers would file amendments each month. The initial costs are calculated by 
adding the Form SHO Initial Technology Projects cost, the CAT: Central Repository – Short Sale Data 
cost, CAT: Reporting of Bona Fide Market Making Exception – Insourcers cost, and the CAT: Reporting 
of Bona Fide Market Making Exception – Outsourcers cost. ($118,950,000 + $113,800 + $870,000 + 
$42,000 = $119,975,800). The annual costs are calculated by adding the Form SHO Filings cost, the Use of 
Structured XML-Based Data Language cost, the Amended Form SHO Filings cost, and the amending Use 
of Structured XML-Based Data Language cost. ($60,326,400 + $9,264,000 + $2,111,424 + $324,240 = 
$72,026,064). See also infra Part VIII.C.6.a and Part VIII.C.6.c for further explanations of these costs.  
660
 See infra note 679. 
661
 See MFA Letter, at 19. 

232 
commenters that might otherwise have been used to refine or adjust its estimates of the 
implementation costs of adopted Rule 13f-2, Form SHO, and the CAT amendment. Thus, the 
Commission believes its estimates to be reasonable given the information it has available. 
Furthermore, the Commission has adjusted estimates in response to policy choices that differ 
from the Proposing Release, some of which will lower compliance costs, including the exclusion 
of the “buy to cover” proposals (proposed Rule 205 and the related CAT amendment) and a 
change to one of the reporting thresholds that will likely result in fewer Managers having to 
report Form SHO. As discussed in Part II.B, these policy changes, to the extent possible, address 
or are in response to statements from commenters regarding costs stemming from the Proposing 
Release.  
a. Form SHO Compliance Costs 
The Commission believes that Managers will incur an initial technology-related burden 
to update their current systems to capture the required information and automate and
 facilitate the 
completion and filing of Form SHO.
662
 While Managers likely have other existing reporting 
obligations that are similar to Form SHO filing obligations, Managers will need to update their 
systems to ensure timely and accurate filing of the specific information required under Form 
SHO.
663
 The estimated aggregate cost of Form SHO initial technology projects across all 
Managers ranges from $29,975,400 to $118,950,000. The Commission estimates that between 
252
664
 and 1,000 Managers will be required to file Form SHO. The lower estimate is based on 
 
662
  See supra Part VII.4. 
663
  See infra Part VIII.C.6.c. 
664
  In the Proposing Release, the Commission estimated 346 Managers would be required (on the low end of 
the estimate). The Commission changed the parameters for this estimate to match the scenario of a $10 
million daily average over the month or 2.5% daily average over the month of shares outstanding 
thresholds that are being adopted as Threshold A. 

233 
the number of Form SH filers above Threshold A. The actual number of reporting Managers will 
likely be higher than our low estimate, because Managers that exercise investment discretion 
with respect to accounts holding section 13(f) securities having an aggregate fair market value of 
less than $100 million were not required to file Form SH.
665
 However, the actual number of 
reporting Managers will likely be lower than the Commission’s high estimate, since this estimate 
is also based on an initial analysis of Form SH filings, which were filed weekly and therefore 
more likely to trigger reporting thresholds, as compared to adopted Form SHO, which will 
involve monthly assessment and therefore require a longer-held large short position to trigger a 
reporting threshold.
666
 The Commission discusses the use of Form SH Data, including 
commenter concerns about the use of the data in this and other contexts, in Box 1: Use of Form 
SH Data.  
 
665
 See Proposing Release, at Table I. See also Proposing Release, at 14963 for more information on the 
methodology and caveats of using Form SH data.  
666
 See Disclosure of Short Sales and Short Positions by Institutional Investment Managers, 73 FR 61679. 
Form SH filers filed weekly reports. As a result, each reporting manager would file fewer reports under 
Rule 13f-2, because Form SHO would be filed monthly. See also 73 FR 61686 (estimating 1,000 weekly 
Form SH filings by reporting Managers). 

234 
Box 1: Use of Form SH Data: 
The Commission’s estimation of the minimum number of Managers likely to report Form 
SHO draws on an analysis of data collected under Form SH, the only existing data source of 
individual Manager-level short sale positions. In addition to estimating the minimum number of 
reporting Managers, the Economic Analysis also uses Form SH data for comparisons of alternative 
thresholds and to estimate the share and number of potential reported securities with only one 
reporting Manager, the potential share of gross short sale dollar volume covered by reporting 
Managers, and statistics on potential holding periods after hitting a threshold.  
The Commission received several comment letters questioning the applicability of Form SH 
data to the current time period.
a
 One commenter stated that the period surrounding the filing of 
Form SH was an abnormal period for financial markets, and also stated that many prominent short 
sellers have left the industry.
b
 While there are various limitations to be considered when using Form 
SH data,
c
 Form SH data are the most relevant and applicable source of data available for the 
purposes of estimating the costs of the design and analysis of Rule 13f-2. There are no other data 
sources, public or regulatory, which specifically track Managers’ short position activities in the U.S. 
While the Commission agrees that having more current data would be useful for the purposes of 
Rule 13f-2’s design and analysis, no commenters provided such data, and the Commission believes 
Form SH data are sufficiently informative to analyze the predicted impact of the amendments.
d
  
Further, in response to these comments, the Commission analyzed FINRA short interest data 
over the period of 2008 to present with the goal of seeing if short interest was comparable between 
the current period and the period surrounding Form SH filings.
e
 Specifically, we compared the trend 
of average short interest to the trend of the number of equities counted from each FINRA short 
interest files covered 2009 to 2023. The analysis revealed that the average short interest per equity 
symbol has increased over time by approximately 46 percent, while the number of symbols has 
increased at a much slower rate of 17 percent. Thus, we observe that the average short interest per 
equity symbol has increased from 2009 to present. However, the Commission cannot assess whether 
the size of Manager positions has changed over time.
f
 Without this piece of knowledge, it is 
indeterminate whether the average amount of short interest generated by a manager has changed 
over time. If there are currently more Managers relative to 2008, it is possible that the average short 
position per manager is smaller than during the period Form SH was used. Conversely, if there are 
fewer Managers, it is likely the average short position per manager has increased relative to 2008.  
a
 See, e.g., Law and Finance Professors Letter, at 3; AIMA Letter at 11-12; Two Sigma Letter at 5-6. 
b
 See Law and Finance Professors Letter, at 3. 
c
 See supra Part VIII.B.4.e and note 670 for a discussion of limitations in the use of Form SH data. See also Part VII.B.1 
for a discussion of other ways Form SH data differ from Form SHO data. 
d
 See supra Part II.A.3 for additional discussion of comments regarding the Reporting Thresholds and note 177 for 
further discussion of the time period of the data.   
e
 FINRA Short Interest data are available at https://www.finra.org/finra-data/browse-catalog/equity-short-interest/data. 
See also Part VIII.B.4 a for further information about FINRA Short Interest Data.  
f
 See supra Part VII.B.1 for a discussion of estimates of the number of affected Managers using Form SH, which most 
closely mirrors the criteria of Rule 13f-2 and Form SHO and how the number may have changed over time.  
 

235 
The Commission estimates that the annual cost to Managers for filing Form SHO ranges 
from $15,202,252 to $60,326,400.
667
 The Commission estimates that Managers will collectively 
spend an additional $2,334,528 to $9,264,000 per year to structure Form SHO directly in Form 
SHO-specific XML.
668
 The Commission estimates that the Managers that will file amended 
Form SHOs will collectively spend $542,938 to $2,111,424 per year to file amended Form 
SHOs.
669
 Further, the Commission estimates that Managers filing amended Form SHO will 
collectively spend an additional $83,376 to $324,240 per year to structure Form SHO directly in 
Form SHO-specific XML.
670
 The Commission thus estimates that the aggregate cost of 
structuring and filing Form SHO across all Managers ranges from $18,163,094 to 
$72,026,064.
671
 Costs might be underestimated to the extent that wages are higher than those 
used in the estimation. The initial costs are likely higher than the lower bound estimates as 
Managers who may not file Form SHO on a monthly basis will likely still incur the initial costs. 
Furthermore, because Manager short positions are fluid, some Managers will not be required to 
file a report every month when they do not cross the reporting threshold. As a result of this 
 
667
 See supra PRA Table 2 and note 450. The lower estimate was calculated using 252 Managers. 20 hours per 
filing x 252 filings by Managers each month x 12 months x $251.36 = $15,202,252. The Commission 
estimates that 252 Managers would have been required to file Form SH had Form SH been subject to the 
same $10 million and 2.5% threshold. 
668
  See infra Part VIII.C.6.c and infra note 686. The lower estimate was calculated as follows: 2 hours per 
filing x $386 per hour for a programmer x 252 filings by Managers each month x 12 months = $2,334,528. 
669
  See supra PRA Table 1 and accompanying text discussing amended Form SHO estimates. We maintain the 
assumption of 3.5% of Managers amending monthly in all of our estimated costs for amending Form SHO. 
Using the lower estimate of 252 Managers, this would result in 9 Managers filing amendments monthly. 20 
hours per filing x 9 filings by Managers each month x 12 months x $251.36 per hour = $542,938.  
670
  Using the lower estimate of 9 Managers filing amendments monthly would result in $83,376 to structure 
amended Form SHO filings in Form SHO-specific XML. 2 hours per filing x 9 filings by Managers each 
month x 12 months x $386 per hour = $83,376. 
671
  See supra PRA Table 2. These costs are calculated by adding the costs for Form SHO Filings, Use of 
Structured XML-Based Data Language, Amended Form SHO Filings, and the amending Use of Structured 
XML-Based Data Language together. For the lower estimate, we calculate using 252 Managers filing each 
month annually and 9 Managers filing amendments monthly. ($15,202,252 + $2,334,528 + $542,938 + 
$83,376 = $18,163,094). 

236 
fluidity, ongoing costs could be lower than our estimates. Moreover, to the extent that the 
number of reportable short positions varies across Managers, the costs to track and report those 
positions will also vary by Manager. Initial costs might also be higher for some Managers who 
do not currently have systems built to report to EDGAR.
672
 By contrast, because we expect 
Managers will have a financial incentive to automate the reporting process by leveraging Form 
SHO-specific XML reporting, the aggregate costs associated with Form SHO-specific reporting 
may be meaningfully lower going forward.
673
  
For some Managers, there may be additional considerations, which may increase costs. 
For example, rules for filing Form SHO require Managers to prevent duplicative reporting.
674
 
The burden to ensure that duplicative reporting doesn’t occur will vary by Manager and will 
depend on whether two or more Managers exercise investment discretion over the same 
reportable securities position. Also, Managers managing multiple accounts with short positions 
requiring aggregation may have additional costs associated with the aggregation when modifying 
systems to track the Reporting Thresholds and report positions on Form SHO. 
The Commission believes the need to amend Form SHO may vary by familiarity with 
filing Form SHO. These costs may be more common for Managers who do not hold short 
positions often and are likely to decrease with time as Managers become more experienced with 
filing Form SHO. As part of updating systems to comply with the reporting requirements of Rule 
13f-2, Managers must calculate the market value of their position using the official closing price 
as of the close of regular trading hours for the trade settlement date in question at the end of the 
 
672
  Most Managers will be familiar with EDGAR filing requirements through other reporting obligations, such 
as Form 13F. See supra notes 193 and 452. See also infra Part VIII.C.6.c. 
673
  See supra note 451 and infra note 711. 
674
 See Form SHO, General Instructions at Rules to Prevent Duplicative Reporting. 

237 
month, which may not be the fair market value at the time in which the trade occurred.
675
 
However, the Commission believes that in most cases this will be a small burden on Managers as 
the data needed for the calculation will be publicly available and that Managers may already 
track the end of day fair market value of short positions. Even in cases that the reportable equity 
security is not traded on an exchange, the Commission believes that Managers may be able to 
calculate the value of their short positions by using publicly available closing prices from the 
OTC Reporting Facility. In circumstances where closing prices of non-reporting company issuers 
are not available, the Commission believes the tracking such information will still not impose a 
large burden as a Manager can use the price at which they last purchased or sold any share of 
that security, which will be readily available to the Manager.  
b. Costs of Tracking Threshold Status 
There will be costs associated with tracking short positions in relation to the threshold.
676
 
Particularly, after the last day of each calendar month, Managers must calculate their average 
short positions over the month to be aware if their average daily gross short position exceeds $10 
million
677
 or 2.5 percent of shares outstanding; or in the case of equity securities of non-reporting 
company issuers, if Managers meet or exceed a gross short position of $500,000 at the close of 
regular trading hours on any settlement date. However, the Commission believes that the 
Reporting Thresholds will generally limit the burden on Managers, in aggregate, as fewer 
 
675
 See Form SHO, General Instructions at INSTRUCTIONS FOR CALCULATING REPORTING 
THRESHOLD. See also PRA Table 2 in Part VII for an estimate of these burden hour. 
676
 As stated in the proposing release, based on the number of registered investment companies reporting short 
positions and the number of hedge funds engaged in a strategy including short selling, we continue to 
anticipate that only a small fraction of Managers is likely to have monitoring responsibilities pursuant to 
the rule and, given the Reporting Thresholds and the modification of Threshold A, an even smaller fraction 
is likely to have reporting obligations. Proposing Release at 14998 n. 298.  
677
  Under Proposed Form SHO, the threshold was triggered if a gross short position exceeded $10 million on a 
single day. Adopted Form SHO requires a daily average gross short position of $10 million over the month. 

238 
Managers will be required to report than if the Commission did not adopt an amended reporting 
threshold. For example, the Commission believes that certain types of Managers that carry short 
positions will not meet a Reporting Threshold.
678
 Additionally, certain types of Managers may 
be less likely to meet the threshold, resulting in lower overall costs for these Managers.
679
 Using 
Form SH data, the Commission estimates that an average of 442 Managers were required to file 
Form SH each month under the threshold in place during temporary Rule 10a-3T. However, only 
252 eligible Managers would have been required to file had Threshold A of adopted Form SHO 
been in place instead of the threshold in temporary Rule 10a-3T.
680
  
The Commission received several comment letters that described what they believed 
were the high cost of monitoring with respect to the thresholds to file Form SHO under Rule 13f-
2.
 
681
 One commenter stated that the cost of daily monitoring would be high, although no specific 
estimated cost is provided.
682
 While the costs would likely be higher if firms choose to monitor 
daily, Rule 13f-2 does not require daily monitoring, either for reporting or non-reporting stocks.  
For Managers engaged in shorting selling, the rule necessitates that Managers calculate 
their average daily gross short position in equity securities for which they have conducted short 
 
678
 See supra Part VIII.B.1 for a discussion on why certain types of Managers are more likely to have reporting 
requirements. For example, market makers and algorithmic technical traders are not likely to meet the 
thresholds because they generally close their positions by the end of the day.  
679
  However, Managers that trigger a threshold(s) but do not currently report to EDGAR may face additional 
compliance costs associated with Rule 13f-2. 
680
 The lower number of estimated reporting Managers in Form SHO compared to Form SH is due to the fact 
that the Reporting Thresholds are higher for Form SHO than Form SH in Threshold A (average daily gross 
position of $10 million vs. a single day threshold of $10 million, and 2.5 % of shares outstanding vs. 0.25 
% of shares outstanding). This estimate differs from the Proposing Release due to modification of the part 
of the threshold from $10 million daily to $10 million average daily over the month. Commenters 
questioned the use of Form SH data in this and other contexts. See supra Box 1: Use of Form SH Data for 
responses to comments on the use of these data. 
681
  See, e.g., MFA Letter, at 13; AIMA Letter, at 12-14; ICI Letter, at 5; Ropes & Gray Letter, at 2 and 5-7; 
SBAI Letter, at 4; SIFMA Letter, at 4, 7-8, and 13-19; T. Rowe Price Letter, at 3-4, Two Sigma Letter, at 
6-7 and 10. 
682
  See ICI Letter, at 11. 

239 
sales during that calendar month in order to know if they are required to file Form SHO within 
14 days of the end of that month.
683
 Managers may choose to do this calculation on a rolling 
basis, or to do the calculation after the month has ended. While some Managers may choose to 
incur the higher costs of daily tracking and calculation for purposes of compliance with Rule 
13f-2, the final rule’s Threshold A is not based on a Manager’s gross short position on a single 
trading date, reducing the need for daily tracking. 
The Commission understands that the cost of tracking short positions might be higher for 
certain types of equity securities. For example, tracking the short position in an ETF as a percent 
of shares outstanding will be more difficult as the number of shares outstanding changes 
frequently. Additionally, Managers who hold short positions in non-reporting company issuers 
may have difficulty calculating the value of their position, however Managers may use the last 
price at which the Manager traded even though the price may be stale.
684
  
c. Cost of Reporting Form SHO to EDGAR 
Requiring Form SHO to be filed on EDGAR in Form SHO-specific XML will not impose 
significant incremental costs on Managers. The Commission expects most Managers who will be 
required to file Form SHO will likely have experience filing EDGAR forms that use similar 
EDGAR Form-specific XML data languages, such as Form 13F. In that regard, the process for 
filing Form SHO, as well as the XML-based data language used for Form SHO, will be similar 
 
683
  As discussed in supra Part II.A.3, Managers with gross short sale positions that exceed a daily average 
during the previous month of $10 million or a daily average of 2.5% of a reporting firm’s shares 
outstanding will have to file Form SHO. With regard to short sale positions of non-reporting firms, 
Managers will have to file Form SHO if their short sale position exceeded $500,000 on any single day 
during the previous month. 
684
  See supra Part II.A.3.b for discussion of comments received related to tracking non-reporting company 
short positions. 

240 
to the filing process and data language used for Form 13F.
685
 We expect that Managers with such 
experience that choose to file Form SHO directly in Form SHO-specific XML will incur some 
compliance costs associated with doing so.
686
  
In addition, Managers will be given the alternate option of filing Form SHO using a 
fillable web form that will render into Form SHO-specific XML in EDGAR, rather than filing 
directly in Form SHO-specific XML using the technical specifications published on the 
Commission’s website. We expect Managers who do not have experience filing Form 13F or 
other EDGAR Form-specific XML filings will likely choose this option. In that regard, 
Managers are only required to file Form 13F if they exercise investment discretion with respect 
to accounts holding section 13(f) securities having an aggregate fair market value on the last 
trading day of any month of any calendar year of at least $100 million.
687
 Of Managers that do 
not have experience filing Form 13F, only a subset are subject to other EDGAR Form-specific 
XML filing requirements.
688
 For any Managers that choose to file Form SHO using a fillable 
 
685
 See EDGAR Filer Manual (Volume II) version 67 (September 2023), at 9-1 (“EDGAR Filer Manual 
Volume II”) (describing process for submitting Form-specific XML filings directly to EDGAR); see also 
Form 13F XML Technical Specification, available at https://www.sec.gov/edgar/filer-information/current-
edgar-technical-specifications. 
686
 See supra PRA Table 2 (estimating the ongoing burden for the Form SHO-specific XML requirement at 
two hours per Manager per filing and two hours per amended filing). These estimates conservatively 
assume that Managers will structure their filings in Form SHO-specific XML, incurring $772 (2 hours x 
$386 per hour for a programmer = $772) per filing or amended filing, rather than use a fillable form. 
Assuming 1,000 Managers filing 12 Form SHO filings per year would equal 12,000 filings per year, 
resulting in 24,000 total annual industry burden hours (12 filings x 1,000 Managers x 2 hours = 24,000) and 
$9,264,000 in industry costs for filings per year (24,000 hours * $386 per hour = $9,264,000) attributable to 
the Form SHO-specific XML requirement. In addition, based on an estimate of 420 amended filings per 
year, the total industry cost for the Form SHO-specific XML would be $324,240 for amended filings (420 
amended filings x 2 hours per amended filing x $386 per hour = $324,240). As such, the total annual 
industry cost attributable to the Form SHO-specific XML requirement (including amended filings) is 
$9,588,240 ($9,264,000 for filings + $324,240 for amended filings = $9,588,240). Using a lower estimate 
of 252 Managers would result in $2,417,904 in total annual industry costs to structure initial and amended 
filings in Form SHO-specific XML. See supra note 517. 
687
 See 17 CFR 240.13f-1(a). 
688
 For example, registered brokers or dealers that are subject to the reporting requirements set forth in 17 CFR 
240.17h-2T must file Form 17-H either electronically or in paper. Those that choose to file electronically 
 

241 
web form, whether or not they have prior experience with filing forms in EDGAR Form-specific 
XML, the Form SHO-specific XML requirement (i.e., the requirement to place the collected 
information in a fillable web form provided by EDGAR, rather than in an HTML or ASCII 
document to be filed on EDGAR as is required for most other EDGAR forms) will not impose 
any additional compliance costs.
689
  
d. Costs associated with reporting Bona Fide Market Making locate 
exception to CAT 
The 25 Plan Participants will face costs associated with the CAT amendment, as they will 
be required to engage the Plan Processor to modify the Central Repository to accept and process 
new short sale data elements on order receipt and origination reports. Additionally, the 
Commission estimates an external cost of $4,522 per participant or $113,800 total to compensate 
the Plan Processor for staff time required to make the initial necessary programming and systems 
changes.
690
 However, these initial costs might be higher if the Commission underestimated the 
time and wages necessary for programming and systems changes for the plan processor to accept 
and process new data elements. Furthermore, the Commission believes that CAT amendment 
will not impose additional ongoing cost to Participants beyond those costs already accounted for 
 
must file Form 17-H partially in EDGAR Form-specific XML. Insurance companies may offer variable 
contracts that are registered under the Investment Company Act of 1940, and would thus be required to file 
annual reports on Form N-CEN in EDGAR Form-specific XML as well as, in some cases, monthly 
portfolio information on Form N-PORT in EDGAR Form-specific XML. Corporations may make exempt 
offerings and be required to file Form 1-A, Form C, or Form D in EDGAR Form-specific XML either in 
part or in full, depending on the nature of the offering. 
689
 See 17 CFR 232.101(a)(1)(iv); 17 CFR 232.301; EDGAR Filer Manual Volume II at 5-1 (requiring 
EDGAR filers generally to use ASCII or HTML for their filed documents, subject to certain exceptions). 
690
 See supra note 475. 

242 
in existing Paperwork Reduction Act estimates that apply for Rule 613 and the CAT NMS Plan 
approval order.
691
 
The Commission believes that the CAT a mendment involving the bona fide market 
making exception from the locate requirement will impose a one-time cost to Industry 
Members.
692
 These costs will involve creating an additional field in the order origination report. 
Some broker-dealers will incur ongoing costs related to the recording of the use of the BFMM 
locate exception.
693
 To the extent that broker-dealers are not already recording the use of the 
exception, broker-dealers may have costs to inputting the use of the exception into their current 
systems.
694
   
The Commission recognizes that costs will vary broadly across Industry Members, 
particularly depending on whether the Industry Member outsources the provision of an order 
handling system and regulatory data reporting to a service provider. In the CAT NMS Plan 
Approval Order,
695
 the Commission identified 126 Industry Members that do not outsource these 
activities. For these Industry Members, implementation is likely to require changes both to their 
order handling systems as well as their regulatory data reporting systems that produce their CAT 
reporting data. Additionally, 58 insourcing Industry Members will incur an aggregate initial cost 
of $870,000 or $15,000 individually to update systems to facilitate reporting the new bona fide 
 
691
 See supra Part VII.C.4 for more information on costs for CAT Plan Participants. 
692
 Id.  
693
  The Commission believes these costs will be comparable to those estimated in the Proposing Release in 
connection to the burden of marking an order. The Commission estimates that recording (marking) this 
information will take between 0.42 and 0.5 seconds per trade, with an annual time burden per Manager 
equal to 592-7,104 hours. See Table 3 from Proposing Release at 14975, available at 
https://www.sec.gov/files/rules/proposed/2022/34-94313.pdf. 
694
  See supra Part IV.B for description of Industry Members’ use of BFMM. 
695
 See CAT NMS Plan Approval Order, 81 FR 84860. 

243 
market making exception elements to CAT.
696
 However, this cost might be lower if the 
Commission is overestimating the number of insourcing industry members, in particular, the 
additional cost might drive some insourcing industry members to begin to outsource. The 
Commission believes that ongoing costs associated with reporting the newly required 
information to CAT will already be covered by ongoing cost estimates included in its cost 
estimates for the CAT NMS Plan. The Commission further believes that similar implementation 
and ongoing costs will be borne by each of the service providers that provide order handling 
systems and regulatory data reporting services to Industry Members that outsource these 
systems.
  
For Industry Members that outsource, the Commission believes that implementation costs 
will be far lower because the service bureaus that provide them with order handling systems and 
regulatory data reporting services will adapt those systems on their customers’ behalf.
697
 
Additionally, 42 outsourcing industry members will incur an aggregate one-time cost of $42,000 
or $1,000 individually to update systems to facilitate reporting the new bona fide market making 
exception elements to CAT.
698
 However, these costs might be higher if some current insourcing 
industry members begin to outsource as a result of the increased costs, which will lead to an 
overall reduced cost for the rule as outsourcing is less costly than insourcing. The Commission 
believes that the costs of service bureaus adapting those systems will be passed to their Industry 
Member customers.
  
 
696
 See supra Part VII.C.4.  
697
 One commenter stated that support from third-party data service providers could make Form SHO 
reporting less burdensome. See S3 Letter, at 5. 
698
 See supra Part VII.C.4 

244 
e. Comparison to Rule 10a-3T Costs 
The Commission is cognizant of the burdens Managers experienced of filing Form SH in 
compliance with temporary Rule 10a-3T and has designed Rule 13f-2 and Form SHO to attempt 
to reduce those burdens. First, commenters on the temporary Rule 10a-3T stated that the 0.25 
percent threshold was too low.
699
 The two-pronged threshold in Rule 13f-2 is higher than the 
threshold in Rule 10a-3T, reducing the number of Managers likely to have a reporting obligation. 
For example, the Commission estimates that only 28 percent of positions reported under Rule 
10a-3T will be required to report given the higher threshold in Rule 13f-2 and Form SHO, while 
still collecting 78 percent of the dollar value.
700
 Additionally the threshold might be less 
burdensome to assess than the one in Rule 10a-3T because it requires the Manager to assess 
whether it is above the threshold on a monthly basis rather than on each individual day.
701
 
Second, many commenters believed that weekly reporting was overly burdensome.
702
 The short 
selling information required by Rule 13f-2 and Form SHO will be reported less frequently 
(monthly rather than weekly) and will involve reporting end of month positions rather than daily 
 
699
 See Temporary Rule 10a-3T Comment letters (including Seward & Kissel LLP Letter), available at 
https://www.sec.gov/comments/s7-31-08/s73108-43.pdf; MFA Letter, available at 
https://www.sec.gov/comments/s7-31-08/s73108-41.pdf; IAA Letter, available at 
https://www.sec.gov/comments/s7-31-08/s73108-38.pdf; ICI Letter, available at 
https://www.sec.gov/comments/s7-31-08/s73108-47.pdf; SIFMA Letter, available at 
https://www.sec.gov/comments/s7-31-08/s73108-52.pdf. See also supra Part III.D.2. (for more information 
on Threshold A using Form SH data). 
700
 See Proposing Release at Economic Analysis Table I: Various Threshold Levels for Monthly Average 
Positions and Monthly Maximum Dollar Value. However, the Commission recognizes that temporary Rule 
10a-3T was in effect in 2008-2009 and the market may be different, particularly the average short position 
may be larger. Only Managers that exercise investment discretion with respect to accounts holding section 
13(f) securities having an aggregate fair market value of at least $100 million were required to file Form 
SH. Additionally, the data lacked data validation according to the needs of the end user when filed, making 
the data hard to work with. 
701
 This example assumes the equity is from a reporting company. Thresholds for non-reporting companies are 
triggered following a single day in which the short sale position exceeds $500,000. See supra Part II.A.3 
702
 See supra note 697 for the comment letters in note, as well Coalition of Private Investment Companies 
letter, available at https://www.sec.gov/comments/s7-31-08/s73108-46.pdf. 

245 
positions. Third, Managers will have more time to compile and file the Form SHO reports than 
they had to compile Form SH.  
Notwithstanding these cost-reducing differences, the Commission does recognize that 
other differences might offset some or all of these cost reductions. In particular, Rule 13f-2 and 
Form SHO will require that the information on activity include daily records if the Manager 
exceeds a position threshold that month rather than include daily records if the Manager exceeds 
an activity threshold that week.
703
 Also, unlike the Form SH required under Rule 10a-3T, the 
Form SHO that will be required by Rule 13f-2 will feature an XML schema that will incorporate 
technical validations of certain data fields on the Form, and will flag technical errors and require 
the filer to correct the technical errors before successful submission on EDGAR. However, 
because the field validations implemented by Rule 13f-2 and Form SHO will be limited to 
technical errors (e.g., letters instead of numbers in a field requiring only numbers) that will be 
straightforward to resolve, such resubmission costs will not be significant. Finally, the rule might 
impose costs on Managers who were not required to report Form SH because Rule 10a-3T and 
Form SH did not apply to Managers that exercise investment discretion with respect to accounts 
holding section 13(f) securities with an aggregate fair market value of less than $100 million. 
f. Other Compliance Costs 
One commenter stated that the Commission should consider that “the sheer number and 
complexity of the Proposals, when considered in their totality, if adopted, would impose 
 
703
 Rule 10a-3T required institutional investment managers to report beginning and end of day short position, 
number of securities sold short each day if the particular data item exceeded the threshold. See P 3 final 
Rule 10a-3T, 73 FR 61678 (Oct. 17, 2008), available at https://www.sec.gov/rules/final/2008/34-
58785fr.pdf. However, in analysis of Form SH data intraday short selling volume could not be examined 
for Form SH because the data field for “Number of Securities Sold Short” was populated in only 7% of 
observations after filters were applied. See Proposing Release note 80 at 14963 for more information on 
short volume in Form SH data. 

246 
staggering aggregate costs, as well as unprecedented operational and other practical 
challenges.”
704
 But, consistent with its long-standing practice, the Commission’s economic 
analysis in each adopting release considers the incremental benefits and costs for the specific 
rule—that is the benefits and costs stemming from that rule compared to the baseline. In doing 
so, the Commission acknowledges that in some cases resource limitations can lead to higher 
compliance costs when the compliance period of the rule being considered overlaps with the 
compliance period of other rules. In determining compliance periods, the Commission considers 
the benefits of the rules as well as the costs of delayed compliance periods and potential 
overlapping compliance periods.  
In this regard, some commenters mentioned the proposals which culminated in the recent 
adoptions of Rule 10c-1a, Beneficial Ownership Reporting, Private Fund Advisers, Settlement 
Cycle Adopting Release, and May 2023 SEC Form PF Amending Release.
705
 The Commission 
acknowledges that there are compliance dates for certain requirements of these rules that overlap 
in time with the final rule, which may impose costs on resource constrained entities affected by 
multiple rules.
706
  
However, we do not think these increased costs from overlapping compliance periods 
will be significant for several reasons. First, the number of Managers who will also be subject to 
one or more of these recently adopted rules could be limited; we estimate that 252 to 1000 
Managers may be required under the final rules to report on new Form SHO, and of those, 
 
704
  NAPFM Letter 3. 
705
  See supra note 499. As stated above, commenters also specifically suggested the Commission consider 
potential overlapping compliance costs between the final rule and certain proposing releases. See supra 
note 505. These proposals have not been adopted and thus have not been considered as part of the baseline 
here. To the extent those proposals are adopted in the future, the baseline in those subsequent rulemakings 
will reflect the regulatory landscape that is current at that time. 
706
  See supra notes 500-504 (summarizing compliance dates). 
 

247 
depending on their activities, only a portion may also be required to comply with one or more of 
the recently adopted rules raised by commenters (and even fewer may need to comply with more 
than one of those other rules).
707
 In addition, commenters’ concerns about the costs of 
overlapping compliance periods were raised in response to the proposal and as discussed above, 
we have taken steps to reduce costs of the final rule.
708
 Finally, although the compliance periods 
for these rules overlap in part, the compliance dates adopted by the Commission are generally 
spread out over more than a two-year period from 2023 to 2026.
709
 
7. Effect of Certain Electronic Filing and Dissemination Requirements 
Rule 13f-2 and Form SHO will require the short position and activity disclosures to be 
filed on the Commission’s EDGAR system using a structured, machine-readable data language. 
In particular, the rule and Form will require Form SHO to be filed on EDGAR in a custom 
XML-based data language specific to that Form (“custom XML,” here “Form SHO-specific 
XML”). The XML schema for Form SHO-specific XML will incorporate validations of certain 
data fields on the Form to help ensure consistent formatting and completeness.
710
 While the field 
 
707
  For example, broker-dealers who need to report on Form SHO under Rule 13f-2 will also need to comply 
with Settlement Cycle Adopting Release but may not need to comply with the requirements of any of the 
other recently adopted rules. 
708
  The final rule mitigates costs relative to the proposal in three ways. First, the reporting threshold for the 
U.S. dollar value-based prong for reporting company issuer securities is being adopted as a monthly 
average, rather than the daily end-of-day calculation that was proposed. See supra Part II.A.3.b. Second, 
Form SHO is being adopted without the proposed requirement to report hedging classifications in 
Information Table 1, and includes a streamlined Information Table 2, which reduces the form’s complexity 
and the granularity of the information reported. See supra Parts II.A.4.d.iii, II.A.4.d.iv. Third, proposed 
Rule 205 and related CAT reporting requirements are not adopted. See supra Part III.B. 
709
  For example, compliance periods for the May 2023 SEC Form PF Amending Release and the Settlement  
Cycle conclude by mid-2024 while reporting under the final rule will be required by the end of 2024 at the 
earliest. Similarly, certain compliance deadlines for Rule 10c-1a extend into early 2026. See supra notes 
500-504. 
 
710
 See supra Part II.A.4.b. Field validations are restrictions placed on each data element which would not 
allow a filer to file a form if there are certain technical errors in critical fields. If a Form SHO were to 
include, for example, letters instead of numbers in a field requiring only numbers, it would be flagged as a 
technical error, at which point the filer would either be unable to file the Form (if completed using the 
 

248 
validations will act as an automated form completeness check when a Manager files a Form 
SHO, the field validations will not be designed to verify the accuracy of the information filed in 
Form SHO filings. EDGAR will subsequently aggregate the reported information at the equity 
security level and release the aggregated data to the public on EDGAR. These requirements will 
incrementally augment the various effects of the short position and activity disclosures discussed 
herein by enhancing the accessibility, usability, and quality of the Form SHO disclosures (for use 
by the Commission) and the aggregate security-level disclosures (for use by the public). By 
requiring a structured machine-readable data language and a centralized filing location 
(EDGAR) for the disclosures on Form SHO, the Commission will be able to access and 
download large volumes of Form SHO disclosures in an efficient manner. To the extent that the 
efficiencies derived from the centralized filing of the Form SHO disclosures facilitate more rapid 
Commission response to potential market manipulation, investors could indirectly benefit from 
the fact that such practices are detected, and possibly addressed, earlier than might otherwise be 
the case.  
One commenter agreed with the Commission’s proposal to require Managers to provide 
Form SHO in EDGAR in a Form SHO-specific XML.
711
 Another commenter stated that “XML 
is a widely used language and therefore implementation and maintenance would keep costs low 
and efficiency high.”
712
 
 
 
fillable web form provided by EDGAR) or the filing would be rejected (if directly filed in EDGAR in Form 
SHO-specific XML). To complete the filing, the filer would need to correct the error and re-file. 
711
  See Comment Letter from Aaron Franz, available at https://www.sec.gov/comments/s7-18-21/s71821-
20120685-272855.pdf (“This form and forum are ideal for reporting purposes. Further, since the Form 
SHO is proposed to be published in XML format it should be easy for Managers to automate the process of 
filling and filing the Form SHO.”).  
712
  “[XML] would also allow for easy parsing and review of the data. The costs shouldn’t vary very much 
between managers as the SHO form should be uniform for all managers, which means they will all use 
similar implementations to conform to its usage.” Anonymous Comment Letter (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm. 

249 
Similarly, the provision of the aggregated security-level information at a centralized, 
publicly accessible location in a structured, machine-readable data language, will enable 
investors and other public data users to download the aggregated information directly, and the 
data might then be analyzed using various tools and applications. Placing the security-level 
information someplace other than a centralized location in a structured, machine-readable 
language would mean that data users seeking to analyze the information using tools and 
applications would need to search for, extract, and structure the security-level short position and 
activity information or pay a third-party vendor to do so. 
Requiring the short position and activity disclosures to be filed in Form SHO-specific 
XML will facilitate more thorough review and analysis of the reported short sale disclosures by 
the Commission, which will increase the efficiency and effectiveness with which the 
Commission could identify manipulative short selling strategies—which may also serve as a 
deterrent to would be manipulators and thus may help prevent manipulation. 
The requirement for short sale disclosures to be filed on EDGAR in Form SHO-specific 
XML will result in additional incremental compliance costs on filing Managers. These direct 
compliance costs are detailed in a subsequent section.
713
 Moreover, to the extent these 
incremental compliance costs further chill the incidence of short-selling, the EDGAR and Form 
SHO-specific XML requirements will increase the likelihood of the indirect costs that are 
discussed elsewhere in Parts VII.C.2, VII.C.3, VII.C.4, and VII.C.6. 
Some commenters expressed concerns with regard to the risks of cyber criminals 
accessing non-public Form SHO data.
714
 Although the SEC is not exempt from cyberattacks, the 
 
713
 See supra Part VIII.C.6. 
714
 See MFA Letter, at 8 and Two Sigma Letter, at 5. 

250 
Commission is pursuing several actions to protect SEC data and strengthen the EDGAR system 
as described above. The Commission recently deployed security and modernization 
enhancements focusing on technology upgrades to the EDGAR system.
715
 The Commission 
recognizes that the Rule collects sensitive information and that, while the likelihood of a data 
breach is low, the costs of a data breach could be substantial. These costs include but are not 
limited to the following: trading losses that could occur due to the revelation of private trading 
strategies or economic positions which may enable identifying and trading opportunistically 
around such strategies, such as facilitating a short squeeze; business disruptions that could occur 
if the data breach results in temporary system down time; data breach response costs as market 
participants must devote resources to determining how to respond to the data breach; and 
reputational harm to individual Managers and the broker-dealers that employ them. While the 
potential costs of a breach, to the extent that one occurs, could be severe, RNSAs, ATSs, and 
SROs, are currently subject to existing requirements designed to improve the resiliency and 
oversight of securities market technology infrastructure, such as Regulation Systems Compliance 
and Integrity (“Regulation SCI”) (17 CFR 242.1000 through 242.1007). Adherence to such 
regulations can reduce the probability of a data breach and mitigate the costs associated with a 
breach, should it occur. 
As stated previously, one commenter stated that the LEI and the FIGI of issuers is “not 
commonly provided” in other holding reports and would therefore cause Managers to incur 
additional costs.
716
 While LEIs are widely used in the global financial markets (for example, the 
 
715
  See Annual Report on SEC Website Modernization Pursuant to Section 3(d) of the 21st Century Integrated 
Digital Experience Act (Dec. 2022), available at https://www.sec.gov/files/21st-century-idea-act-report-
2022-12.pdf.  
716
  MFA Letter, at 9. 

251 
Commission currently requires funds to identify themselves with LEIs in portfolio holding 
reports on Form N-PORT),
717
 we agree that there are costs associated with obtaining and 
maintaining LEIs.
 
Currently, U.S. entities may obtain an LEI for a one-time fee of $60   and an 
annual renewal fee of $40.
718
  
FIGIs also are widely used in the financial markets, and the Commission recently added 
FIGI as an optional securities identifier on Form 13F.
719
 Further, FIGIs, which are automatically 
assigned and are retrievable and redistributable without licensing restrictions and at no cost,
720
 
are not expected to result in compliance costs for reporting persons. Lastly, firms can use 
identifier mapping tables, and thus likely would not need new technology systems to accept LEIs 
 
717
  Item A.1.d and Item A.2.c of Form N-PORT. See also Item B.1.d of Form N-CEN (requiring funds to 
disclose their LEIs on annual reports); 17 CFR 242.903(a) (requiring security-based swap participants to 
report LEIs to swap data repositories). Additionally, other U.S. and foreign regulators require firms to 
identify themselves with LEIs. For example, Commodity Futures Trading Commission (CFTC) regulations 
require counterparties to swaps, including interest-rate swaps, to report their LEIs. See 17 CFR 45.6 (CFTC 
LEI requirement for parties to swap transactions).  
718
  A U.S. entity can currently obtain and renew an LEI from one of eleven LEI operating units. See Get an 
LEI: Find LEI Issuing Organizations, G
LOB. LEGAL ENTITY IDENTIFIER FOUND., available at 
https://www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations (2023). One LEI operating unit 
currently discloses an initial fee of $60 and a renewal fee of $40. See Frequently Asked Questions, Fees, 
Payments & Taxes, B
LOOMBERG LEI, available at https://lei.bloomberg.com/docs/faq#what-fees-are-
involved (2023). 
719
  Special Instruction 11.b.iii of Form 13F. Based on Commission staff analysis of Form 13F filings in 
EDGAR, at least 500 unique filers have included FIGIs on their Form 13F filings since the amendments to 
Form 13F became effective on January 3, 2023. As of the second quarter of 2022, 1 billion FIGIs had been 
assigned to financial instruments. Financial Instrument Global Identifier Newsletter Q2 2022, O
PENFIGI 
(June 30, 2022), available at https://www.openfigi.com/about/news/2022/6/30/financial-instrument-global-
identifier-newsletter-q-2-2022. 
720
  ALLOCATION RULES FOR THE FIN. INSTRUMENT GLOB. IDENTIFIER (FIGI) STANDARD (OBJECT MGMT. GRP. 
& AM. NAT’L COMM. X9, amended 2022) section 1.2.1, available at 
https://www.openfigi.com/assets/local/figi-allocation-rules.pdf (“FIGI Allocation Rules”); Symbology, 
O
PENFIGI, available at https://www.openfigi.com/about/symbology. FIGI is an open-source, non-
proprietary data standard for the identification of financial instruments across asset classes. FIGI Allocation 
Rules sections 1.1.1, 1.2.1, 1.4.1. The Share Class level FIGI is assigned to equities and funds, and enables 
users to link multiple FIGIs for the same instrument to obtain an aggregated view for that instrument across 
all countries globally. Id. section 1.4.3. 

252 
and FIGIs.
721
 However, the Commission recognizes that Managers who do not currently use 
those identifiers and who do not already have identifier mapping capabilities in their data 
systems would incur one-time costs to build such functionality. 
8. Potential Increased Use of Derivatives 
The Commission recognizes the risk that the benefits of Form SHO data could be 
diminished to the extent that Managers avail themselves of economically similar arrangements.  
For example, Managers might consider trading derivatives in place of engaging in short selling, 
particularly for stocks with liquid options.
722
 Benefits might similarly be diminished if a robust 
single-stock futures market develops over time.
723
 Indeed, Rule 13f-2 and its accompanying 
Form SHO might be a catalyst for growth in derivatives markets if short sellers were to look for 
avenues to take the economic equivalent of short positions that did not require similar 
disclosures. 
The Reporting Thresholds in Rule 13f-2 are based on a Manager’s gross short position in 
the equity security itself, and do not consider derivative positions. Consequently, a Manager 
seeking to build a large short position without incurring a reporting obligation might hold a short 
position just below a Reporting Threshold and use derivatives to take positions that effectively 
rise above that threshold.
724
 One commenter stated that this may be viewed as regulatory 
arbitrage.
725
 
 
721
  FIGI allows users to link various identifiers for the same security to each other, which includes mapping 
the FIGI of a security to its corresponding CUSIP number. See Financial Instrument Global Identifier, 
OMG
 STANDARDS DEV. ORG. (2023), available at https://www.omg.org/figi/. 
722
 See supra note 527, R. Battalio, and P. Schultz (2011), Grundy, Lim, and Verwijmeren (2012). One 
commenter agreed that this is a likely outcome. See Better Markets Letter at 9-10. 
723
 See supra note 527, Jiang, Shimizu, and Strong (2019).  
724
 While combining short positions with derivatives may allow a Manager not to trigger the Reporting 
Thresholds, using options may trigger a report to FINRA’s LOPR. See supra note 78. 
725
 See Law and Finance Professors Letter, at 3. 

253 
Using derivatives to establish an economically equivalent short position that does not 
include a reporting obligation may be costly. Options tend to be more expensive than equity 
transactions, particularly for less liquid securities. Additionally, some equities do not have listed 
options. Consequently, the Managers’ desire to avoid the costs associated with reporting Form 
SHO information articulated in Parts VIII.C.1 and VII.C.2 is balanced against the increased cost 
of using derivatives such as options to execute a short position. Thus, for some stocks, i.e., those 
with illiquid or non-existent options, the likelihood that Managers will seek to employ alternative 
arrangements through options may be minimal. However, academic research has shown that 
investors have used options as an alternative means to obtain short-like economic exposure when 
short selling is restricted, thus there is a significant risk that there will be some attempt to employ 
alternative arrangements using derivatives, particularly in stocks with liquid options markets.
726
 
D. Efficiency, Competition and Capital Formation 
1. Efficiency 
Markets function best and are most efficient when all relevant information regarding a 
security is known and is incorporated into prices.
727
 This includes negative information. When 
negative information is not tradable, stocks tend to be overpriced, leading to an inefficient 
allocation of capital across the economy.
728
 More efficient prices lead to better economic 
outcomes for the macro economy as capital flows into high value projects and out of low value 
projects. Short sellers have incentive to uncover negative information and to trade in order to 
 
726
 See supra note 527. 
727
 See Eugene F. Fama, Efficient Capital Markets a Review of Theory and Empirical Work, The Fama 
Portfolio 76-121 (2021). 
728
 See supra note 624. 

254 
profit from that information.
729
 As discussed in Part VIII.D .2, more transparency in short selling 
will improve the amount of information that investors have to value a stock – increasing price 
efficiency. However, it might also disincentivize fundamental research which may harm price 
efficiency by limiting the amount of total information has been discovered, and thus, limiting the 
amount of information incorporated into stock prices. Overall, the impact of the adopted rule and 
CAT amendment on price efficiency is uncertain.
730
 
 Additionally, the CAT amendment will improve the efficiency of the Commission’s 
oversight and enforcement of regulations relating to the bona fide market making exception by 
providing more efficient access to data on how individual market makers are using the exception. 
Currently, the Commission must request information about the use of the market maker 
exception from specific broker-dealers.
731
 
2. Competition 
Investors compete with one another to gather information that they use to enact trading 
strategies. Academic research indicates that when short selling is costly, investors owning the 
asset have an advantage in gathering information due to the reduced cost of acting on whatever 
information that they gather.
732
 The final rule may increase this advantage since it will increase 
the cost of short selling for Managers above the Reporting Thresholds, as discussed in Parts 
VIII.C.1 and VIII.C.2. Relatedly, fund performance is a key determinate of drawing investor 
flows. The Commission believes that Rule 13f-2   and Form SHO might harm competition for 
 
729
  See supra Part VIII.C.2 for discussion of short selling motivation. 
730
  See supra Part VIII.C.2 for discussion of price efficiency effects.  
731
  See supra Part VIII.B.3 for a further discussion of the inefficiencies of existing data with regards to 
oversight and enforcement of rules relating to bona fide market making. In examinations and enforcement 
matters, the Commission has used broker-dealer trade blotters in combination with other regulatory data to 
consider whether conditions were met for the use of BFMM locate exemptions. 
732
  See Dixon (2022), supra note 581. 

255 
fund flows between Managers who do and do not use short selling strategies. For instance, 
Managers that are skilled at uncovering negative information may face additional costs when 
transacting on this information, potentially leading to lower returns.  
The Commission believes that the CAT amendment will not alter significantly the 
competitive landscape for broker-dealer services. Because small broker-dealers are likely to use 
a service bureau to report their CAT data,
733
 the Commission believes that implementation costs 
will be borne by service bureaus and are likely to be recovered across many service bureau-client 
broker-dealers. Individual small broker-dealers may face expenses in configuring service bureau 
software packages, but these expenses are likely to be one-time and modest because the bulk of 
implementation activities will have been performed by the service bureau.
734
 Because larger 
broker-dealers that self-report CAT Data enjoy economies of scale, they should be able to absorb 
the costs associated with compliance more easily, and they may choose to contract with a service 
bureau if implementation is unusually burdensome due to the operation of multiple legacy order-
handling systems. 
In addition, as stated above, some commenters requested the Commission consider 
interactions between the economic effects of the proposed rule and other recent Commission 
rules, as well as practical realities such as implementation timelines.
735
 As discussed above, the 
Commission acknowledges that overlapping compliance periods may in some cases increase 
costs.
736
 This may be particularly true for smaller entities with more limited compliance 
 
733
  See Rule 613 Adopting Release for the Commission discussion of CAT costs to broker-dealers. 
734
  See supra Part VIII.C.6 for a discussion of compliance costs. 
735
  See supra Part VIII.C.6. 
736
  See id. 

256 
resources.
737
 This effect can negatively impact some competitors because these entities may be 
less able to absorb or pass on these additional costs, making it more difficult for them to remain 
in business or compete. However, the final rule mitigates overall costs relative to the proposal,
738
 
and we do not believe these increased compliance costs will be significant for most Managers.
739
 
We therefore do not expect the risk of negative competitive effects from increased compliance 
costs due to simultaneous compliance periods to be significant.
 
 
3. Capital Formation  
One of the primary roles of the securities markets is to allocate capital (money) across the 
economy. If investors believe that a company is undervalued then, all else being equal, they will 
buy that stock; if many investors buy the stock, the price for that stock will increase – lowering 
the cost of equity financing and making funding projects easier for the firm. On the other hand, if 
investors believe that a company is overvalued then, all else being equal, they will sell or short 
sell the stock to invest in other more profitable ventures. If enough investors sell or short the 
stock, then the stock price will decline. A lower stock price implies more expensive equity 
financing and thus a higher weighted average cost of capital. When stocks are overpriced, they 
are inherently allocated too much capital, which deprives more productive ventures from 
receiving optimal capital and hinders economic progress. Consequently, short sellers contribute 
to capital formation by enhancing price efficiency which helps to ensures an optimal allocation 
of capital across firms. Thus, to the extent that the adopted rule and CAT amendment discourage 
 
737
  But see supra Part VII.B.2 and infra Part IX (the Commission anticipates that the type of Manager that will 
trigger a reporting threshold likely already has sophisticated information technology and the ability to 
automate reporting; and that the reporting thresholds will not apply to a significant number of small 
Managers). 
738
  See supra note 706 and accompanying text. 
739
  See supra Part VIII.C.6.f. 

257 
short selling, as discussed in Parts VIII.C.1 and VIII.C.2, it may lead to the overpricing of some 
stocks and the underpricing of others.
740
 This mispricing distorts optimal capital formation as it 
implies that some firms may have a cost of capital that is relatively too high or too low with 
respect to that firm’s fundamentals and risk profile.  
Additionally, academic research suggests that managers learn from stock price changes, 
using them as a way to tap into the ‘wisdom of crowds’ phenomena to improve decisions.
741
 For 
instance, if a firm announces a capital investment or other project, and the stock price moves up 
or down, then managers may use this information as a signal about the market’s perception of the 
value of that project. Thus, stock price reactions may be an input into manager decisions in terms 
of when and how to invest capital. To the extent that the rule discourages short selling, it may 
make it more difficult for managers to extract signals from stock prices about the value of capital 
investments – particularly low value projects as the rule may attenuate the market’s ability to 
respond to negative information.  
The costs associated with Managers monitoring their short positions for compliance with 
reporting Form SHO along with the negative economic effects detailed in Parts VIII.C.1, 
VIII.C.2, and VIII.C.7 may harm capital formation, specifically capital formation using 
convertible debt, if it increases the cost of short selling. Investors may be less inclined to 
purchase convertible debt if the cost of hedging that purchase by short selling the security 
becomes more expensive – through both the direct and indirect costs associated with Form 
SHO.
742
 Thus, to the extent that the costs associated with Form SHO increase the cost of short 
 
740
 See supra note 624, Miller (1977). 
741
 See I.  Goldstein and A. Guembel, Manipulation and the Allocational Role of Prices, 75 (1) THE REV. OF 
ECON. STUDIES 133-164 (2008). 
742
 See, e.g., Stephen J. Brown, Bruce D. Grundy, Craig M. Lewis and Patrick Verwijmeren, Convertibles and 
Hedge Funds as Distributors of Equity Exposure, 25 (10) R
EV. FIN. STUD 3077-3112 (Oct. 2012). 

258 
selling they may also increase the cost of hedging convertible debt and may make that form of 
financing more expensive. This effectively increases the weighted cost of capital for firms that 
use convertible debt and may hinder their ability to fund operations, including new investments.  
In contrast, adopted Rule 13f-2, Form SHO, and the CAT amendment may have a 
positive influence on capital formation if they disincentivize short selling that takes place in 
connection with securities fraud. For example, in one type of fraud, investors holding convertible 
debt would engage in a manipulation including short sales of a stock in an attempt to drive down 
the price artificially in order to convert their debt to equity and cover their short positions at a 
lower price. To the extent that the rule facilitates better oversight and prosecution of this sort of 
fraud, it may facilitate capital formation by lowering the risk that convertible debt holders will 
engage in this sort of fraud. More generally, to the extent that enhanced oversight of short sale 
activity deters manipulative activity such as short squeezes and associated price bubbles 
stemming from short squeezes, price efficiency may be enhanced, which in turn, could further 
promote capital formation. 
Rule 13f-2 may also affect capital formation through investor confidence. Some 
commenters on FINRA’s short interest proposal suggested that short selling, and in particular a 
lack of short selling disclosure, leads some investors to have less confidence in financial 
markets.
743
 One commenter, however, stated that, “Rule 13f-2 will not promote greater risk 
management among market participants, and hence, not bolster confidence in the markets by 
providing greater transparency,” because investors already use aggregate short interest data from 
FINRA, the exchanges, and data vendors for risk management purposes.
744
 As discussed 
 
743
 See letters from NASDAQ, OTC Markets, and CFA Institute in response to FINRA’s short interest 
proposal) available at https://www.finra.org/rules-guidance/notices/21-19#comments.  
744
  See SBAI Letter, at 3. 

259 
throughout this release, the Commission, however, believes that the data from Form SHO and 
the amendment to CAT will provide information that is additive to these and other data sources 
and will therefore improve short selling transparency and strengthen investor confidence, which 
might increase investment activity and, in turn, promote capital formation. 
E. Reasonable Alternatives 
1. Alternative Approaches 
a. Releasing Aggregated CAT Data 
As an alternative to collecting, aggregating, and publishing Form SHO, the Commission 
considered amending the CAT NMS Plan to collect additional information so that the 
Commission or the Plan Processor could aggregate and publish CAT Data. This alternative 
would effectively eliminate the thresholds for reporting.
745
  
CAT data currently contains a short sale mark and, as part of the implementation of the 
Customer Account Information System (CAIS), will also provide the identities of those 
transacting. Consequently, the Commission or the Plan Processor could aggregate information on 
the number of short sales that Managers engage in from CAT, assuming that the Commission or 
the Plan Processor could determine that a transaction is by or on behalf of a Manager, and 
disseminate aggregated information to the public at monthly intervals – or more frequently. The 
Commission or Plan Processor could publish daily statistics on the number of short sales 
engaged in by Managers each day in the prior month as reported in CAT. Additionally, the 
reports could include information on options transactions that lead to short exposure, such as 
purchasing a put option, or writing a call option.
746
 Furthermore, a longer time series (for 
 
745
  See Proposing Release, at 15003. 
746
 In this alternative, however, CAT would not contain the information on option expirations or assignments. 

260 
example, a rolling year) to estimate a Manager’s position could be aggregated using CAT data. 
These could be aggregated to create a market-wide short position estimate. However, this 
estimate would be inaccurate because the alternative does not consider collecting in CAT 
information on changes in positions that come from activity other than secondary market 
transactions, such as secondary offering purchases, conversions, creations and redemptions, and 
option exercises and assignments. This inaccuracy could also result in the market-wide short 
position estimate being less accurate than current short interest data.
747
 
The alternative would result in lower benefits than those from Rule 13f-2 and the 
disclosures Form SHO requires. The data published under this alternative would have significant 
overlap with the data that would be published under Rule 13f-2 and Form SHO. However, again 
assuming that the Commission or the Plan Processor could determine that a transaction is by or 
on behalf of a Manager, the data in this alternative could be more comprehensive in terms of the 
breadth of Managers whose short selling information could be aggregated and published,
748
 
because the Commission could publish aggregated data on short selling transactions from all 
Managers instead of just those that meet the threshold. However, the published data would be 
less accurate in terms of estimating positions and changes in positions as they would not include 
certain activity, such as options assignments, that are not collected in CAT but that may affect a 
short position. As a result of these differences, this alternative would result in less clarity about 
bearish sentiment among Managers. Thus, in terms of price efficiency, this approach would not 
have many of the same benefits as adopted Rule 13f-2 and Form SHO. 
 
747
 FINRA’s process of gathering and validating short interest data takes approximately two weeks. See supra 
note 561. 
748
 This assumes the Managers that could be identified in CAT could include all those that would be 
responsible for reporting under Proposed Rule 13f-2 and Proposed Form SHO. 

261 
The alternative would also reduce the benefits of comparing the published data to short 
interest because the alternative would focus on transaction dates rather than settlement dates and 
the alternative would not be restricted to large positions.
749
 Short interest measures short 
positions as of two settlement dates per month. A comparison of the data in the alternative to the 
short interest data would require either publishing the position data as of the transaction dates 
that correspond to the short interest settlement dates or users would have to use the activity data 
to offset the dates themselves. Further, the inclusion of more than just Managers with large short 
positions means that the information conveyed by the alternative relative to short interest data 
would be less additive than the data provided that will be provided by adopted Rule 13f-2 and 
Form SHO. 
This alternative would mitigate some of the concerns associated with Managers being 
exposed to increased risk of short squeezes or other retaliation as discussed in Parts V III.C.1 and 
VIII.C.2. This reduced risk stems from the fact that it would be more difficult to determine 
whether the short selling activity reported was due to many Managers short selling small 
amounts, or just a few Managers short selling large amounts. It would also be more difficult to 
identify individual short sellers based on the data. A lower risk of retaliation or short squeezes 
may also mitigate some of the negative effects of Rule 13f-2 and Form SHO with regard to less 
overall short selling or fundamental research that are described in Part VIII.C.2, depending on 
the delay in publication under the alternative. 
Additionally, this approach would have lower compliance costs for Managers than the 
current proposal, as it would not require Managers to file Proposed Form SHO. One commenter 
 
749
 Adopted Rule 13f-2 requires reporting based on the settlement date, which is normally two business days 
after the transaction day. 

262 
agreed that releasing CAT data with short sale information would be less costly for Managers 
than Proposed Form SHO.
750
 While it would result in the same costs for Industry Member 
reporting as those associated with the CAT amendment, it would increase costs associated with 
the Plan Processor improving processing power for the aggregation of CAT data if such 
computations could not be performed with existing resources (without reducing other 
functionality). Any costs incurred by the Plan Processor would be passed along to Plan 
Participants and Industry Members. 
There are several drawbacks to this alternative relative to the existing proposal. First, it 
would take some time before CAT data could be used to develop an estimate of the size of short 
positions. Thus, the data would not immediately provide the Commission or market participants 
with information about the size of individual large short positions. Consequently, to the extent 
that knowing the total size of short positions held by Managers with large positions conveys 
fundamental information to the market, then this fundamental information would not be 
immediately available if the Commission were to adopt a version of this alternative. 
Additionally, the data provided by this alternative would exclude transactions outside of the 
purview of CAT that may affect short positions. Thus, the data provided under this alternative 
would always be estimates of total short positions, which could be inaccurate for some 
Managers. Another drawback to this alternative is that releasing CAT data to the public could 
increase security risks. CAT contains highly sensitive information and creating a process that 
would release portions of the data, even if aggregated, could present risks.  
 
750
  See SBAI Letter, at 2. 

263 
A larger expansion of CAT could achieve at least the same data value as in Rule 13f-2 
and Form SHO.
751
 For example, CAT could expand to require the reporting of all the 
information that will be collected in adopted Form SHO. Specifically, the Commission could 
expand CAT to include data on account positions, including short selling positions associated 
with those positions. In addition, CAT could be expanded to capture information on changes in 
those positions. Under this approach, regulators would have access to the same data as if 
Managers filed Form SHO but for all short sellers, not only the subset of Managers reporting on 
Form SHO. This approach would also result in additional information available to regulators not 
collected in Form SHO that could improve investor protections. In addition, this alternative 
would reduce costs for Managers who are not Industry Members because they would not be 
required to report new information. However, costs would increase for Industry Members, who 
would have to report a significant amount of new information on CAT report types that do not 
exist today and for Participants who would have to work out technical specifications and 
implement changes for new types of CAT reports. Further, more Industry Members would report 
this information to CAT than Managers who, under the final rule, would be required to report 
information on Form SHO. It would be a major undertaking for both the Plan Processor and 
industry participants to build out and adapt systems to collect, process, and publish this 
information. This implementation would likely be very complex and take a significant amount of 
time to compile. Overall, the cost of this alternative is likely to exceed the costs of adopted Rule 
13f-2 and Form SHO. 
 
751
  See Proposing Release, at 15004. 

264 
Further, if the Commission were to expand CAT to collect additional information beyond 
what would be captured by the amendment to CAT, such as position information, then these 
additional expansions would impose significant direct costs to CAT-reporting firms. 
a. FINRA Reporting 
As discussed in Part VIII.C.4.i, FINRA already collects and, together with the listing 
exchanges, disseminates aggregate short interest that it collects from member broker-dealers. 
Consequently, the Commission could codify FINRA’s existing process to ensure that it continues 
in perpetuity.
752
 
This alternative would have no additional costs to market participants but would 
substitute a Commission mandate for the publication of the short interest data. Several 
commenters expressed support for the use of FINRA to satisfy DFA requirements in lieu of Rule 
13f-2 and Form SHO.
753
 The commenters’ support is motivated by familiarity with current 
FINRA short reporting requirements and costs that would not be incurred to comply with Rule 
13f-2 and Form SHO. 
Similarly, the Commission could require FINRA to publish a version of its short interest 
information that specifically identifies the aggregate short interest of Managers – separate from 
other short interest.
754
 To accomplish this, reporting broker-dealers would separately include in 
their reports to FINRA the short positions that originate from Managers. FINRA would then 
compile both total short interest, as it currently does, as well as a Manager specific short interest. 
Because broker-dealers already have experience reporting short interest data to FINRA and 
would thus not need to build out new systems to report the data, this alternative might have been 
less expensive than the existing proposal as it would have only required a modification of an 
 
752
  See Proposing Release, at 15004. 
753
  See, e.g., AIMA Letter, at 8; ICI Letter, at 51; Ropes & Gray Letter, at 4; Two Sigma Letter, at 9. 
754
  See Proposing Release, at 15004. 

265 
existing process. Since this alternative would not have provided the Commission with the 
positions of any identified Managers or any Manager-specific activity data, the benefits and risks 
associated with these data articulated throughout Part VIII. D would decline. In addition, it would 
not have distinguished Managers with large positions from other Managers. Therefore, neither 
market participants nor regulators would know what share of short interest was concentrated 
among Managers with large positions. As discussed above in Part VIII.C.1, Managers often 
accumulate large short sale positions based on fundamental market research or other factors that 
differ from investors with smaller positions, the latter of which are more likely shorting for 
hedging or smaller-scale speculative purposes. Therefore, this alternative would have provided 
less transparency into the short sale market relative to the Rule 13f-2 and Form SHO because it 
would not have revealed the degree to which short interest was concentrated among Managers 
with large positions. 
The Commission also expects that data on Manager short interest in addition to total short 
interest would have likely not provided much incremental value over the existing short interest 
data due to the likely significant overlap of the short positions of Managers and total short 
interest, and the absence of activity information to better understand changes in short interest.
755
 
Thus, while the alternative that requires FINRA to produce separate short interest data for 
Managers would have reduced costs to market participants relative to the existing proposal, it 
also might not have provided the market or regulators a significant incremental benefit relative to 
existing short selling data. 
 
755
 Analysis of Form SH data indicates that these data, which would be a subset of the data collected in this 
alternative, amounted to a high percentage of short interest. Commenters questioned the use of Form SH 
data in this and other contexts. See supra Box 1: Use of Form SH Data for responses to comments on the 
use of these data. 

266 
b. Broker-Dealer Reporting to EDGAR on Behalf of Managers 
The Commission could adopt a modified rule that allows broker-dealers to file Form 
SHO reports with the Commission on behalf of Managers.
756
 This alternative might reduce costs 
as it could concentrate reporting with broker-dealers that have significant experience collecting 
and providing such information – increasing operational efficiency. On the other hand, Managers 
may use multiple prime brokers and thus the reporting prime broker may not have easy access to 
information about all such Manager’s positions and activity in a security. Consequently, the 
reporting prime broker may not know whether the sum of the manager’s positions exceeds either 
of the thresholds and thus whether reporting is necessary. Thus, the reporting broker would need 
to gather additional information from the Manager about activity associated with other prime 
broker(s).
757
 In the absence of such information gathering, the reporting broker may mistakenly 
not report Form SHO for a Manager whose position with that particular reporting broker is under 
the threshold, but over the threshold when positions across brokers are combined. Requiring 
additional data collection of a Manager’s short positions by the reporting broker might increase 
complexity and costs as Managers and broker-dealers would need to develop systems by which a 
Manager provides information to its reporting broker about its activity with other prime brokers. 
Alternatively, the Commission could permit broker-dealers to report on behalf of Managers only 
if the broker-dealer could report full information. Thus, Managers using multiple prime brokers 
would have the option of providing comprehensive information to their reporting prime broker, 
or they could report Proposed Form SHO data themselves. 
 
756
 See Proposing Release, at 15004. 
757
 The latter could result in the additional complication of double reporting or prime brokers having to 
coordinate on who reports a position. Likely, the least costly solution could involve Managers being 
responsible for informing their prime brokers of their threshold status. 

267 
c. Harmonization with European Disclosure Requirements 
The Commission could also craft Rule 13f-2 and Form SHO to be consistent with 
European disclosure requirements.
758
 In 2012, the European Parliament and the Council of the 
European Union adopted regulations on short selling (the “SSR”) that standardized the reporting 
threshold for all EU member states.
759
 Under the SSR, a natural or legal person holding a short 
position is required to report to the relevant regulator when its short position (“net short 
position”), computed by taking into account relevant derivative positions such as options, if any, 
reaches the initial threshold of 0.2 percent of the issued share capital of the company, and in 0.1 
percent up and down increments thereafter.
760
 The threshold for reporting to a regulator recently 
was lowered to 0.1 percent.
761
 If the net short position reaches 0.5 percent of the share capital of 
the company, then the relevant market regulator reports the net short position to the public with 
the identity of the short seller revealed. New filings are required to be made whenever the net 
short position increases or decreases by 0.1 percent of the share capital of the company. In the 
EU, trading entities must submit their data to the relevant regulator by 3:30 pm on the following 
trading day.
762
 Trading entities accomplish public disclosure via a central website operated or 
supervised by the relevant competent authority.
763
 
 
758 
See Proposing Release, at 15005. 
759
 See European Parliament and Council Regulation 236/2012, 2012 O.J. (L 86) 1, available at https://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:086:0001:0024:en:PDF.  The SSR was adopted 
on Mar. 14, 2012 and its provisions had applicability dates of Mar. 25 and Nov. 1, 2012. 
760
 Id. at Article 5(2). 
761
 The threshold was temporarily lowered in Mar. 2020 in response to the COVID-19 pandemic. See ESMA 
Decision of 16 Mar. 2020, ESMA 70-155-9546, available 
at https://www.esma.europa.eu/sites/default/files/library/esma70-155-9546_esma_decision_-
_article_28_ssr_reporting_threshold.pdf. In September 2021, the change was adopted on a permanent basis. 
See European Union, Commission Delegated Regulation 2022/27, art. 1, 2022 O.J. (L 6) 9, available 
at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32022R0027.  
762
 Id. at Article 9(2). 
763
 Id. at Article 9(4). 

268 
Consequently, the Commission could structure the rule to require Manager short selling 
reports that are consistent with the European regulations in terms of the thresholds for 
reporting, the computation of the threshold, the items reported, the timing for when short sale 
information is made public, and the timing for when new reports have to be issued. This 
alternative would provide directional information about short positions because only net short 
positions are required to be reported; would likely impose lower compliance costs to 
Managers;
764
 would likely raise the risk of abusive practices towards short sellers; would likely 
increase Managers’ ability to evade the threshold; and would lower the detail of the data the 
Commission receives relative to the data from adopted Form SHO.  
One advantage of this alternative would be likely lower compliance costs for Managers 
that engage in short selling in both the EU and US.
765
 By only needing one set of compliance 
systems in place to satisfy both rules, Managers might enjoy lower costs to comply in both 
systems. Additionally, Managers might face lower costs to track and report net short positions. 
Moreover, in connection with Regulation SHO compliance, some Managers already track net 
positions on an aggregation unit basis.
766
 Thus, the computation of net positions for such 
Managers might be less costly than that of gross short positions as required by Rule 13f-2. 
However, for other Managers who are not currently aggregating positions on a net basis, costs of 
tracking may be higher under this alternative than under Rule 13f-2.   
This alternative also could have some negative consequences. The EU data are timelier 
than data available under adopted Rule 13f-2, since the forms are posted publicly immediately 
 
764
  For Managers operating in both the EU and the US, these costs may be lower. 
765
 Due to uncertainties regarding the EU short selling data regarding the identities of short sellers and the 
ability to map those IDs to US Managers, the Commission cannot identify the number of US Managers that 
currently comply with EU regulations. 
766
  See supra note 263. 

269 
after receipt by the regulator, which potentially facilitates greater price discovery. However, this 
comes at the cost of increasing the possibility of revealing short sellers’ proprietary information 
and its associated risks, including short squeezes and copycat trading. Additionally, the EU 
structure, whereby individual short sellers’ names are made public, might raise the risk of 
retaliation towards short individual sellers, as well as the ability for market participants to engage 
in copycat strategies that decrease the profitability of gathering information. As a result of these 
costs to short sellers, investors may not be able to gather as much fundamental information as 
under the final rule.
767
 One commenter,
768
 however, stated that a recent study has found that the 
EU’s regulation finds no evidence that the disclosure requirements have resulted in increased 
coordination or have resulted in short sellers being targeted for short squeezes.
769
 
Another potential consequence of this alternative would be adjusting position sizes to 
evade the Reporting Threshold. Multiple studies found evidence that short sales in the EU are 
clustered below the threshold, suggesting that investors are trying to conceal their positions to 
protect their underlying investment strategies.
770
 Thus, short sellers may adjust their positions to 
either increase their long exposure or reduce their short exposure, leading to loss of price 
efficiency. The Commission believes that since there are benefits to short sale activity, including 
 
767
 For analyses of how the SSR lead to increased copycat trading, lower price efficiency, and increased 
volatility, see Stephan Jank, Christoph Roling, and Esad Smajlbegovic, Flying Under the Radar: The 
Effects of Short-Sale Disclosure Rules on Investor Behavior and Stock Prices, 139 (1) J. OF FIN. ECON.  209-
233 (2021); Charles M. Jones, Adam V. Reed, and William Waller, Revealing Shorts an Examination of 
Large Short Position Disclosures, 29 (12) THE REV. OF FIN. STUDIES 3278-3320 (2016). 
768
  See Better Markets Letter, at 13.  
769
  See Charles M. Jones, Adam V. Reed, and William Waller, Revealing Shorts an Examination of Large 
Short. Position Disclosures, 29 Rev. of Fin. Studies 3278, 3282 (2016).  
770
  See Stephan Jank, Christoph Roling, and Esad Smajlbegovic, Flying Under the Radar: The Effects of 
Short-Sale Disclosure Rules on Investor Behavior and Stock Prices, 139 (1) J. OF FIN. ECON.  209-233 
(2021); Mazzacurati, Julien, The Public Disclosure of Net Short Positions, European Securities and 
Markets Authority (ESMA), Trends, Risks, Vulnerabilities (TRV) Report No. 1, 2018. 

270 
increased price efficiency, then there would likely be increased costs to disclosing manager 
identities, since this would reduce short sale activity. 
By reporting net short positions, rather than gross short position, the Commission and the 
public would not receive information about large, but hedged, short positions. For instance, the 
alternative would allow
771
 a comparison of total short interest with reported large hedged short 
positions, which might provide additional information to the market about the activities of large, 
though perhaps non-information based, traders. While hedged short positions are less likely to be 
manipulative in nature, or to pose systemic risk, large short positions are still potential sources of 
systemic risk. One commenter stated that using thresholds based on net short positions would 
allow market makers that carry large gross short positions for market making purposes rather 
than directional trading strategies to avoid having to submit Form SHO and incur its associated 
costs. According to the commenter, since net positions of market makers tend to be close to zero, 
including market maker gross positions in the public release of Rule 13f-2 data could be 
misleading to market participants (assuming that those market participants did not understand 
what data Rule 13f-2 will and will not provide).
772
 The Commission believes, however, that 
market makers will rarely if ever be required to report their short positions because the dollar-
value threshold of Rule 13f-2 was increased from the proposal’s $10 million on a single trading 
day to a $10 million daily average over the course of a month. It is the Commission’s 
understanding that markets makers are highly unlikely to hold a gross short position averaging 
$10 million over the course of trading month. 
 
771
  This comparison, however, would be different than that of comparing Form SHO data to short interest data. 
772
 See HSBC Letter 2, at 3.  

271 
A reporting requirement for only net short positions would reduce the value of Rule 13f-2 
data for use in reconstructing market events. For instance, during the recent meme stock 
phenomenon, for certain stocks it became difficult to hedge options transactions using the 
underlying security due to the significant price changes in the spot market. Consequently, 
positions that were previously judged to have been hedged, and thus low risk, may no longer 
have been hedged. In addition, large short positions with hedges that have been significantly 
weakened or broken due to unforeseen extreme market events, may have become systemically 
important. In such cases, it would be useful for the Commission to have information on large 
short positions, regardless of perceived net short position, in order to aid in the reconstruction of 
market events. This is a loss of value compared to adopted Rule 13f-2 and Form SHO, which are 
triggered by large gross short positions.  
 Further, the EU regulations provide activity data if positions change by 0.1 percent or 
more. Thus, market participants could only learn about measured positions changes, rather than 
position changes of all sizes. As an example, there may be times where the public may be 
interested in seeing the reaction to a corporate announcement, but this may be limited if 
Managers do not adjust short positions above the 0.1 percent threshold to trigger reporting.  
2. Data modifications 
a. Release Proposed Form SHO Data in Alternative Formats 
The Commission could release the information included in Form SHO in a different 
manner. This alternative could take one of several forms.
773
 For example, the Commission could 
release each Form SHO report to the public exactly as it is filed, identifying the Managers. The 
Commission could also release the Forms as filed, but with the identities of the filers removed. 
 
773
  See Proposing Release, at 15005. 

272 
The Commission could also release the aggregated data as in the current proposal, but it could 
publish the data in different ways in the aggregated Form SHO report, such as publishing the 
number of entities underlying the aggregated data or publishing increases in short positions 
separate from decreases.  
In the first alternative, the Commission could release Form SHO as filed, allowing all 
market participants to see the identities of short sellers – similar to the EU regulation discussed 
above. This would increase the information that market participants have to evaluate sentiment 
on particular equities in the market. In particular, for some market participants, this information 
would also allow market participants to better manage risk by allowing them to manage their 
exposure to Managers with large short positions. There are also potential costs to this alternative. 
One potential result from this alternative is that if a short seller is viewed as sophisticated and 
informed, then releasing identifying information would likely spur copy-cat trading strategies. 
This outcome has been documented with respect to the EU regulation and suggests that revealing 
the identities of the short sellers may diminish the value of becoming informed.
774
 In addition, 
the detailed information on daily short activity could reveal not just market sentiment, but 
trading strategies of individual Managers. Additionally, releasing the names of large short sellers 
would further increase the likelihood that the short seller would be the victim of a short squeeze 
or other retaliatory actions as described in Part VIII.C.1.  
Similarly, the Commission could publicly release individual Form SHO filings with 
identification information removed from the released data. This alternative would provide market 
participants a clearer view into the activities of large short sellers, potentially improving their 
ability to learn from the actions of large short sellers relative to the current proposal. For 
 
774
 See supra Part VIII.F.1.iv. 

273 
instance, the data would allow market participants to know whether short sentiment was broadly 
held – as would be indicated by many filings – or concentrated – as would be indicated by few 
filings. This information could potentially improve the market assessment of bearish sentiment 
relative to Rule 13f-2, improving price efficiency.  
However, the indirect costs of this alternative would be greater than for Rule 13f-2 and 
Form SHO. Releasing all the information from Proposed Form SHO could reveal trading 
strategies that would be costly even if the identities of the short sellers remained anonymous. For 
example, releasing this information, even without naming the short sellers, might increase the 
risk of copycat trading which reduces the profits of acquiring information. It might also provide 
information about how vulnerable short sellers may be to a short squeeze as it could give a signal 
about whether a short seller has a large and potentially vulnerable short position. In this case, the 
negative effects of the rule on the value of collecting information and of short selling in general 
would be greater than under the final rule, leading to less price efficiency and potentially more 
volatility. Additionally, even though the data could be released anonymously, it is not clear that 
in all cases the identities of the individual short sellers would remain anonymous.
775
 If market 
participants were able to uncover the identities of individual short sellers, then the risk of 
retaliation or short squeezes would increase relative to Rule 13f-2 and Form SHO.  
Alternatively, the Commission could release the data as specified in the current proposal 
but also include the number of entities whose Form SHO reports were collected. This 
 
775
 Issuers have been known to hire private investigators to try and uncover the identities of short sellers when 
they learn that their stock is being targeted by short sellers. See supra note 622. Additionally, researchers 
have used algorithms to unmask the identities of individuals from masked data released to the public by the 
SEC. See Huaizhi Chen, Lauren Cohen, Umit Gurun, Dong Lou, and Christopher Malloy, IQ from IP: 
Simplifying Search in Portfolio Choice, 138 (1) J. OF FIN. ECON.  118-137 (2020). While the Commission 
could design this alternative to avoid the specific vulnerabilities exploited by Chen et al (2020) it is 
possible that motivated researchers and market participants could find some other unforeseen way to link 
the public data to individual short sellers. 

274 
information would provide the market with additional detail about whether short sentiment was 
broadly held by multiple Managers, or narrowly held by just one or a few. This information 
could be useful as market participants assess bearish sentiment in the market and adjust their 
actions accordingly. However, adding this information might also increase the risk of short 
squeezes or other retaliatory actions in the case where there are very few reporters of Form SHO. 
In the Form SH data collected under temporary Rule 10a-3T, 32 percent of stocks had only one 
Manager reporting a position per month.
776
 Such a situation could signal to market participants 
that one, or a few, short sellers have large short positions that could potentially be vulnerable to a 
short squeeze.  
Similarly, the Commission could collect Form SHO data but publicly release the daily 
aggregate increases separately from the daily aggregate decreases in short positions as opposed 
to daily net changes to short positions as adopted in Form SHO. This approach would provide 
the public more detailed information and understanding on what drives changes to short 
positions. However, separating daily aggregate increase from decreases in short positions could 
increase the risk of revealing trading strategies, which could disincentivize short selling and 
harm market quality. 
b. Collect Data on Derivatives Positions 
Investors can use derivatives to take an economically short position in a security. For 
example, an investor with a bearish view of a stock can purchase a put option in that stock. 
Consequently, for a more complete view of the total economic short position that a Manager has 
taken, the Commission could require Managers who report adopted Form SHO to also disclose 
 
776
 See Proposing Release, at 14963 for more information on methodologies and caveats for using Form SH 
data. See also supra Box 1: Use of Form SH Data for responses to comments on the use of these data. 

275 
their derivatives positions on underlying equity securities such as options and total-return swaps 
as an alternative to Form SHO as adopted, which does not directly collect information on 
derivatives.
777
 This alternative refers only to options and other derivative securities for which 
their transactions do not fit the definition of a short sale under Rule 200(a) of Reg SHO. 
Requiring this data would provide a more complete view of the economic short position 
that a Manager engaging in a large short sale has taken.
778
 Consequently, the information would 
aid market participants in gauging bearish sentiment in a security relative to Rule 13f-2 and 
Form SHO, as adopted. This information may also help the Commission to better evaluate 
potentially risky short positions and respond more quickly in the case of a market event. The 
Commission could also better reconstruct market events, such as the recent meme stock events in 
January 2021, with options positions data. 
Requiring options data to be reported on Form SHO would increase the compliance costs 
to Managers of reporting on Proposed Form SHO. One commenter stated that the inclusion of 
derivatives, warrants, convertible debt, and ETFs would be costly.
779
 Adopted Rule 13f-2 will 
compel Managers to track their gross short positions in individual equities in a month. Tracking 
of ETFs for the purposes of adopted Rule 13f-2 is the same as tracking any equity security with 
the exception of tracking shares outstanding, which might be marginally more costly. 
Additionally, securities that may be used to change a gross short position, such as options or 
convertible debt, are unaffected by Rule 13f-2 unless they are used in a manner that changes 
 
777 
See Proposing Release, at 15006. 
778
  One commenter argued including derivatives for Rule 13f-2 would give a more complete picture of 
Managers’ positions. See NASDAQ Letter, at 3.  
779
  See MFA Letter, at 12. 

276 
gross short position in an equity security.
780
 The alternative discussed here would require explicit 
tracking and reporting of such securities. 
While Managers generally track their options exposure carefully, it is frequently different 
trading desks that execute options trades and equity transactions. Thus, it is possible that 
Managers use separate systems to track their options and equity positions. For these Managers, 
collecting options and equity transactions to report the data required for Proposed Form SHO 
would require building a process to pull data from two separate systems - increasing the cost of 
complying with the rule. Requiring derivative position information might also be duplicative of 
other derivatives reporting requirements.  
3. Threshold Modifications 
As an alternative to the adopted Form SHO Thresholds, the Commission could require 
reporting Form SHO at either higher or lower thresholds – or no threshold.
781
 Commenters to the 
Proposal Release expressed a range of opinions on the thresholds, some of whom supported 
increasing the thresholds and others decreasing the thresholds relative to Proposed Form SHO.
782
 
When selecting thresholds, the fundamental economic tradeoff is the value of the data versus the 
cost of collecting the data. Alternative thresholds that are lower than Threshold A or Threshold B 
specified in Rule 13f-2 or an alternative that would not contain a threshold would produce more 
data as more entities would be required to report.  
 
780
  Such as a Manager exercising a call option to buy equity, and thus decreasing the Manager’s gross short 
position, if any. 
781
  See Proposing Release, at 15007. 
782
 Furthermore, in response to a solicitation of comments on Temporary Rule 10a-3T, commenters suggested 
thresholds generally ranging from 1% to 5%. See Proposing Release, at 14963 n.79 for links to specific 
comment letters. 

277 
Commission analysis of Form SH data collected under temporary Rule 10a-3T indicates 
that the gross short position thresholds in adopted Form SHO for Threshold A, equal to daily 
averages of $10 million or 2.5 percent of shares outstanding, would have collected more than 
three-quarters (78.5 percent) of the dollar value of short positions.
783
 Therefore, an alternative 
that lowers the threshold might lead to only a minor increase in coverage relative to the adopted 
thresholds in Form SHO. Nevertheless, the Commission recognizes that even a relatively small 
increase in coverage could increase benefits. For example, such an alternative would provide 
market participants with a clearer view of Manager bearish sentiment compared to adopted rule 
and form, as more Managers would be required to report the data, making the data more 
comprehensive.  
A lower threshold would also enhance Commission oversight of short selling and allow 
the Commission to more easily reconstruct significant market events involving short selling – 
again because the data would be more comprehensive. One commenter stated that reducing or 
eliminating the reporting thresholds to Form SHO would provide additional benefits, since 
unknown, hidden short positions pose risks to investors and the markets. Reducing or eliminating 
reporting thresholds would reveal the identity of all holders of short sale positions, thereby 
reducing these risks.
784
 
However, a lower or no threshold would increase the cost of reporting Form SHO data in 
terms of compliance costs associated with Managers compiling and filing the required data 
thorough EDGAR and in the indirect costs associated with revealing short sellers’ information. 
Evidence of this increase in aggregate reporting costs can be seen through an analysis of Form 
 
783
  Commenters questioned the use of Form SH data in this and other contexts. See supra Box 1: Use of Form 
SH Data for responses to comments on the use of these data. 
784
  See Better Markets Letter, at 12. 

278 
SH data. For example, if the reporting thresholds of adopted Form SHO were reduced from 
average daily gross position of 10 million or 2.5 percent of shares outstanding to $5 million or 1 
percent of shares outstanding, the number of reporting Managers would rise from 252 to 314. 
Furthermore, the increase in the share of gross short sale dollar volume covered by reporting 
Managers would rise from 78.5 percent to 88.6 percent. In addition, Managers would likely be 
required to file reports for more securities, which would further increase compliance costs. 
Indirect costs include increased risk of copycat short selling strategies, which can lead to herding 
and increased volatility, and short sellers engaging in strategic behavior to build short positions 
just underneath the threshold, which would lead to lower price efficiency.
785
  
In some cases, a lower threshold would decrease the indirect costs associated with 
adopted rule because it would be harder to identify individual short positions from aggregate 
reporting if there are many entities reporting.
786
 This effect may not be universally true, 
however. In particular, at thresholds just below Threshold A, the number of securities in which 
only one entity reported Form SH increases.
787
 This result implies that there are a number of 
securities for which only one short seller held a short position at a level lower than the current 
cutoff. In these cases, lowering the threshold might increase the risk of identifying individual 
short sellers. 
In contrast, alternatives that would raise the reporting threshold would lower many of the 
costs associated with providing Form SHO data, since fewer entities would be required to report. 
 
785
 See supra Part VIII.F.1.iv for discussion of this behavior in Europe.  
786
 See supra Part VIII.C.1 and Part VIII.E.1 with accompanying text for more information on risks of 
identifying individual short sellers. 
787
 According to Form SH data, 39% of securities would have only one Manager reporting at or above the 
threshold of $10 million average daily and 2.5% average daily of shares outstanding. If the percent 
threshold was reduced to 1% average daily of shares outstanding along with the $10 million average daily 
threshold the number of securities with only one Manager reporting would increase to 41%.  

279 
It would also limit somewhat the value of the data – again as the reported data would reflect a 
smaller portion of overall short positions. One means of increasing the threshold would be to 
require that both thresholds in Threshold A (i.e., both daily averages of $10 million and 2.5 
percent of shares outstanding) be reached before a Manager is required to file, instead of either 
threshold. Another alternative would be to increase one or both of thresholds in Threshold A but 
continue to require only one of them be reached before a Manager is required to file Form SHO. 
This decline in aggregate reporting costs can be seen with an analysis of Form SH data, which 
show that increasing the Form SHO daily average thresholds from 2.5 percent and $10 million to 
5 percent and $25 million would reduce the number of reporting Managers from 252 to 165. In 
addition, it would reduce the percentage of short sale dollar volume covered by reporting 
Managers from 78.5 percent to 58.4 percent. 
Higher thresholds, however, might also come with increased risk of identification and 
retaliation towards short sellers because at some point the likelihood that more than one investor 
holds a very large short position diminishes. For example, according to analysis of Form SH 
data, if the Form SHO thresholds rose from an average daily position of $10 million or 2.5 
percent of share outstanding to $25 million or 5 percent of shares outstanding, the share of 
reported securities with only one Manager would rise from 39.3 percent to 48.4 percent.
788
 
Another alternative would be to raise the percent threshold from 2.5 percent to 5 percent, 
as suggested by one commenter,
789
 without altering the $10 million threshold. Commission 
analysis of Form SH data indicates that this would only reduce the number of reporting 
Managers from 252 to 247. However, further analysis reveals that there could be a  substantial 
 
788
 See Proposing Release, at 14963 for more information on methodologies and caveats for using Form SH 
data. 
789
  See supra note 120 and associated discussion. 

280 
loss of transparency into stocks with less than a $400 million market capitalization. Since stocks 
with market caps exceeding $400 million will always trigger the $10 million threshold before the 
2.5 percent trigger ( 2.5 percent of $400 million = $10 million), raising the 2.5 percent to 5 
percent will not impact the number of large positions reported in stocks with market caps 
exceeding $400 million. However, stocks with market caps under $400 million will always 
trigger the 2.5 percent threshold before the $10 million threshold. Thus, raising the 2.5 percent 
threshold to 5 percent without altering the $10 million threshold would result in fewer smaller 
stock positions being reported. Furthermore, analysis of Form SH data indicates that for stocks 
that are specifically sensitive to the 2.5 percent threshold (i.e ., stocks in which all reportable 
short sale positions are under $10 million and therefore only trigger the 2.5 percent threshold), 
raising the threshold to 5 percent would reduce the number of reportable stocks from 131 to 30, a 
decline of about 77 percent. Thus, Form SH data analysis indicates that while raising the 
threshold from 2.5 percent to 5 percent might only result in a small reduction in the number of 
reporting Managers, it could nevertheless lead to a significant loss of transparency in small 
stocks (stocks with market capitalizations under $400 million).    
For securities subject to Threshold B, the economic impact of either raising or lowering 
the dollar threshold would be similar.
 Raising the threshold would lower compliance costs but 
also the quality of the data, while lowering the threshold would do the opposite. For example, if 
the Commission raised Threshold B from $500,000 to $10 million, then under the assumption of 
one manager short selling each Threshold B security, the total number of short positions captured 
for Threshold B securities would decrease from 23.72 percent to 8.76 percent.
790
 Similarly, 
 
790
 See Proposing Release, at Table II (analysis within table). 

281 
under the same assumptions, lowering the threshold to $50,000 would increase the number of 
short positions captured to 48.08 percent.  
As another alternative to the proposed Threshold A, the Commission could establish a 
threshold based on one rather than both of the thresholds in Rule 13f-2, i.e., either the average 
daily dollar short position or the percent of shares outstanding.
791
 The advantage of this 
alternative is that it might reduce compliance costs by simplifying reporting requirements. One 
commenter stated that the two-prong threshold for reporting companies was, “overly and 
unnecessarily complex.”
792
 In addition, the commenter said that using a percentage-based 
threshold was more costly to Managers, in part because it can be burdensome to obtain data on 
shares outstanding, which serves as the denominator in the calculation of the percentage-based 
threshold.
793
 Another commenter, however, stated that, relative to percentage-based threshold, 
“compliance with a dollar value threshold typically requires significant manual processes and 
more difficult system buildouts.”
794
 The Commission acknowledges that a dollar-value threshold 
might be somewhat less complicated for some Managers, but nevertheless believes that data 
tracking the number of shares outstanding are generally readily available, and that it is 
straightforward to calculate an average daily gross short position as a percentage of outstanding 
shares. 
The Commission also acknowledges that using a single threshold for Threshold A would 
lower compliance costs, primarily because fewer entities would be required to report. However, 
choosing which of the two thresholds to drop would impact which positions are more likely to 
 
791
  See Proposing Release, at 15008 for discussion of this alternative with the $10 million threshold as 
proposed, not as adopted. 
792
  See MFA Letter, at 13 
793
  See Proposing Release, at 15008. 
794
  See ICI Letter, at 9. 

282 
trigger the remaining threshold. For example, an alternative that retained only the $10 million 
daily average threshold would decrease the likelihood of small cap positions being reported, 
since these firms reach the 2.5 percent threshold before the $10 million threshold.
795
 Smaller 
market capitalization stocks tend to be easier to manipulate and less stable. Thus, an alternative 
that excludes the 2.5 percent threshold would result in less visibility into the actions of short 
sellers among smaller market capitalization stocks and may undermine the ability of Rule 13f-2 
to reduce manipulative behavior among these stocks, as articulated in Part VIII.C.1.
  
Commission analysis of Form SH data suggest that an alternative that includes only the 
2.5 percent threshold would result in a substantial reduction in the number of reporting Managers 
relative to the two-prong threshold in adopted Rule 13f-2. More specifically, switching from the 
adopted Form SHO thresholds of $10 million daily average or 2.5 percent of shares outstanding 
to a single prong threshold of 2.5 percent would cause the number of reporting Managers under 
Form SH to fall from 252 to 115. Furthermore, it would drastically reduce the share of covered 
short sale volume of reporting Managers from 78.5 percent to 16 percent. One commenter stated 
that excluding the dollar-based threshold and solely using a threshold of 5 percent or more, 
“...would allow the Commission to achieve its objectives without imposing unnecessary 
complexity on advisers and other reporting Managers.”
796
 Form SH data, however, indicate that 
this would reduce the number of reporting Managers from 252 to 55 and the share of covered 
short sale volume from 78.5 percent to 9 percent.  
More generally, the alternative of requiring a threshold based only on short positions as a 
percent of shares outstanding would largely eliminate reporting in larger securities. Note that for 
 
795
  Short positions in stocks with market capitalizations below $400 million will trigger the 2.5 % threshold 
before they trigger the $10 million threshold. 
796
  See ICI Letter at 9. 

283 
stocks with market capitalization above $400 million, short sellers reach the $10 million 
threshold before the 2.5 percent threshold. Furthermore, for large cap stocks, generally defined 
as having a market capitalization exceeding $10 billion, short position would have to be more 
than $250 million in order to trigger the 2.5 percent threshold. Consequently, an alternative in 
which the Commission required reporting based only on the percent of shares outstanding would 
result in fewer Form SHO reports for stocks with larger market capitalizations. Less visibility 
into the actions of short sellers in larger market capitalization stocks would provide less 
information about bearish sentiment in the economy. This is because larger market capitalization 
stocks, which are more well-established than small cap stocks, are more likely to be shorted due 
to general pessimism about the macroeconomy and less likely to be targeted as part of 
manipulative strategy in comparison to small cap stocks.
797
  
As another alternative, the Commission could structure the Reporting Thresholds to 
include the nominal economic value of short derivative positions. Specifically, reporting on 
Form SHO would be required if a Manager’s total short position in the stock and in derivatives 
such as options and security-based swaps exceeded the relevant Reporting Thresholds.
798
 This 
alternative would decrease the likelihood that Managers seek to avoid the Reporting Thresholds 
by transacting in derivatives and thus, may increase the benefits of the data from Form SHO.
799
 
Making it more difficult to circumvent the reporting requirements using derivatives might also 
decrease strategic, and sub-optimal, trading around the Reporting Thresholds which leads to 
 
797
  See, e.g., Carole Comerton-Forde & Tālis J. Putniņš, Stock Price Manipulation: Prevalence and 
Determinants, 18:1 R
EV. OF FIN. 23-66 (2014), available at https://doi.org/10.1093/rof/rfs040 (for evidence 
on small and less liquid stocks higher exposure to manipulative behavior by investors). See also discussion 
in supra Part VIII.C.1. 
798
  See Proposing Release, at 15008 (discussing this alternative with the $10 million threshold as proposed, not 
as adopted). 
799
 See supra Part VIII.C.8. 

284 
lower price efficiency.
800
 However, increasing the amount of information that was disclosed on 
publicly released Form SHO may increase copycat activity that leads to herding and increased 
volatility. Conversely, incorporating derivatives in Form SHO reports may dilute the information 
filed by Managers relative to the case where only equity gross short positions are included, 
thereby reducing the amount of herding. This alternative could also result in situations in which 
Managers would have a reporting obligation despite having large long positions in the equity 
over the entire month, which would increase costs for the Managers and would provide less 
relevant information. Additionally, including derivatives in the Reporting Threshold 
computations would increase the complexity of the rule and the cost of implementing the rule. 
For instance, Managers may need to pull information from multiple systems to determine the 
total value of their short position for reporting. Pulling information from multiple systems can be 
costly. Additionally, while valuing short positions in most equities is fairly straightforward, this 
is not true for derivatives. There are often multiple methodologies used by different market 
participants to value derivative contracts such as options. Thus, an alternative including a 
threshold for a Manager’s short exposure in derivatives would be significantly more complicated 
than Adopted Rule 13f-2 and Form SHO.  
An additional alternative could also involve requiring reporting thresholds to be based on 
activity and not just positions.
801
 This alternative would increase the amount of information 
available to the Commission regarding the activities of entities engaging in a high volume of 
short selling. This alternative might provide additional insight into Managers that sell short but 
do not hold short positions. Specifically, entities with high volumes of short selling are likely to 
 
800
 See supra Part VIII.C.1 for further discussion on strategic trading around the threshold and how the rule is 
designed to reduce it. 
801
  See Proposing Release, at 15009. 

285 
be market makers who use short selling to maintain two sided quotes in the absence of inventory 
and other high frequency traders. These entities trade in large volumes but tend to end trading 
sessions fairly flat on inventory in larger stocks. Consequently, requiring reporting based on 
activity might not significantly improve the market’s ability to assess of bearish sentiment. 
However, one area where reporting based on activity may be beneficial would be in identifying 
short selling attacks that are relatively short lived. For example, an investor with a convertible 
bond may seek to distort the stock price right around the exercise date of their bond as such 
contracts stipulate that the holder of the convertible bond receives more shares if the stock price 
is lower. In this case, an attempted manipulator may seek to aggressively short sell right around a 
convertible bond exercise date. Activity that is concentrated enough in time might not trigger a 
reporting threshold based on average position over the prior month under the final rule. While 
this activity information may be helpful in flagging unusual short selling activity, the 
Commission could conceivably build reports based on existing CAT data
802
 that would be more 
effective at detecting such behavior and Rule 13f-2 would identify these activities if the market 
participant exceeds the Reporting Thresholds.  
As an alternative, the Commission could measure the thresholds as of the last settlement 
day of the month rather than using the $10 million average daily prong or 2.5 percent average 
daily prong for Threshold A and the $500,000 threshold over any single day for Threshold B.
803
 
This alternative would have the advantage of simplifying compliance with Rule 13f-2 and Form 
SHO and thus may reduce compliance costs. Form SH data analysis indicates that using last 
 
802
  In particular, because such an analysis would not involve estimating a position for the Manager, the 
limitations of CAT are less important. 
803
  See Proposing Release, at 15009 (discussing this alternative with the $10 million threshold as proposed, not 
as adopted). 

286 
settlement day of the month instead of average daily thresholds for Threshold A would only 
result in a marginal increase in the number of reporting Managers,  from 252 to 256. However, 
the Commission is concerned that this alternative might also invite more strategic trading around 
the end of the month than adopted Form SHO, which is structured to prevent trading around the 
threshold. For instance, Managers with short positions near the threshold may temporarily reduce 
their positions to below a Reporting Threshold on exactly the days that short positions are 
measured for compliance with the threshold to avoid reporting. This inefficient trading may 
reduce price efficiency right around the reporting days as trading to avoid holding a position that 
would trigger reporting is not trading based on economic considerations but rather trading based 
on regulatory considerations and thus is inefficient and may harm price efficiency on these days. 
Instead of Threshold B, the Commission could require the same two prong, $10 million 
or 2.5 percent daily average gross position reporting threshold for short positions in equity 
securities of non-reporting company issuers, as well as for equity securities of reporting company 
issuers.
804
 This approach might be less complex as all short positions would be subject to the 
same reporting threshold. Further, it would retain a threshold that relates to the size of the short 
position and to the size of the issuance to ensure capturing positions that are relatively large 
whereas the Threshold B imposes a flat threshold that could result in some relatively large 
positions, in terms of daily average gross position of percentage of shares outstanding, not being 
filed on Form SHO. 
However, this alternative would increase the burden for Managers as information for 
non-reporting company issuers can be hard to find, making threshold calculations difficult. In 
particular, information on the number of shares outstanding can be difficult to obtain for non-
 
804
  See Id. 

287 
reporting company issuers and when it is available it is often stale and inaccurate. This could 
lead to problems with the calculations for the 2.5 percent threshold. One commenter stated that a 
single percentage-based threshold level applied to both reporting and non-reporting company 
issuers, “...would mitigate unnecessary operational and cost burdens on managers, including 
complexities from monitoring and reporting with up to three separate thresholds.”
805
 However, 
this alternative would require Managers to know the number of shares outstanding in non-
reporting companies for each trading day for their short positions, and would therefore 
effectively impose new recordkeeping costs on Managers. Further, there are multiple sources 
from which Managers can obtain shares outstanding for securities of non-reporting company 
issuers. At times these sources may report different numbers for total shares outstanding. 
Consequently, Managers could also feel the need to track the sources used to identify shares 
outstanding each day and would incur costs to determine which sources to trust for compliance. 
One concern is that Managers would try to game different data sources in order to avoid having 
to report Form SHO.  
The Commission could enhance record keeping requirements associated with this 
alternative by requiring Managers to record and report on Form SHO the source of data used to 
calculate shares outstanding.
806
 This could improve the quality of the information reported in 
Form SHO for securities of issuers who do not report with the Commission by improving the 
quality of the data that Managers use when calculating their positions. It might also help mitigate 
concerns that Managers may try to game different data sources to avoid complying with the 
regulation. For securities of reporting issuers, accurate shares outstanding information is readily 
 
805
  See ICI Letter, at 9. 
806
  See Proposing Release, at 15009. 

288 
available, thus concerns about gaming data sources or using low quality information is not as 
relevant. However enhanced record keeping requirements would increase the costs to Managers. 
While the Commission believes that most Managers have ready access to this information, 
requiring that Managers record and report the information would require Managers to further 
build out systems, in conjunction with the systems already required to report Form SHO, to also 
capture the source of information used.  
4. Other Alternatives 
a. Alternative Reporting Frequency or Additional Reporting 
Delay 
As alternatives, the Commission could require reporting at different frequencies than the 
monthly reporting mandated by the rule. Specifically, the Commission could require gross short 
position assessment and reporting (assuming at least one of the thresholds had been crossed) at 
frequencies that are shorter than a month.
807
 For example, the Commission could require 
reporting daily, weekly,
808
 biweekly, or whenever there is a significant change in short position 
(as is currently the standard in the European Union), but at least monthly. These alternatives 
could require reporting if the average short position surpasses the threshold for the month prior 
to the reporting period or if average positions surpass the threshold for the prior period (e.g. 
week, or two weeks). This could result in an increase in the number of Managers that report, 
since it is likely that some Managers hold short positions that cross a Form SHO threshold for 
 
807
  See Proposing Release, at 15009. In this alternative, the thresholds would conform to the reporting period, 
such that the 2.5 % and $10 million daily average thresholds would be calculated over the alternative 
shortened time period. 
808
 Many commenters on temporary Rule 10a-3T stated that weekly reporting was overly burdensome. See, 
e.g., Seward Kissel LLP, available at https://www.sec.gov/comments/s7-31-08/s73108-43.pdf; Investment 
Adviser Association, available at https://www.sec.gov/comments/s7-31-08/s73108-38.pdf; and Securities 
Industry and Financial Markets Association, available at https://www.sec.gov/comments/s7-31-08/s73108-
52.pdf. 

289 
the alternative time frequencies (e.g. one week) but not for the entire month. These Managers 
may be required to report with more frequent disclosures relative to Adopted Form SHO.
 
 
The fundamental tradeoff with such thresholds compares the simplicity of the rule with 
the potential to game the threshold by strategic trading. Such alternative frequencies face the 
fundamental tradeoff of increased cost and increased transparency of the data. Put simply, 
increasing the reporting frequency increases the number of reports and thus increases the cost 
associated with reporting by a similar factor.  
Increased reporting frequency could also result in collecting more information than the 
current proposal. The difference between the information collected in the current proposal and 
this alternative would mainly come from the frequency and timeliness of the reports. The 
improved timeliness could increase the risk of copycat strategies and short squeezes, but also 
improve price efficiency. One commenter stated that a study of the EU’s short sale disclosure 
policy, which requires, “immediate public disclosure of large short positions,” finds no evidence 
of increased manipulation or short squeezes.
809
 However, multiple studies have found evidence 
that the EU’s policy has result in short sellers seeking to avoid disclosure by accumulating 
positions slightly under the threshold, which could result in a loss price efficiency.
810
 
Furthermore, one commenter stated that increasing the disclosure delay to 45 days would help 
prevent copycat trading and short squeezes.
811
 The Commission recognizes that there are 
benefits and costs to more timely disclosure, and believes that the two week delay incorporated 
in adopted Form SHO effectively balances these costs and benefits. 
 
809
  See Better Markets Letter, at 13 and Charles M. Jones, Adam V. Reed, and William Waller, Revealing 
Shorts an Examination of Large Short. Position Disclosures, 29 Rev. of Fin. Studies 3278, 3282 (2016). 
810
  See supra note 770. 
811
  See MFA Letter at 4. 

290 
The Commission could also consider different reporting windows for Managers who 
meet the threshold short positions to report on Form SHO.
812
 The current proposal requires 
Managers to report on Form SHO within 14 calendar days of the end of each month. Shorter time 
horizons may increase the cost of reporting as Managers would have less time to gather and file 
the data on Form SHO and may need to build costlier procedures to ensure compliance with the 
reporting requirement.
813
 A mitigating factor would be that most of this reporting is likely to be 
done electronically, consequently it may not take the full 14 calendar days for Managers to 
gather and file the required data to the Commission. 
Additionally, the Commission could adopt different horizons for releasing the aggregated 
data after the reporting deadline.
814
 The fundamental tradeoff in terms of the delay between 
reporting and when the Commission releases the aggregated data is that a shorter delay increases 
the relevance of the data, in terms of the bearish sentiment it contains, which may improve 
managerial decision making, as well as providing more timely information about bearish 
sentiment in the market.
815
 At the same time a shorter delay increases the likelihood of copycat 
behavior, which decreases the incentive that short sellers have to gather information potentially 
leading to lower price efficiency and greater volatility.
816
 The converse is true for longer delays. 
 
812
  See Proposing Release, at 15010. 
813
 See Seward & Kissel LLP Letter (discussing Temporary Rule 10a-3T) at 5, available at 
https://www.sec.gov/comments/s7-31-08/s73108-43.pdf.  
814
  See Proposing Release, at 15010. 
815
  One commenter stated that the “...proposed data framework will not provide timely insight for the SEC to 
act given that it is monthly data with 14 days delay after month end.” See SBAI Letter, at 2. The 
Commission recognizes that removing the 14-day delay would increase its ability to monitor and respond 
more rapidly to market events stemming from short sale activity. However, as discussed elsewhere in this 
release, the delay is in part necessary to review and validate the data, and may also serve to reduce the 
likelihood of short squeeze and copycat behavior. 
816
  One commenter stated that the public dissemination of Rule 13f-2 data should be increased from 14 days to 
45 days in order to provide additional protection against exposure of trading strategies, which could be used 
as part of a replication strategy or to facilitate a short squeeze. See MFA Letter, at 4. More generally, the 
 

291 
Additionally, a shorter delay provides less time for the Commission to aggregate the data and run 
checks on the aggregated data to ensure the Commission’s aggregation is error-free, and also 
provides less time for amendments to be filed, both of which could harm the quality of the data.  
b. Report Form SHO in Inline XBRL 
The adopted rule would require Form SHO to be filed in Form SHO-specific XML, a 
structured, machine-readable data language. As an alternative, the Commission might require 
Form SHO to be filed in Inline eXtensible Business Reporting Language (“Inline XBRL”), a 
separate data language that is designed for business reporting information and is both machine-
readable and human-readable.
817
 Compared to the adopted Form SHO, the Inline XBRL 
alternative for Form SHO would provide more sophisticated validation, presentation, and 
reference features for filers and data users. However, given the fixed and constrained nature of 
the disclosures to be reported on Form SHO (e.g., the information would be as of a single 
reporting date rather than multiple reporting dates, and Managers would not be able to customize 
the content or presentation of their reported data), the benefits of these additional features would 
be muted. Compared to the adopted Form SHO, this alternative would impose greater initial 
implementation costs (e.g., licensing Inline XBRL filing preparation software) upon reporting 
persons that have no prior experience structuring data in Inline XBRL.
818
 By contrast, because 
many Managers that would be Form SHO filers would likely have experience structuring filings 
 
commenter believes that since the amendments would provide only “limited marginal benefits,” reducing 
the cost of compliance, including the risk of exposing the identities of investment managers and their 
proprietary trading strategies, is warranted. 
817
  See Proposing Release, at 15010. 
818
 See Inline XBRL Filing of Tagged Data, Securities Act Release No. 10514 (June 28, 2018), 83 FR 40846 at 
40862, available at https://www.sec.gov/rules/final/2018/33-10514.pdf (discussing costs associated with 
Inline XBRL filing of operating company financial statements and investment company risk/return 
summaries, including software licensing costs). 

292 
in a similar EDGAR Form-specific XML data language, such as in the context of filing Form 
13F, the Form SHO-specific XML requirement will likely impose lower implementation 
compliance costs on Form SHO filers than an Inline XBRL requirement would impose. 
IX. Regulatory Flexibility Act Certification 
The Regulatory Flexibility Act (“RFA”)
819
 requires Federal agencies, in promulgating 
rules, to consider the impact of those rules on small businesses. Section 603(a) of the 
Administrative Procedure Act, as amended by the RFA, generally requires the Commission to 
undertake a final regulatory flexibility analysis of rules it is adopting, to determine the impact of 
such rulemaking on “small businesses” unless the Commission certifies that the rule would not 
have a significant economic impact on a substantial number of “small entities.”
820
 
Certification for Rule 13f-2 and Form SHO. Although section 601(b) of the RFA defines 
the term “small business,” the statute permits agencies to formulate their own definitions. The 
explanation of the term “small entities” and the definition of the term “small business” in 17 
CFR 240.0-10
821
 of the Exchange Act do not explicitly reference Managers. Rule 0-10 does 
provide, however, that the Commission may “otherwise define” small entities for purposes of a 
particular rulemaking proceeding. For purposes of Rule 13f-2 and related Form SHO, therefore, 
the Commission has determined that the definition of the term “small business” found in 17 CFR 
275.0-7(a)
822
 under the Investment Advisers Act of 1940
823
 is more appropriate to the functions 
 
819
  5 U.S.C. 601 et seq. 
820
  In response to the Commission’s request for comment, commenters provided general predictions without 
empirical data to support their assessments that Proposed Rule 13f-2, Proposed Form SHO, and the 
Proposed CAT Amendments would have a significant economic impact on a substantial number of “small 
entities.” See supra note 324 and accompanying text. 
821
  Rule 0-10. 
822
  Rule 0-7(a). 
823
  15 U.S.C. 80b-1 et seq. 

293 
of institutional managers such as the Managers with reporting obligations under Rule 13f-2. The 
definition will help ensure that all persons or entities that might be Managers subject to reporting 
requirements under Rule 13f-2 will be included within a category addressed by the Rule 0-7(a) 
definition. 
Therefore, for purposes of this rule and the RFA, a Manager is a small entity if it: (i) has 
assets under management having a total value of less than $25 million; (ii) did not have total 
assets of $5 million or more on the last day of its most recent fiscal year; and (iii) does not 
control, is not controlled by, and is not under common control with another investment adviser 
that has assets under management of $25 million or more, or any person (other than a natural 
person) that had total assets of $5 million or more on the last day of its most recent fiscal year.
824
 
The Commission did not receive any comments on the certification as it related to entities 
impacted by Rule 13f-2.
  
Under Rule 13f-2, Managers are not required to report on Form SHO unless they meet or 
exceed a specified Reporting Threshold. Managers with a gross short interest position in an 
equity security of a reporting company issuer will be subject to a two-pronged reporting 
threshold structure: a   monthly average gross short position in the equity security with a U.S . 
dollar value of $10 million or more; or a monthly average gross short position as a percentage of 
shares outstanding in the equity security of 2.5 percent or more (Threshold A). Managers with a 
gross short interest position in an equity security of a non-reporting company issuer will be 
subject to a single-pronged reporting threshold structure: a gross short position in the equity 
security with a U.S . dollar value of $500,000 or more at the close of regular trading hours on any 
 
824
  Rule 0-7(a), supra note 822. See generally, Reporting Threshold for Institutional Investment Managers, 
Exchange Act Release No. 89290 (July 10, 2020), 85 FR 46016, 46031 n.90 (July 31, 2020) (stating that 
“[r]ecognizing the growth in assets under management at investment advisers since Rule 0-7(a) was 
adopted, the Commission plans to revisit the definition of a small entity in Rule 0-7(a).”). 

294 
settlement date during the calendar month (Threshold B). While the parameters of the Reporting 
Thresholds under Rule 13f-2 relate to the number and dollar value of shares of short positions, 
rather than assets under management, the Commission nevertheless anticipates that application 
of the Reporting Thresholds will result in Rule 13f-2 not applying to a significant number of 
“small businesses” as defined under Rule 0-7(a). 
With respect to the first prong of Threshold A, a monthly average gross short position in 
the equity security with a U.S . dollar value of $10 million or more for reporting company issuer 
securities represents forty percent of the assets of an entity that qualifies as a “small entity” under 
Rule 0-7(a). The Commission believes it is also unlikely that a significant number of small 
entities would place 40 percent of their respective assets under management in a short position in 
a single security. Further, many types of Managers that could be small entities, including bank 
trustees, endowments, and foundations, are subject to fiduciary standards that prohibit them from 
investing in large, concentrated short positions. Such restrictions deter small entities (with less 
than $25M of assets under management) from investing over $10M (greater than 40 percent) of 
their assets in a single short position, and therefore prevent them from triggering the first prong 
of Threshold A.
825
 
With respect to the second prong of Threshold A, smaller Managers (those with under 
$25M in assets under management) would likely try to leverage their assets through a 
combination of traditional short sales and derivatives and similar transactions that create 
economic short exposure to a security. Such entities therefore, would likely engage in strategies 
that do not lend themselves to a clear determination that the second prong of Threshold A under 
 
825
  See Molk and Partnoy, supra note 510, describing impediments that have kept different types of 
institutional investment managers from engaging in short selling. 

295 
Rule 13f-2 has been met.
826
 Further, the Commission estimates, based on an analysis of US 
common stocks,
827
 that Managers that qualify as small entities under Rule 0-7(a) would not meet 
the 2.5 percent monthly average reporting threshold for securities representing over ninety-eight 
percent (98 percent) of the overall market value.
828
 
When it comes to meeting the dollar value limits of Threshold B and the first prong of 
Threshold A, it is important to note that for the subset of Managers that engage in the most short 
selling activity—hedge funds
829
—less than twenty-five percent have less than $50M in assets 
under management.
830
 Indeed, research shows that most hedge funds have assets under 
management above the amount that would qualify them as small entities under Rule 0-7(a), i.e., 
above $25M.
831
 Further, the Commission certified in the Proposing Release that Proposed Rule 
13f-2 would not have a significant economic impact on a substantial number of small entities, as 
defined under Rule 0-10, for purposes of the RFA. The Commission requested written comments 
regarding this certification and did not receive any. Additionally, and as described above, the 
adopted dollar-value based prong of Threshold A for reporting company issuer securities is 
 
826
  Id. at 839 (positing that “institutions incorporate short selling into their strategies, not necessarily by taking 
net-short positions, but instead by combining leveraged long equity index positions with smaller actively 
managed short portfolios.”). 
827
  A small entity, with less than $25M in assets under management, is not able to hold a short position of at 
least 2.5% in a company with a market capitalization above $1B. Such companies represent over 98.5% of 
the overall market cap of US equities. See also Stock Market Size Categories (2021), available at 
https://stockmarketmba.com/sizecategories.php (calculating approximately three percent (3%) of the US 
stock market consists of common stocks of companies with less than $2B in market capitalization (i.e., 
small-cap and micro-cap stocks) and stating that micro-cap companies are generally too small for even 
most large institutional investment managers to invest in). 
828
  An analysis by Commission of the daily dataset of the Center for Research in Security Prices (“CRSP”) 
showed that for the month of Oct. 2021, on average, the number of companies with less than $1B in market 
capitalization (2,293) constituted 1.51% of the overall market capitalization. 
829
  See Molk and Partnoy, supra note 510, at 846. 
830
  See David Goldin, Elephant in the room? Size and hedge fund performance, AURUM (June 28, 2019), 
available at https://www.aurum.com/insight/elephant-in-the-room-size-and-hedge-fund-performance/.  
831
  See Daniel Barth et. al., The Hedge Fund Industry is Bigger (and Has Performed Better) Than You Think 
(Office of Fin. Research, Working Paper No. 20-01, Feb. 25, 2020, Revised Mar. 8, 2021). 

296 
based on a monthly average rather than a daily calculation, likely capturing fewer Managers than 
would have been required to report under the proposed daily dollar-value prong of Threshold A, 
so it is even less likely that small entities will be required to report on Form SHO as adopted.  
For these reasons, the Commission certifies that Rule 13f-2 will not have a significant 
economic impact on a substantial number of small entities, as defined under Rule 0-10, for 
purposes of the RFA. 
Certification for the Amendment to CAT. The amendment to the CAT NMS Plan will 
impose requirements on the CAT NMS Plan Participants (the national securities exchanges 
registered with the Commission under section 6 of the Exchange Act and FINRA), and broker-
dealers that effect short sales utilizing the bona fide market making exception pursuant to Rule 
203(b)(2)(iii) of Regulation SHO and report use of the exception to CAT.  
With respect to the national securities exchanges, the Commission’s definition of a small 
entity is an exchange that has been exempt from the reporting requirements of Rule 601 of 
Regulation NMS, and is not affiliated with any person (other than a natural person) that is not a 
small business or small organization.
832
 None of the national securities exchanges registered 
under section 6 of the Exchange Act that will be subject to the amendments are “small entities” 
for purposes of the RFA. In addition, FINRA is not a “small entity.”
833
 Based on Commission 
knowledge and experience with broker-dealers that identify as market makers, the Commission 
does not believe that any broker-dealer that effects short sales utilizing the bona fide market 
making exception pursuant to Rule 203(b)(2)(iii) of Regulation SHO and reports to the CAT will 
 
832
  See 17 CFR 240.0-10(e) (stating that a broker-dealer is a small entity if it has total net capitalization (net 
worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its 
audited financial statements were prepared pursuant to 17 CFR 240.17a-5(d), and it is not affiliated with 
any person (other than a natural person) that is not a small business or small organization). 
833
  See 13 CFR 121.201. 

297 
qualify as a small entity pursuant to Exchange Act Rule 0-10(c), because they either exceed 
$500,000 in total capital or are affiliated with a person that is not a small entity as defined in 
Rule 0-10. Given the above estimates it is possible, but unlikely, that in the future a small entity 
may come within scope of the Amendment to CAT, because such firms are likely to exceed 
$500,000 in total capital or be affiliated with a person that is not a small entity. 
For the foregoing reasons, the Commission certifies that the Amendment to CAT will not 
have a significant economic impact on a substantial number of small entities for purposes of the 
RFA. 
X. Other Matters 
Pursuant to the Congressional Review Act,
834
 the Office of Information and Regulatory 
Affairs has designated these rules as a “major rule,” as defined by 5 U.S.C. 804(2).  
If any of the provisions of these final rules, or the application thereof to any person or 
circumstance, is held to be invalid, such invalidity shall not affect other provisions or application 
of such provisions to other persons or circumstances that can be given effect without the invalid 
provision or application.  
Statutory Authority  
The Commission is adopting the rule and form contained in this document under the 
authority set forth in the Exchange Act [15 U.S.C 78a et seq.] , particularly sections 3, 10(b), 12, 
13(f), 15, (d), 23(a), 35A, 36 thereof [ 15 U.S.C. 78c, 78j(b), 78l, 78m(f), 78o(  d), 78w(a), 78ll, 
and 78mm], and Public L aw 111-203, 929X, 124 Stat. 1376 (2010). The Commission is 
amending the CAT NMS Plan pursuant to the Exchange Act, particularly Sections 2, 3, 5, 6, 
 
834
  5 U.S.C. 801 et seq.  

298 
11A, 15, 15A, 17(a) and (b), 19, and 23(a) thereof [ 15 U.S.C. 78b, 78c, 78e, 78f, 78k-1, 78o, 
78o-3, 78q(a) and (b), 78s, and 78w(a)], and Rules 608(a)(2) and (b)(2) thereunder. 
List of Subjects in 17 CFR Parts 240 and 249 
Reporting and recordkeeping requirements, Securities. 
Text of Amendments 
In accordance with the foregoing, the Commission is amending title 17, chapter II of the 
Code of the Federal Regulations as follows.  
PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE 
ACT OF 1934 
1. The authority citation for part 240 is amended by removing the sectional authority for 
§ 240.13f-2(T) to read in part as follows: 
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 
77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78j-4, 78k, 78k-1, 78l, 78m, 78n, 
78n-1, 78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 80a-20, 
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 
U.S.C. 5221(e)(3); 18 U.S.C. 1350; and Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. 
L. 112-106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.  
*  *  *  *  * 
2. Add § 240.13f-2 to read as follows: 
§ 240.13f-2 Reporting by institutional investment managers regarding gross short position 
and activity information. 

299 
(a) An institutional investment manager shall file a report on Form SHO (referenced in 17 
CFR 249.332), in accordance with the form’s instructions, with the Commission within 14 
calendar days after the end of each calendar month with regard to: 
(1) Each equity security that is of a class of securities that is registered pursuant to section 
12 of the Exchange Act or for which the issuer of that class of securities is required to file reports 
pursuant to section 15(d) of the Exchange Act over which the institutional investment manager 
and all accounts over which the institutional investment manager (or any person under the 
institutional investment manager’s control) has investment discretion with respect to either:  
(i) A monthly average gross short position at the close of regular trading hours in the 
equity security with a U.S. dollar value of $10 million or more; or  
(ii)   A monthly average gross short position at the close of regular trading hours as a 
percentage of shares outstanding in the equity security of 2.5 percent or more; and  
(2) Each equity security that is of a class of securities that is not registered pursuant to 
section 12 of the Exchange Act or for which the issuer of that class of securities is not required to 
file reports pursuant to section 15(d) of the Exchange Act over which the institutional investment 
manager and all accounts over which the institutional investment manager (or any person under 
the institutional investment manager’s control) has investment discretion with respect to a gross 
short position in the equity security with a U.S . dollar value of $500,000 or more at the close of 
regular trading hours on any settlement date during the calendar month.  
(3) Form SHO and any amendments thereto must be filed with the Commission via the 
Commission’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”), in 
accordance with 17 CFR part 232 (Regulation S-T). The Commission will publish, on an 

300 
aggregated basis, certain information regarding each equity security reported by institutional 
investment managers on Form SHO and filed with the Commission via EDGAR. 
(b) For the purposes of this section: 
(1) The term institutional investment manager has the same meaning as in section 
13(f)(6)(A) of the Exchange Act. 
(2) The term equity security has the same meaning as in section 3(a)(11) of the Exchange 
Act and § 240.3a11-1 (Rule 3a11-1)  . 
(3) The term investment discretion has the same meaning as in § 240.13f-1(b) (Rule 13f-
1(b)). 
(4) The term gross short position means the number of shares of the equity security that 
are held short as a result of short sales as defined in 17 CFR 242.200(a) (Rule 200(a) of 
Regulation SHO), without inclusion of any offsetting economic positions such as shares of the 
equity security or derivatives of such equity security. 
(5) The term regular trading hours has the same meaning as in 17 CFR 242.600(b)(77) 
(Rule 600(b)(77)). 
PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934  
3. The general authority citation for part 249 continues to read as follows:  
Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 
1350; Sec. 953(b) Pub. L. 111-203, 124 Stat. 1904; Sec. 102(a)(3) Pub. L. 112-106, 126 Stat. 309 
(2012), Sec. 107 Pub. L. 112-106, 126 Stat. 313 (2012), Sec. 72001 Pub. L. 114-94, 129 Stat. 
1312 (2015), and secs. 2 and 3 Pub. L. 116-222, 134 Stat. 1063 (2020), unless otherwise noted. 
*  *  *  *  *   

301 
4. Add § 249.332 to read as follows: 
§ 249.332 Form SHO, report of institutional investment managers pursuant to section 
13(f)(2) of the Securities Exchange Act of 1934. 
This form shall be used by institutional investment managers that are required to furnish 
reports pursuant to section 13(f)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 
78m(f)(2)) and 17 CFR 240.13f-2 (Rule 13f-2).  
5. Add Form SHO referenced in §249.332. 
Note: Form SHO is attached as Appendix A to this document. Form SHO will not appear 
in the Code of Federal Regulations.  
By the Commission. 
Dated: October 13, 2023. 
 
 
J. Matthew DeLesDernier, 
Deputy Secretary. 
Note: The following appendix will not appear in the Code of Federal Regulations. 
  

302 
Appendix A—Form SHO 
OMB Number: XXXX-XXXX 
FORM SHO 
INFORMATION REQUIRED OF INSTITUTIONAL INVESTMENT MANAGERS 
PURSUANT TO SECTION 13(f)(2) OF THE SECURITIES EXCHANGE ACT OF 1934 
AND RULES THEREUNDER 
GENERAL INSTRUCTIONS 
Rule as to Use of Form SHO. Institutional investment managers (“Managers”) must use Form 
SHO for reports to the Commission required by Rule 13f-2 [17 CFR 240.13f-2] promulgated 
under section 13(f)(2) of the Securities Exchange Act of 1934 [15 U.S.C. 78m(f)(2)] (“Exchange 
Act”). A Manager shall file a report on Form SHO in accordance with these instructions with the 
Commission within 14 calendar days after the end of each calendar month with regard to: 
(1) 
each equity security that is of a class of securities that is registered pursuant to section 12 of 
the Exchange Act or for which the issuer of that class of securities is required to file reports 
pursuant to section 15(d) of the Exchange Act over which the Manager and all accounts over 
which the Manager (or any person under the Manager’s control) has investment discretion with 
respect to either (A) a monthly average gross short position at the close of regular trading hours 
in the equity security with a value of $10 million or more, or (B) a monthly average gross short 
position at the close of regular trading hours as a percentage of shares outstanding in the equity 
security of 2.5 percent or more; and (2) each equity security that is of a class of securities that is 
not registered pursuant to section 12 of the Exchange Act or for which the issuer is not required 
to file reports pursuant to section 15(d) of the Exchange Act over which the Manager and all 
accounts over which the Manager (or any person under the Manager’s control) has investment 

303 
discretion with respect to a gross short position in the equity security with a U.S. dollar value of 
$500,000 or more at the close of regular trading hours on any settlement date during the calendar 
month. For purposes of Rule 13f-2 and Form SHO, “regular trading hours” shall have the 
meaning ascribed in Rule 600(b)(77) under the Exchange Act [17 CFR 242.600(b)(77)]. 
A Manager that determines that it has filed a Form SHO with errors that affect the accuracy of 
the short sale data reported must file an amended and restated Form SHO within ten (10) 
calendar days of discovering the error. 
Rules to Prevent Duplicative Reporting. If two or more Managers, each of which is required by 
Rule 13f-2 to file Form SHO for the reporting period, exercise investment discretion with respect 
to the same securities, only one such Manager must report the information in its report on Form 
SHO. If a Manager has information that is required to be reported on Form SHO and such 
information is reported by another Manager (or Managers), such Manager must identify the 
Manager(s) reporting on its behalf in the manner described in Special Instruction 5. 
Fi
   ling of Form SHO. A reporting Manager must file Form SHO with the Commission via the 
Commission’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”), in 
accordance with Regulation S-T. The Commission plans to publish certain data from the filings 
on an aggregated basis. 
All information included in a Form SHO report is deemed subject to a confidential treatment 
request under 17 CFR 200.83. The Commission plans to publish only aggregated data derived 
from information provided in Form SHO reports. 
Technical filing errors may cause delays in the filing of Form SHO. Technical support for 
making Form SHO reports is available through EDGAR Filer Support.  

304 
INSTRUCTIONS FOR CALCULATING REPORTING THRESHOLD 
A Manager shall file a report on Form SHO: 
• with regard to each equity security that is of a class of securities that is registered 
pursuant to section 12 of the Exchange Act or for which the issuer is required to file 
reports pursuant to section 15(d) of the Exchange Act (a “reporting company issuer”) in 
either of the following circumstances: (1) the Manager and all accounts over which the 
Manager or any person under the Manager’s control has investment discretion that are a 
monthly average gross short position at the close of regular trading hours in the equity 
security with a U.S . dollar value of $10 million or more, or (2) the Manager and all 
accounts over which the Manager or any person under the Manager’s control has 
investment discretion that are a monthly average gross short position at the close of 
regular trading hours as a percentage of shares outstanding in the equity security of 2.5 
percent or more (“Threshold A”). 
• with regard to each equity security that is of a class of securities of an issuer that is not a 
reporting company issuer as described above (a “non-reporting company issuer”),  when 
the Manager and all accounts over which the Manager or any person under the 
Manager’s control has investment discretion that are a gross short position in the equity 
security with a U.S . dollar value of $500,000 or more at the close of regular trading 
hours on any settlement date during the calendar month (“Threshold B”). 
With respect to each equity security to which the circumstances described in Threshold A or 
Threshold B applies, the Manager shall report the information, as described in the “Special 
Instructions” below, aggregated across accounts over which the Manager, or any person under 
the Manager’s control, has investment discretion.  

305 
To determine whether the dollar value threshold described in (1) of Threshold A above is met, a 
Manager shall determine its gross short position at the close of regular trading hours in the equity 
security (as defined in Rule 13f-2) on each settlement date during the calendar month and 
multiply that figure by the closing price at the close of regular trading hours on the settlement 
date (“end of day dollar value”). The Manager shall then add all end of day dollar values during 
the calendar month and divide that sum by the number of settlement dates in the month to arrive 
at a “monthly average” for each equity security the Manager traded during that calendar month 
reporting period. 
To determine whether the dollar value threshold described in Threshold B above is met, a 
Manager shall determine its gross short position at the close of regular trading hours in the equity 
security (as defined in Rule 13f-2) on each settlement date during the calendar month and 
multiply that figure by the closing price at the close of regular trading hours on the settlement 
date. If such closing price is not available, a Manager shall use the price at which it last 
purchased or sold any share of that security. 
To determine whether the percentage threshold described in (2) of Threshold A above is met, the 
Manager shall (a) determine its gross short position at the close of regular trading hours in the 
equity security (as defined in Rule 13f-2) on each settlement date during the calendar month, and 
divide that figure by the number of shares outstanding in such security at the close of regular 
trading hours on the settlement date, and (b) add up the daily percentages during the calendar 
month as determined in (a) and divide that sum by the number of settlement dates in the month to 
arrive at a “monthly average” for each equity security the Manager traded during that calendar 
month reporting period. The number of shares outstanding of the security for which information 

306 
is being reported shall be determined by reference to an issuer’s most recent annual or quarterly 
report, and any subsequent update thereto, filed with the Commission. 
SPECIAL INSTRUCTIONS 
1. This form consists of two parts: the Cover Page, and the Information Tables. 
Cover Page: 
2. The period end date used in the report (and in the EDGAR submission header) is the last 
settlement day of the calendar month. The date shall name the month, and express the day and 
year in Arabic numerals, with the year being a four-digit numeral (e.g., 2023). 
3. Amendments to Form SHO must restate the Form SHO in its entirety. If the Manager is 
filing the Form SHO report as an amendment, then the Manager must check the “ Amendment 
and Restatement” box on the Cover Page; and enter the amendment number. Each Amendment 
and Restatement must include a complete Cover Page and Information Tables. Amendments 
must be filed sequentially. 
a.   In the space designated on the Cover of Page of each Amendment and Restatement, a 
Manager shall (1) provide a written description of the revision being made; (2)   explain 
the reason for the revision; and (3)   indicate whether data from any additional Form 
SHO reporting period(s) (up to the past 12 calendar months) is/are affected by the 
Amendment and Restatement.  
b. If (3) applies, a Manager shall complete and file a separate Amendment and 
Restatement for each previous calendar month so affected (up to the past 12 months) 
and provide a description of the revision being made and explain the reason for the 
revision. 

307 
4. Present the Cover Page information in the format and order provided in the form, 
including the non-lapsed Legal Entity Identifier (“LEI”), if any, of the Manager filing the Form 
SHO report. The Cover Page shall include only the required information. Do not include any 
portions of the Information Tables on the Cover Page. 
5. Designate the Report Type for the Form SHO by checking the appropriate box in the 
Report Type section of the Cover Page, and include, where applicable, the Name and non-lapsed 
LEI (if available) of each of the Other Managers Reporting for this Manager on the Cover Page, 
and the Information Tables, as follows: 
a. If all of the information that a Manager is required by Rule 13f-2 to report on 
Form SHO is reported by another Manager (or Managers), check the box for 
Report Type “FORM SHO NOTICE,” include on the Cover Page the Name and 
non-lapsed LEI (if available) of each of the Other Managers Reporting for this 
Manager, and omit the Information Tables. 
b. If all of the information that a Manager is required by Rule 13f-2 to report on 
Form SHO is reported in this report, check the box for Report Type “FORM SHO 
ENTRIES REPORT,” omit the “Name and Non-Lapsed LEI (if available) of each 
of the Other Managers Reporting for this Manager” section of the Cover Page, 
and include the Information Tables. 
c. If only a part of the information that a Manager is required by Rule 13f-2 to report 
on Form SHO is reported in this report, check the box for Report Type “FORM 
SHO COMBINATION REPORT,” include on the Cover Page the name and non-
lapsed LEI (if available) of each of the Other Managers Reporting for this 
Manager, and include the Information Tables. 

308 
Information Tables:  
6. Do not include any additional information in the Information Tables. Do not include any 
portions of the Information Tables on the Cover Page. 
7. In reporting information required on Information Tables 1 and 2, Managers must account 
for a gross short position in an ETF, and activity that results in the acquisition or sale of shares of 
the ETF resulting from call options exercises or assignments; put options exercises or 
assignments; tendered conversions; secondary offering transactions; or other activity, as 
discussed further below. In determining its gross short position in an equity security, however, a 
Manager is not required to consider short positions that the ETF holds in individual underlying 
equity securities that are part of the ETF basket. 
8. Instructions for Information Table 1—Manager’s Gross Short Position: 
a.   Column 1. Settlement Date. Enter in Column 1 the last day of the calendar month of the 
reporting period on which a trade settles (“settlement date”). 
b.   Column 2. Issuer Name. Enter in Column 2 the name of the issuer of the security for 
which information is being reported. Reasonable abbreviations are permitted. 
c.   Column 3. Issuer LEI. If the issuer has an LEI, enter the issuer’s LEI in Column 3. 
d.   Column 4. Title of Class. Enter in Column 4 the title of the class of the security for which 
information is being reported. Reasonable abbreviations are permitted. 
e.   Column 5. CUSIP Number. Enter in Column 5 the nine (9) digit CUSIP number of the 
security for which information is being reported, if applicable. 
f.    Column 6. FIGI. Enter in Column 6 the twelve (12) character, alphanumeric Financial 
Instrument Global Identifier (“FIGI”) of the security for which information is being 
reported, if a FIGI has been assigned. 

309 
g.   Column 7. End of Month Gross Short Position (Number of Shares). Enter in Column 7 
the number of shares that represent the Manager’s gross short position in the security for 
which information is being reported at the close of regular trading hours on the last 
settlement date of the calendar month of the reporting period. The term “gross short 
position” means the number of shares of the security for which information is being 
reported that are held short, without inclusion of any offsetting economic positions—
including shares of the reportable equity security or derivatives of such security. 
h.   Column 8. End of Month Gross Short Position (rounded to nearest USD). Enter in 
Column 8 the U.S. dollar value of the shares reported in Column 7, rounded to the nearest 
dollar. A Manager shall report the corresponding dollar value of the reported gross short 
position by multiplying the number of shares of the security for which information is 
being reported by the closing price at the close of regular trading hours on the last 
settlement date of the calendar month. In circumstances where such closing price is not 
available, the Manager shall use the price at which it last purchased or sold any share of 
that security. 
9. Instructions for Information Table 2—Daily Activity Affecting Manager’s Gross Short 
Position During the Reporting Period:  
a.   Column 1. Settlement Date. Enter in Column 1 each date during the reporting period on 
which a trade settles (settlement date). The Manager shall report information for each 
settlement date during the calendar month reporting period as described in these 
instructions. 
b.   Column 2. Issuer Name. Enter in Column 2 the name of the issuer of the equity security 
for which information is being reported. Reasonable abbreviations are permitted. 

310 
c.   Column 3. Issuer LEI. If the issuer has an LEI, enter the issuer’s LEI in Column 3. 
d. Column 4. Title of Class. Enter in Column 4 the title of the class of the security for which 
information is being reported. Reasonable abbreviations are permitted. 
e.   Column 5. CUSIP Number. Enter in Column 5 the nine (9) digit CUSIP number of the 
security for which information is being reported, if applicable. 
f.    Column 6. FIGI. Enter in Column 6 the twelve (12) character, alphanumeric FIGI of the 
security for which information is being reported, if a FIGI has been assigned. 
g. Column 7. Net Change in Short Position (Number of Shares). For the settlement date set 
forth in Column 1, enter the net change in short position (represented as a number of 
shares) reflecting how the reported gross short position in shares of the security for which 
information is being reported are being closed out—or increased—as a result of the 
acquisition or sale of shares of that equity security, by taking into account: 
1)   Short sales of the security that settled on that date. 
2)   Shares of the security that were purchased to cover, in whole or in part, an existing 
short position and settled on that date. 
3)   Shares of the security that were acquired in a call option exercise that reduces or 
closes a short position on that security and settled on that date. 
4)   Shares of the security that were sold in a put option exercise that creates or increases 
a short position on that security and settled on that date. 
5)   Shares of the security that were sold in a call option assignment that creates or 
increases a short position on that security and settled on that date. 
6)   Shares of the security that were acquired in a put option assignment that reduces or 
closes a short position on that security and settled on that date. 

311 
7)   Shares of the security for which information is being reported that were acquired as a 
result of the tendered conversions that reduces or closes a short position on that 
security and settled on that date. 
8)   Shares of the security that were obtained through a secondary offering transaction that 
reduces or closes a short position on that security and settled on that date. Such 
secondary offering purchases must be reported whether they occurred outside or 
within the restricted period of Rule 105 of Regulation M, 17 CFR 242.105, which 
prohibits purchasing offering shares within the restricted period after selling short. 
9)   Shares of the security that resulted from other activity not previously reported on this 
form that creates or increases a short position on that security and settled on that date, 
or that reduces or closes a short position on that security and settled on that date. 
10) Activity other than (1) through (9) above that creates or increases, or reduces or 
closes, a short position on that security, including, but not limited to, shares resulting 
from ETF creation or redemption activity. 
PAPERWORK REDUCTION ACT INFORMATION 
Persons who are to respond to the collection of information contained in this form are not 
required to respond to the collection of information unless the form displays a currently valid 
Office of Management and Budget (“OMB”) control number. 
  

312 
OMB Number: XXXX-XXXX 
UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549 
FORM SHO 
FORM SHO COVER PAGE 
 
Report for the Period Ended: [Month / Day / Year] 
Check here if Amendment and Restatement [ ]; Amendment Number: 
Description of the Amendment and Restatement, Reason for the Amendment and Restatement, 
and Which Additional Form SHO Reporting Period(s) (up to the past 12 calendar months), if 
any, is/are affected by the Amendment and Restatement:  
Institutional Investment Manager (“Manager”) Filing Report: 
Name: ______________________________________ 
Mailing Address: ______________________________ 
Business Telephone Number: __________________ 
Business Email: ______________________________ 
Non-Lapsed Legal Entity Identifier (“LEI”): ______ 
Contact Employee: 
Name and Title: _________________  
Business Telephone Number: _____________   
Business Email: ______________ 
Date Filed: ________  

313 
The Manager filing this report hereby represents that all information contained herein is true, 
correct and complete, and that it is understood that all required items, statements, schedules, lists, 
and tables, are considered integral parts of this form.  
Report Type (Check only one):  
[ ] FORM SHO ENTRIES REPORT. (Check here if all entries of this reporting Manager are 
reported in this report.)  
[ ] FORM SHO NOTICE. (Check here if no entries reported are in this report, and all entries are 
reported by other reporting Manager(s).)  
[ ] FORM SHO COMBINATION REPORT. (Check here if a portion of the entries for this 
reporting Manager is reported in this report and a portion is reported by other reporting 
Manager(s).)  
Name and Non-Lapsed LEI of each of the Other Manager(s) Reporting for this Manager:  
[If there are no entries in this list, omit this section.]  
Name: _____________________ Non-Lapsed LEI: ______________________ 
[Repeat as necessary.]  
 

314 
INFORMATION TABLE 1 – Manager’s Monthly Gross Short Position  
 
(Repeat as Necessary) 
  
Column 
1 
Column 
2 
Column 
3 
Column 
4 
Column 
5 
Column 
6 
Column 
7 
Column 
8 
        
Settlement 
Date  
(Month 
End) 
Issuer 
Name 
Issuer LEI  Title of 
Class  
CUSIP  
Number 
FIGI  End of 
Month 
Gross 
Short 
Position 
(Number 
of Shares)  
End of 
Month 
Gross 
Short 
Position 
(rounded 
to nearest 
USD)  
        

315 
INFORMATION TABLE 2 – Daily Activity Affecting Manager’s Gross Short Position 
During the Reporting Period 
 
 
 
(Repeat as Necessary) 
Column 
1 
Column 
2 
Column 
3 
Column 
4 
Column 
5 
Column 
6 
Column 
7 
       
Settlement 
Date 
Issuer 
Name  
Issuer 
LEI 
Title of 
Class 
CUSIP 
Number  
FIGI  Net 
Change 
in Short 
Position 
(Number 
of 
Shares) 
       

Conformed to Federal Register version 

SECURITIES AND EXCHANGE COMMISSION 

17 CFR Parts 240 and 249 

[Release No. 34-98738; File No. S7-08-22] 

RIN 3235-AM34 

Short Position and Short Activity Reporting by Institutional Investment Managers 

AGENCY: Securities and Exchange Commission. 

ACTION: Final rule. 

SUMMARY: The Securities and Exchange Commission (“Commission”) is adopting a new rule 

and new Form SHO pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) and the 

Dodd-Frank Wall Street Reform and Consumer Protection Act (“DFA”). The new rule and 

related form are designed to provide greater transparency through the publication of short sale-

related data to investors and other market participants. Under the new rule, institutional 

investment managers that meet or exceed certain specified reporting thresholds are required to 

report, on a monthly basis using the related form, specified short position data and short activity 

data for equity securities. In addition, the Commission is adopting an amendment to the national 

market system (“NMS”) plan governing the consolidated audit trail (“CAT”) created pursuant to 

the Exchange Act to require the reporting of reliance on the bona fide market making exception 

in the Commission’s short sale rules. The Commission is publishing the text of the amendments 

to the NMS plan governing the CAT (“CAT NMS Plan”) in a separate notice. 

DATES: Effective date: January 2, 2024. 

Compliance date: The applicable compliance date is discussed in Part VI of this release.  



2 

FOR FURTHER INFORMATION CONTACT: Timothy M. Riley, Branch Chief; Patrice M. 

Pitts, Special Counsel; James R. Curley, Special Counsel; Jessica Kloss, Attorney Advisor; 

Brendan McLeod, Attorney Advisor; Roland Lindmayer, Attorney Advisor; Josephine J. Tao, 

Assistant Director, Office of Trading Practices; and Carol McGee, Associate Director, Office of 

Derivatives Policy and Trading Practices, Division of Trading and Markets, Securities and 

Exchange Commission, 100 F Street NE, Washington, D.C. 20549-8010, at (202) 551-5777. 

SUPPLEMENTARY INFORMATION: The Commission is adopting new 17 CFR 240.13f-2 

(“Rule 13f-2”) and related form 17 CFR 249.332 (“Form SHO”) under the Exchange Act to 

require certain institutional investment managers to report, on a monthly basis on new Form 

SHO, certain short position data and short activity data for certain equity securities as prescribed 

in Rule 13f-2. 

The Commission is also adopting, in a separate notice published elsewhere in this issue 

of the Federal Register, an amendment to the CAT NMS Plan (“CAT Amendment”), pursuant 

to 17 CFR 242.608(a)(2) (“Rule 608(a)(2)”) and (b)(2) (“Rule 608(b)(2)”), that enables the 

Commission to adopt a rule to amend any effective NMS plan. For the text of the amendment to 

the CAT NMS Plan, please see the Notice of the Text of the Amendment to the National Market 

System Plan Governing the Consolidated Audit Trail for Purposes of Short Sale-Related Data 

Collection.1  

  

 
1  Notice of the Text of the Amendment to the National Market System Plan Governing the Consolidated Audit 

Trail for Purposes of Short Sale-Related Data Collection, Exchange Act Release No. 34-98739 (Oct. 13, 
2023). 



3 

Table of Contents 
I. Overview 

A. Background 
B. The Proposals 
C. Overview of Proposed Rule 13f-2, Proposed Form SHO, Proposed Rule 205 and 
Proposed CAT Amendments 

1. Overview of Comments Received 
2. Final Rule 13f-2, Form SHO and CAT Amendment 

II. Discussion of Final Rule 13f-2 and Form SHO 
A. Final Rule 13f-2 

1. Scope of persons Covered by Final Rule 13f-2 
2. Scope of Reported Securities 
3. Reporting Thresholds 
4. Form SHO 

B. Data Aggregation and Publication of Information by the Commission 
1. Proposal 
2. Comments 
3. Final Rule 

III. Proposed Amendment to Regulation SHO to Aid Short Sale Data Collection 
A. Proposed Rule 205 
B. Comments 

IV. Amendments to CAT 
A. Proposal to Require “Buy to Cover” Order Marking 
B. Proposal to Require Reporting of Reliance on Bona Fide Market Maker Exception 

V. Other Comments 
VI. Compliance Date 
VII. Paperwork Reduction Act Analysis 

A. Background 
B. Burdens for Managers under Rule 13f-2 and Form SHO 

1. Applicable Respondents 
2. Burdens and Cost 

C. Burdens and Costs Associated with the Amendment to CAT 
1. Summary of Collections of Information 
2. Use of Information 
3. Respondents 
4. Total Initial and Annual Reporting and Record Keeping Burdens 

D. Collection of Information is Mandatory 
E. Retention Period of Recordkeeping Requirement 
F. Confidentiality 

VIII. Economic Analysis 
A. Introduction 
B. Baseline 

1. Institutional Investment Managers 



4 

2. Short Selling 
3. Current Short Selling Regulations 
4. Existing Short Selling Data 
5. Competition 

C. Economic effects 
1. Investor Protection and Market Manipulation 
2. Effects on Stock Price Efficiency 
3. Effect on Market Liquidity 
4. Effect on Corporate Decision Making 
5. Effect on the Securities Lending Market 
6. Compliance Cost 
7. Effect of Certain Electronic Filing and Dissemination Requirements 
8. Potential Increased Use of Derivatives 

D. Efficiency, Competition and Capital Formation 
1. Efficiency 
2. Competition 
3. Capital Formation 

E. Reasonable Alternatives 
1. Alternative Approaches 
2. Data Modifications 
3. Threshold Modifications 
4. Other Alternatives 

IX. Regulatory Flexibility Act Certification 
X. Other Matters 
Statutory Authority  
  



5 

I. Overview 

A. Background 

Short selling involves a sale of a security that the seller does not own, or a sale that is 

consummated by the delivery of a security borrowed by, or for the account of, the seller.2 In 

order to deliver the security to the purchaser, the short seller will generally borrow the security, 

usually from a broker-dealer or an institutional investor, and later close out the position by 

purchasing equivalent securities on the open market and returning the security to the lender. 

Short selling is generally used to profit from an expected downward price movement, to 

provide liquidity in response to unanticipated demand,3 or to hedge the risk of a long position in 

the same security or a related security.4 Short selling provides the market with important 

benefits, such as providing market liquidity and pricing efficiency.5 While short selling can serve 

useful market purposes, such as facilitating price discovery, there are concerns that it could be 

 
2  See 17 CFR 242.200(a).  
3  Market liquidity is generally provided through short selling by market professionals, such as market 

makers, who offset temporary imbalances in the buying and selling interest for securities. Short sales 
effected in the market add to the selling interest of stock available to purchasers and reduce the risk that the 
price paid by investors is artificially high because of a temporary contraction of selling interest. Short 
sellers covering their sales also may add to the buying interest of stock available to sellers. See 
Amendments to Regulation SHO, Exchange Act Release No. 61595 (Feb. 26, 2010), 75 FR 11232, 11235 
(Mar. 10, 2010) (“Rule 201 Adopting Release”). 

4  See, Short Sales, Exchange Act Release No. 50103 (July 28, 2004), 69 FR 48008 (Aug. 6, 2004) 
(“Regulation SHO Adopting Release”). 

5  See, e.g., Phil Mackintosh, How Short Selling Makes Markets More Efficient, NASDAQ (Oct. 1, 2020), 
available at https://www.nasdaq.com/articles/how-short-selling-makes-markets-more-efficient-2020-10-01. 
Efficient markets require that prices fully reflect all buy and sell interest. Market participants who believe a 
stock is overvalued may engage in short sales in an attempt to profit from a perceived divergence of prices 
from true economic values. Such short sellers add to stock pricing efficiency in part because their 
transactions inform the market of their evaluation of future stock price performance. This evaluation is 
reflected in the resulting market price of the security. See Rule 201 Adopting Release, 75 FR 11235 nn. 29 
& 30. Historically, short sellers have, at times, through doing research, uncovered fraudulent behavior. See 
also generally discussion in infra Parts VIII.C.2 and VIII.C.4. 



6 

used to drive down the price of a security, to accelerate a declining market in a security, or to 

manipulate stock prices.6  

The Commission has plenary authority under section 10(a) of the Exchange Act to 

regulate short sales of securities as necessary or appropriate in the public interest or for the 

protection of investors.7 Regulation SHO, which became effective on January 3, 2005,8 imposes 

four general requirements with respect to short sales of equity securities. Under 17 CFR 242.200 

(“Rule 200 of Regulation SHO”), broker-dealers must properly mark sale orders as “long,” 

“short,” or “short exempt.”9 Under 17 CFR 242.203 (“Rule 203 of Regulation SHO”), a broker-

dealer must locate a source of shares that the broker-dealer reasonably believes can be delivered 

in time for settlement (commonly referred to as the “locate requirement”) before effecting a short 

 
6  See, e.g., DIV. ECON. RISK ANALYSIS, SHORT SALE POSITION AND TRANSACTION REPORTING (June 5, 

2014), at 6-7 (“DERA 417(a)(2) Study”), available at https://www.sec.gov/files/short-sale-position-and-
transaction-reporting0.pdf (This is a study of the Staff of the U.S. Securities and Exchange Commission, 
which represents the views of Commission staff, and is not a rule, regulation, or statement of the 
Commission. The Commission has neither approved nor disapproved the content of this study and, like all 
staff statements, it has no legal force or effect, does not alter or amend applicable law, and creates no new 
or additional obligations for any person.); Rule 201 Adopting Release, 75 FR 11235 (describing a “bear 
raid” where an equity security is sold short in an effort to drive down the price of the security by creating 
an imbalance of sell-side interest, as an example of unrestricted short selling that could “exacerbate a 
declining market in a security by increasing pressure from the sell-side, eliminating bids, and causing a 
further reduction in the price of a security by creating an appearance that the security’s price is falling for 
fundamental reasons, when the decline, or the speed of the decline, is being driven by other factors”). See 
generally discussion infra Part VIII.C.1. 

7  15 U.S.C. 78j(a). 
8  See Regulation SHO Adopting Release. 
9  See 17 CFR 242.200(g). A broker or dealer must mark all sell orders of an equity security as “long,” 

“short,” or “short exempt.” A sell order may only be marked “long” if the seller is “deemed to own” the 
security being sold and either (i) the security to be delivered is in the physical possession or control of the 
broker or dealer; or (ii) it is reasonably expected that the security will be in the physical possession or 
control of the broker or dealer no later than the settlement of the transaction. See 17 CFR 242.200(g). A 
person is deemed to own a security only to the extent that he has a net long position in such security. See 17 
CFR 242.200(c). Once marked as long, short, or short-exempt, the order mark should not be changed 
regardless of any subsequent changes in the person’s net position. See In re OZ Mgmt., Exchange Act 
Release No. 75445 (July 14, 2015) (settled) (discussing where OZ Management submitted short sale orders 
to its executing broker, but identified such sales as long sales to its prime broker, causing books and records 
of the prime broker to be inaccurate), available at https://www.sec.gov/litigation/admin/2015/34-
75445.pdf. 



7 

sale.10 Under 17 CFR 242.204 (“Rule 204”), if the broker or dealer that is a member of a 

registered clearing agency fails to deliver the security to the registered clearing agency in time 

for settlement, the broker or dealer must take action to close out the failure to deliver if that 

failure results from a long or short sale.11 Separately, under 17 CFR 242.201 (“Rule 201”), 

trading centers12 must have policies and procedures in place to restrict short selling when a 

covered security has triggered a short sale price test circuit breaker.13 In addition, the 

Commission adopted an antifraud provision, 17 CFR 240.10b-21 (“Rule 10b-21”), to address 

failures to deliver in securities that have been associated with “naked” short selling.14 

Section 929X of the DFA added section 13(f)(2) of the Exchange Act, entitled “Reports 

by institutional investment managers,” requiring the Commission to prescribe rules to make 

certain short sale data publicly available no less frequently than monthly.15 Specifically, section 

13(f)(2) provides: “[t]he Commission shall prescribe rules providing for the public disclosure of 

 
10  See 17 CFR 242.203(b)(1) and (2). The Regulation SHO locate requirement provides that broker-dealers 

may not accept a short sale order in an equity security from another person, or effect a short sale in an 
equity security for its own account, unless the broker-dealer has (i) borrowed the security, or entered into a 
bona-fide arrangement to borrow the security; or (ii) reasonable grounds to believe that the security can be 
borrowed so that it can be delivered on the date delivery is due; and (iii) documented compliance with this 
requirement (“locate requirement”).  

11  See 17 CFR 242.204. “Failures to deliver,” or “fails,” occur when a broker-dealer fails to deliver securities 
to the party on the other side of the transaction on the settlement date.  

12  Trading center in Regulation SHO means a national securities exchange or national securities association 
that operates an SRO trading facility, an alternative trading system, an exchange market maker, an OTC 
market maker, or any other broker or dealer that executes orders internally by trading as principal or 
crossing orders as agent. 17 CFR 242.200. 

13  See 17 CFR 242.201. 
14  See “Naked” Short Selling Antifraud Rule, Exchange Act Release No. 58774 (Oct. 14, 2008), 73 FR 61666, 

61674 (Oct. 17, 2008) (In a “naked” short sale, a seller does not borrow or arrange to borrow the necessary 
securities in time to deliver them to the buyer within the standard settlement period. Although abusive 
“naked” short selling is not defined in the federal securities laws, it refers generally to selling short without 
having stock available for delivery and intentionally failing to deliver stock within the standard settlement 
period. In addition, a seller misrepresenting its short sale locate source or ownership of shares may intend 
to fail to deliver securities in time for settlement and, therefore, engage in abusive ‘‘naked’’ short selling.). 

15  Public Law 111-203, sec. 929X, 124 Stat. 1376, 1870 (July 21, 2010). 



8 

the name of the issuer and the title, class, CUSIP [Committee on Uniform Securities 

Identification Procedures] number, aggregate amount of the number of short sales of each 

security, and any additional information determined by the Commission following the end of the 

reporting period. At a minimum, such public disclosure shall occur every month.”16 In addition, 

the Commission has received multiple petitions to adopt reporting requirements for short sellers 

similar to those required for holders of long positions.17 

B. The Proposals 

In February 2022, in an effort to increase transparency regarding short position and short 

activity data to both market participants and regulators, and to address the requirements of 

section 13(f)(2), the Commission proposed new rule 13f-2 (“Proposed Rule 13f-2”) and related 

 
16  15 U.S.C. 78m(f)(2). 
17  See, e.g., Letter from Elizabeth King, Corporate Secretary, NYSE Group, et al. (Oct. 7, 2015, Petition 4-

689) (stating that rulemaking under 929X “provides an opportunity to implement meaningful public 
disclosure standards for short-sale activity, consistent with that currently required for institutional 
investment managers under section 13(f) of the Exchange Act for long position reporting”), available at 
https://www.sec.gov/rules/petitions/2015/petn4-689.pdf; Letter from Edward S. Knight, Executive Vice 
President, General Counsel and Chief Regulatory Officer, NASDAQ (Dec. 7, 2015, Petition 4-691) 
(requesting that the Commission “take swift action to promulgate rules to require public disclosure by 
investors of short positions in parity with the disclosure regime applicable to long positions”), available at 
https://www.sec.gov/rules/petitions/2015/petn4-691.pdf (“NASDAQ Petition”); see also Letter from E. 
Carter Esham, Executive Vice President, Emerging Companies, Biotechnology Innovation Organization 
(BIO) (Mar. 11, 2016) (“BIO Letter”) (applauding reforms to the short disclosure framework proposed in 
the NASDAQ Petition and in the NYSE Petition and advocating for the promulgation of rules to ensure 
parity between public disclosures required of investors taking long and short positions), available at 
https://www.sec.gov/comments/4-691/4691-5.pdf; Letter from Andrew D. Demott, Jr., Chief Operating 
Officer, Superior Uniform Group (supporting NASDAQ Petition and advocating adoption of disclosure 
requirements for short sellers), available at https://www.sec.gov/ comments/4-691/4691-10.pdf. 
Developments in the market with regard to “meme” stocks in early 2021, some of which were widely 
reported as involving large short sellers, also highlighted a need for more consistent and consolidated short 
sale information. See, e.g., Robert Smith et al., “Short Squeeze” Spreads as Day Traders Hunt Next 
GameStop, FIN. TIMES (Jan. 27, 2021), available at https://www.ft.com/content/acc1dbfe-80a4-4b63-90dd-
05f27f21ceb2; Are “Meme Stocks” Harmless Fun, or A Threat to the Financial Old Guard?, ECONOMIST 
(July 6, 2021) (retrieved from Factiva database). See also Sharon Nunn & Adam Kulam, Short-Selling 
Restrictions During Covid-19, YALE SCH. OF MGMT., PROGRAM ON FIN. STABILITY (Jan. 12, 2021), 
available at https://som.yale.edu/story/2021/short-selling-restrictions-during-covid-19 (discussing global 
short selling regulatory responses to the Covid-19 pandemic). 



9 

form (“Proposed Form SHO”) under the Exchange Act.18 Proposed Rule 13f-2 would require 

certain institutional investment managers (“Managers”) with gross short positions that meet 

certain quantitative reporting thresholds to report, on a monthly basis on new Proposed Form 

SHO, certain short position data and short activity data for certain equity securities. Proposed 

Form SHO included two parts: Information Table 1–reports of information including, but not 

limited to, data elements explicitly referenced in section 13(f)(2), gross end-of-month short 

positions in equity securities that meet the reporting thresholds, and whether such positions are 

fully hedged, partially hedged, or not hedged; and Information Table 2–reports of information 

including, but not limited to, certain daily activity data (including options assignments and 

exercises) that affect a Manager’s gross short positions during the calendar month reporting 

period. Managers would file Proposed Form SHO with the Commission via the Commission’s 

Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) within 14 calendar days 

after the end of the calendar month. The Commission would then expect to publish on EDGAR 

aggregated information derived from the data reported on Proposed Form SHO within one month 

after the end of the reporting calendar month.  

In the Proposing Release, the Commission stated that the required short sale disclosures 

that would be collected under Proposed Form SHO and the aggregated data published pursuant 

to Proposed Rule 13f-2 would increase transparency and provide several important benefits to 

market participants and regulators. Such aggregated information would help inform market 

participants regarding the overall short sale activity by reporting Managers. More information 

about the short sale activity and gross short positions of reporting Managers may promote greater 

 
18  Short Position and Short Activity Reporting by Institutional Investment Managers, Exchange Act Release 

No. 34-94313 (Feb. 25, 2022), 87 FR 14950 (Mar. 16, 2022) (“Proposing Release”). 



10 

risk management among market participants and may facilitate capital formation to the extent 

that greater transparency bolsters confidence in the markets. As discussed in the Proposing 

Release, the Commission’s regular access to Proposed Form SHO data would bolster the 

Commission’s oversight of short selling, as Proposed Rule 13f-2 and Proposed Form SHO would 

improve the utility of information available to the Commission and other regulators.19 

Additionally, to supplement the short sale data made available to the Commission in 

Proposed Form SHO filings, the Commission proposed a new rule at 17 CFR 242.205 

prescribing a “buy to cover” order marking requirement under Regulation SHO (“Proposed Rule 

205”) for certain purchase orders effected by a broker-dealer for its own account or for the 

account of another person at the broker-dealer, if, at the time of order entry, the purchaser had a 

gross short position in such security in the account for which the purchase is being made. The 

Commission also proposed amendments to the NMS plan governing the CAT (“Proposed CAT 

Amendments”) to require the reporting of “buy to cover” order marking information and of 

reliance on the bona fide market making exception in Rule 203(b)(2)(iii) of Regulation SHO 

(“BFMM locate exception”). Proposed Rule 205 and the Proposed CAT Amendments were 

designed to fill an information gap for the Commission and other regulators by providing 

insights into the lifecycle of a short sale that are not available under existing data sources.20 

 
19  Proposing Release, at 14951. 
20  Because data obtained through CAT are not made public, the “buy to cover” and “bona fide market 

making” data reported pursuant to the Proposed CAT Amendments would not be made publicly available 
as a result of such reporting. 



11 

C. Overview of Proposed Rule 13f-2, Proposed Form SHO, Proposed Rule 205 

and Proposed CAT Amendments 

1. Overview of Comments Received 

The Commission received robust comment on Proposed Rule 13f-2, Proposed Form 

SHO, Proposed Rule 205, and the Proposed CAT Amendments (collectively, the “Proposals”). 

Comments were submitted by individual investors as well as other market participants, such as 

trade associations, institutional investment managers, investment advisers, broker-dealers, 

non-profit organizations, and academicians. These comments, which are discussed in context 

below, included a variety of different viewpoints on various aspects of the Proposals.21 Many 

commenters were supportive of the Proposals as a step toward increasing transparency into short 

sale activity.22 Many commenters stated that short selling is a particularly opaque area of the 

 
21  The comment letters on the Proposing Release (File No. S7-08-22) are available at 

https://www.sec.gov/comments/s7-08-22/s70822.htm. Over 98% of the over 3,000 comments received 
were from individual investors, most of whom (over 1,900) submitted a variation of a template letter from 
“We The Investors,” an advocacy group for retail investors. The remaining comments were from trade 
associations, financial services firms—including institutional investment managers and investment 
management firms, broker-dealers—and their advisors, non-profit organizations, academicians, and entities 
other than individual investors. See Comment Letter from We the Investors, available at 
https://www.sec.gov/comments/s7-08-22/s70822-typea.pdf (“WTI Letter”). 

22  See, e.g., Comment from Samuel Hudock (Mar. 2, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-20118373-271244.htm; Comment from Michelle R. Bracke (Mar. 4, 2022) available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118531-271417.htm; Comment from Joshua Barbee 
(Mar. 4, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20118530-271416.htm; 
Comment from Robert Ross (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20119365-272251.htm; Comment from David Arkules (Feb. 28, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118071-270876.htm; Comment from Gina Preziosi 
(Mar. 7, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20118726-271589.htm; 
Comment from Jessica Cooke (Mar. 9, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20118963-271791.htm; Comment from Mauricio Gonzalez (Oct. 12, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-310835.htm; Comment from Liam Sutton (Oct. 19, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-311965.htm; Comment from Nicholas 
Graham (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-312051.htm; 
Comment from Steffen Maier (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-312049.htm; Comment from Zachary D’Elia (Oct. 19, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-312047.htm; Comment from Stephen Leachman (Oct. 19, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-312046.htm; Comment from Sergio 
Herrera (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-312042.htm; 

 



12 

market and that increasing transparency regarding short selling would be beneficial to market 

participants.23 Some of these commenters stated that the increased information regarding short 

sales would allow investors to be better informed and make better investment decisions.24 A 

number of these commenters urged the Commission to strengthen the proposed reporting 

requirements further by, for example, lowering or eliminating the thresholds triggering reporting 

obligations under Proposed Rule 13f-2.25 

 
Comment from David P. Miller Jr. (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-312038.htm.  

23  See, e.g., Comment from William Bloxham (Oct. 21, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-313372.htm; Comment from Ricardo Gomez (Oct. 29, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316604.htm; Comment from Victor 
Arriaza (Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316625.htm; 
Comment from Kyle Byrd (Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
316701.htm; Comment from Tarek Elseweifi (Oct. 29, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-316706.htm; Comment from Clay Wyant (Oct. 29, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-316708.htm; Comment from Yin Hung Lam 
(Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316601.htm; Comment from 
Evan Anderson (Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316580.htm; 
Comment from Connor Judson (Oct. 29, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-316599.htm; Comment from Nicky (Oct. 29, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-316638.htm.  

24  See, e.g., Comment from Eric Mills (April 27, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20126810-287520.htm (“[T]he proposals will serve the mission of the SEC by increasing 
transparency regarding short selling activity. On-going efforts by the SEC to increase market transparency 
and relieve information asymmetries promote efficiency, order, fairness, capital formation, and public trust. 
The result is an enhancement of investor ability to assess the market and make more informed decisions.”); 
Comment from Stanley Little (Mar. 8, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20118870-271692.htm (“The proposed rule is a[n] important missing link for investors. The 
ordinary person wishing to make money in the stock market should have all available information at their 
disposal to make informed decisions . . . The transparency rule is such a tool needed to make well informed 
decisions.”); Comment from Brendon Withers (Feb, 27, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118078-270936.htm (supported “immediate 
implementation [of the proposals] to improve the US Stock Market and provide a more fair and free system 
in which market participants can have accurate information and make informed decisions based on 
CURRENT AND ACCURATE data.”). 

25  See, e.g., Letter from Stephen W. Hall, Legal Director and Securities Specialist, Better Markets, et al. (Apr. 
26, 2022), at 12, available at https://www.sec.gov/comments/s7-08-22/s70822-20126822-287528.pdf 
(“[T]the SEC should eliminate the proposed thresholds so as to reduce or eliminate the risk that unknown, 
hidden short positions could pose to investors and the markets.”) (“Better Markets Letter”); Comment from 
Matthew Sinex (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-317106.htm; 
Comment from Noah Tewahade (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-317046.htm; Comment from Luke Dansie (Oct. 31, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-317081.htm; Comment from Mike Flowers (Oct. 30, 

 



13 

As discussed in further detail below, some commenters recommended changes to the 

Proposals in response to their concerns about: the scope of Proposed Rule 13f-2; the underlying 

approach and levels of the proposed thresholds that would trigger a reporting obligation under 

Proposed Rule 13f-2; the feasibility of operationalizing Proposed Rule 205 in a manner that 

would result in the gathering of meaningful short sale-related data; and the necessity for the 

Proposed CAT Amendments. 

Some commenters stated that the Commission did not sufficiently articulate the benefits 

of, or regulatory justification for, the Proposals and did not accurately estimate or adequately 

justify the costs and impacts of the new reporting requirements.26 Some of these commenters 

expressed concern that the Proposing Release’s Economic Analysis did not adequately estimate 

the costs and burdens of the Proposals.27 

 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-317245.htm; Comment Letter from 
Katherine Lander (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
317266.htm; Comment from Marco Alvarenga (Oct. 31, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-316992.htm; Comment Letter from Erikka Jehle (Oct. 31, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-316930.htm. 

26  E.g., Comment Letter from Robert Toomey, Managing Director and Associate General Counsel, Securities 
Industry and Financial Markets Association, et al. (Apr. 26, 2022), at 3, available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126803-287514.pdf (“SIFMA Letter”) (“SIFMA is 
concerned that such an expansive reporting regime would impose burdens and costs on reporting parties 
that would materially outweigh the benefit of the information they might yield, and that the SEC has not 
provided justification for why such information is necessary and/or cannot already be obtained through 
other means available to the SEC”); see also, Comment Letter from Thomas M. Merritt, Deputy General 
Counsel, Virtu Financial (Apr. 26, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
20126856-287588.pdf (“Virtu Letter”); Comment Letter from Thomas Deinet, Executive Director, 
Standards Board for Alternative Investments (Apr. 26, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126850-287575.pdf (“SBAI Letter”); Comment Letter 
from Matthew B. Siano, Managing Director and General Counsel, Two Sigma (Apr. 26, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126808-287518.pdf (“Two Sigma Letter”); Comment 
Letter from Richard F. Kerr, Partner, K&L Gates LLP (Apr. 26, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126848-287571.pdf (“K&L Gates Letter”).  

27  See, e.g., SIFMA Letter, at 6 n. 15 (“SIFMA is concerned that the SEC’s economic analysis of the 
Proposed Rules does not adequately consider that the sum total of the proposed requirements may result in 
a burden that far exceeds the SEC’s estimates with respect to each individual component . . .”); Comment 
Letter from Jennifer Han, Executive Vice President, Chief Counsel and Head of Regulatory Affairs, 
Managed Funds Association (Apr. 26, 2022), at 7, 19, available at https://www.sec.gov/comments/s7-08-
22/s70822-20126815-287523.pdf (“MFA Letter”) (“[T]he SEC’s economic analysis and, specifically, the 

 



14 

2. Final Rule 13f-2, Form SHO and CAT Amendment 

For the reasons discussed more fully in Parts II-IV below, and to balance implementation 

and compliance costs and burdens with the Commission’s goal of enhancing transparency 

regarding short selling, the Commission is adopting Rule 13f-2 and related Form SHO with 

certain modifications in response to comments.28 The new reporting regime of Rule 13f-2 

provides disclosures that supplement the short sale-related information that currently is publicly 

available or accessible for a fee from existing short sale reporting regimes provided by some 

registered national securities exchanges (“exchanges”) and registered national securities 

associations (“RNSAs”).29  

Final Rule 13f-2 will require Managers (defined in section 13(f)(6)(A) of the Exchange 

Act) to report to the Commission, on a monthly basis on related Form SHO, certain short 

position data and short activity data for certain equity securities. In particular: 

• On the Cover Page of Form SHO, Managers will be required to report certain basic 

information including its name, mailing address, business telephone number and business 

email, as well as the name, title, business telephone number and business email of the 

Manager’s contact employee for the Form SHO report; and the date the report is filed. 

The Manager will also provide its non-lapsed Legal Entity Identifier (“LEI”) if it has one. 

 
Proposal’s estimated costs are materially understated.”); Comment Letter from Mark A. Steffensen, Senior 
Executive Vice President and General Counsel, HSBC North American Holdings Inc. and HSBC Bank 
USA, N.A. (Jan. 24, 2023), at 15 n. 53, available at https://www.sec.gov/comments/s7-08-22/s70822-
20155771-324031.pdf (“HSBC Letter”) (“We [] do not believe that the Commission’s economic analysis 
adequately considers the costs of Proposed Rule 13f-2 to market makers.”). 

28  Rule 13f-2 and Form SHO, as adopted, are responsive to the policy recommendations to increase 
transparency around short selling activities and improve short sale data of participants in the Government-
Business Forums on Small Business Capital Formation held by the Commission in recent years. See, e.g., 
Report on the Report on the 41st Annual Small Business Forum, at 22, available at 2022 OASB Annual 
Forum Report (sec.gov); Report on the Report on the 40th Annual Small Business Forum, at 25, available 
at https://www.sec.gov/files/2021_OASB_Annual_Forum_Report_FINAL_508.pdf 

29  See infra Part II.A.4. See also Proposing Release, at 14964-65.   



15 

If other Managers are required to be listed in the “Other Manager(s) Reporting for this 

Manager” section of the Cover Page, the Manager will also be required to include the 

name and non-lapsed LEI of each such “Other Manager” listed, if the LEI of such “Other 

Manager(s)” is available to the Manager filing the Form SHO report. 

• With regard to each individual equity security reported on by Managers in the 

Information Tables of Form SHO, Managers will report: the issuer’s name and LEI if it 

has one, and the equity security’s title of class, CUSIP, and Financial Instrument Global 

Identifier (“FIGI”) (if any has been assigned).30  

• With regard to Information Table 1 of Form SHO, the Manager will also report the 

number of shares of the reported equity security that represent the Managers’ gross short 

position at the close of the last settlement date of the calendar month reporting period, as 

well as the corresponding U.S. dollar value of this reported gross short position.  

• With regard to Information Table 2 of Form SHO, for each reported equity security, for 

each individual settlement date during the calendar month reporting period, a Manager 

will report “net” activity in the reported equity security. The net activity reported by a 

Manager will be expressed by a single identified number of shares of the reported equity 

security, and will reflect offsetting purchase and sale activity by Managers. A positive 

number of shares identified will indicate net purchase activity in the equity security on 

the specified settlement date, while a negative number of shares identified will indicate 

net sale activity in the equity security on the specified settlement date. 

Managers will report such information regarding each equity security if the following 

thresholds are met: 

 
30  See infra nn. 36 & 218. 



16 

• With respect to any equity security that is of a class of securities that is registered 

pursuant to Exchange Act section 1231 or for which the issuer of that class of securities is 

required to file reports pursuant to Exchange Act section 15(d)32 (a “reporting company 

issuer”) in which the Manager meets or exceeds either: (1) a monthly average of daily 

gross short positions at the close of regular trading hours in the equity security with a 

U.S. dollar value of $10 million or more, or (2) a monthly average of daily gross short 

positions at the close of regular trading hours as a percentage of shares outstanding in the 

equity security of 2.5 percent or more (“Threshold A”). 

• With respect to any equity security that is of a class of securities of an issuer that is not a 

reporting company issuer as described above (a “non-reporting company issuer”) in 

which the Manager meets or exceeds a gross short position in the equity security with a 

U.S. dollar value of $500,000 or more at the close of regular trading hours on any 

settlement date during the calendar month. (“Threshold B”).  

The Commission will then publish aggregate information as follows: 

• With regard to Information Table 1 of Form SHO, the Commission will publish, for each 

class of equity securities, as an aggregated number of shares across all reporting 

Managers, the number of shares of the reported equity security that represent the 

Managers’ gross short position at the close of the last settlement date of the calendar 

month, as well as the corresponding aggregated U.S. dollar value of this reported gross 

short position. 

 
31  15 U.S.C. 78l. 
32  15 U.S.C. 78o(d). 



17 

• With regard to Information Table 2 of Form SHO, for each reported equity security, for 

each individual settlement date during the calendar month, the Commission will publish 

the net activity in the reported equity security, as aggregated across all reporting 

Managers. 

The Commission is also adopting, substantially as proposed, the amendment to the CAT 

NMS Plan to require broker-dealers with a reporting obligation to CAT, to report whether an 

original receipt or origination of an order to sell an equity security is a short sale for which a 

market maker is claiming the BFMM locate exception. However, for the reasons discussed 

below, the Commission is not adopting Proposed Rule 205 or the CAT “buy to cover” reporting 

requirements. 

Changes Made to the Proposals: In response to comments, and as discussed in more 

detail below, the Commission is modifying the proposal generally by:  

• Streamlining Form SHO reports by not adopting as proposed the requirement to report 

hedging classifications on Information Table 1, and by requiring a lower level of 

granularity of reporting on Information Table 2 ;33  

• Adjusting the calculation of the dollar value prong of the reporting threshold for equity 

securities of reporting company issuers (i.e., Threshold A) to be based on a monthly 

average of daily gross short positions rather than the proposed daily calculation;  

• Requiring in Rule 13f-2 and in the instructions to Form SHO that, for purposes of 

determining whether a Manager meets or exceeds a reporting threshold, a Manager shall 

determine its gross short position “at the close of regular trading hours” in the equity 

 
33  Because the proposed rule and form called for publication of only “net” activity based on the information 

reported in Information Table 2, this change in information reported on Form SHO as adopted does not 
affect the information published by the Commission from information derived from the Form SHO reports. 



18 

security, rather than at the “end of day” as was provided for in the instructions to 

Proposed Form SHO; 

• Not adopting Proposed Rule 205 and, consequently, not adopting the Proposed CAT 

Amendment requiring a “buy to cover” order mark in order receipts and order origination 

reports submitted to the CAT; and 

• Making modifications to the text of Rule 13f-2 and the instructions to Form SHO to 

provide context and enhance comprehensibility, such as—adding a reference in the 

definition of “gross short position” to “short sales” as defined in Rule 200(a) of 

Regulation SHO and making minor adjustments to phrasing in the definition;34 adding 

language to the rule text to more precisely describe the equity securities for which 

information is reported in final Form SHO;35 deleting the superfluous word “collectively” 

from the rule text to enhance overall readability; replacing the term “active LEI” on 

Proposed Form SHO with “non-lapsed LEI”36 on final Form SHO; updating the contact 

 
34  Specifically, we made a non-substantive revision to change the word “including” to “such as” and removed 

the amphibological comma. 
35  To affirm that the Rule 13f-2 requirements apply to each class of an equity security about which 

information is being reported on Form SHO, and to more accurately indicate that classes of securities, not 
issuers, are registered pursuant to section 12 of the Exchange Act, Rules 13(a)(1) and Rule 13(a)(2) have 
been revised to refer to “each equity security that is of a class of securities” rather than “each equity 
security of an issuer . . . .” This distinction by class of security is also consistent with CUSIP procedures, 
under which, we understand, different classes of stock have distinct identifying codes. Rule 13f-2 requires 
that Managers provide CUSIP numbers for equity securities for which information is reported on Form 
SHO. 

36  For greater precision in the terminology used in Form SHO as adopted, an LEI that is currently in effect is 
referred to as a “non-lapsed LEI,” rather than an “active LEI” (the terminology used in Proposed Form 
SHO), of a Manager. A non-lapsed LEI is an LEI for which the Manager is current on its periodic renewal 
fees needed to maintain the LEI. Further, to avoid any suggestion that a Manager filing a Form SHO report 
has an obligation to monitor the status of an issuer’s LEI, Instructions 8.c and 9.c of Form SHO—“Column 
3. Issuer LEI. If the issuer has an LEI, enter the issuer’s active LEI”—have been revised to remove the term 
“active.” 



19 

information to be provided on the final Form SHO cover page,37 and making 

corresponding modifications to conform the text of Rule 13f-2 and the instructions to 

Form SHO.  

• Making non-substantive, technical changes to correct inadvertent grammatical errors in 

the text of the adopted amendment to the CAT NMS Plan that requires a broker-dealer 

with a reporting obligation to CAT to indicate whether an order is a short sale effected by 

a market maker in connection with bona fide market making activities for which the 

BFMM locate exception is claimed.38  

II. Discussion of Final Rule 13f-2 and Form SHO 

A. Final Rule 13f-2 

1. Scope of Persons Covered by Final Rule 13f-2 

a. Proposal 

Exchange Act section 13(f) pertains to “Reports by Institutional Investment Managers.”39 

Proposed Rule 13f-2 would have required Managers to collect and file with the Commission via 

EDGAR certain short sale-related data on proposed Form SHO, within fourteen (14) calendar 

days after the end of each calendar month, with regard to each equity security over which the 

Manager and all accounts over which the Manager (or any other person under the Manager’s 

 
37  The required Form SHO Cover Page contact information for the reporting Manager and its “Contact 

Employee” has been updated to reflect the greater reliance on the communication technology of email 
rather than facsimile.   

38  Specifically, the preposition “for” was added before “a short sale” to clarify that reporting is required for a 
short sale in which the bona fide market maker exception is claimed, the article “the” was added before 
“exception,” and the preposition “in” was added before “Rule 203(b)(2)(iii)” to clarify that the BFMM 
locate exception is found in Rule 203(b)(2)(iii). 

39  15 U.S.C.78m(f). 



20 

control) has investment discretion40 that meet or exceed a quantitative reporting threshold 

(“Reporting Threshold”). 

As defined in section 13(f)(6)(A) of the Exchange Act and for purposes of Proposed Rule 

13f-2, ‘‘institutional investment manager’’ includes any person, other than a natural person, 

investing in or buying and selling securities for its own account, and any person exercising 

investment discretion with respect to the account of any other person.41 As such, the term 

‘‘institutional investment manager’’ typically can include brokers and dealers, investment 

advisers, banks, insurance companies, pension funds and corporations.42 

Proposed Rule 13f-2(b)(3) states that “investment discretion” has the same meaning as in 

17 CFR 240.13f-1(b) (“Rule 13f-1(b) under the Exchange Act”),43 and Rule 13f-1(b) states that 

“investment discretion” has the same meaning as in section 3(a)(35) of the Exchange Act. Rule 

13f-1(b)’s definition is comprehensive in that it covers all accounts over which the Manager, or 

any person under the Manager’s control, has investment discretion. This same definition of 

investment discretion was used by the Commission in adopting 17 CFR 240.10a-3T (“interim 

final temporary Rule 10a-3T”) in 2008, which required certain Managers to file weekly 

nonpublic reports with the Commission on Form SH regarding short sales and positions.44 In 

addition, the Rule 13f-1(b) definition of investment discretion is used for Form 13F “long” 

position reporting by certain Managers.45 

 
40  See Proposed Rule 13f-2(b)(3). 
41  See Proposed Rule 13f-2(b)(1). 
42  See also Instructions to Form 13F. 
43  See 17 CFR 240.13f-1(b). 
44  See infra discussion in Part II.A.3.a. 
45  See Form 13F (sec.gov), available at https://www.sec.gov/pdf/form13f.pdf.21 

b. Comments and Final Rule 

One commenter encouraged the Commission to expand the scope of market participants 

subject to reporting under Proposed Rule 13f-2 “beyond just Managers.”46 This commenter 

believed the Commission’s determination “to omit a large group of market participants from 

Proposed Rule 13f-2’s scope will negatively affect the completeness and analytical sufficiency of 

the aggregated and disclosed short sale data, impeding the Commission’s ability to accurately 

reconstruct significant or unusual market events.”47 This commenter believed that omitting a 

large group of market participants would “not provide the Commission with full visibility into 

the short sale market that it could otherwise achieve pursuant to Proposed Rule 13f-2” and 

believed that an “artificially narrow scope will not further the Commission’s stated goals of 

providing greater transparency and filling the information gaps for market participants and 

regulators.”48 This commenter, however, did not identify what market participants were being 

omitted under the proposal and that should otherwise be included. 

As a potential alternative to Proposed Rule 13f-2, however, this commenter suggested, in 

part, that the current FINRA short interest reporting regime could be enhanced, and subsequently 

codified, to address potential limitations in the currently available short sale-related data. 

However, because FINRA’s short interest reporting is applicable only to broker-dealers that are 

FINRA member firms, Managers represent a more diverse group of market participants than is 

 
46  See Comment Letter from the Alternative Investment Management Association Ltd (Apr. 26, 2022), at 10-

11, available at https://www.sec.gov/comments/s7-08-22/s70822-20126829-287533.pdf (“AIMA Letter”); 
see also SBAI Letter, at 3 (stating that the proposed reporting only includes Managers, which would not 
provide a complete perspective of shorting activity). In raising concerns about reporting and monitoring 
burdens imposed by the reporting regime of Proposed Rule 13f-2, other commenters, however, did not 
question the application of the proposed rule to institutional investment managers.  

47  AIMA Letter, at 11. 
48  Id. 



22 

required under FINRA reporting (as was suggested as a potential alternative by the commenter). 

As stated above, Managers typically can include various market participants, including brokers 

and dealers, as well as investment advisers, banks, insurance companies, pension funds and 

corporations. Accordingly, the Commission is adopting as proposed Rule 13f-2(b)(1) to define 

institutional investment managers as having the same meaning as in Exchange Act section 

13(f)(6)(A). Short sale-related data reported by Managers on Form SHO will provide additional 

context to, and otherwise supplement, currently available data by, for example, distinguishing 

directional short selling of Managers from short sale activity effected by market makers and 

liquidity providers. This approach should reduce the reporting of non-directional, “transient” 

short sales activity and provide market participants with more focused information on substantial 

short positions held by Managers. 

Another commenter suggested that the Commission consider an exemption for certain 

types of Managers that do not regularly utilize short positions or that only utilize short positions 

for passive investing purposes.49 By capturing short sale-related data from Managers who hold 

substantial gross short positions—regardless of the purpose for which they utilize short positions, 

the reporting regime of Rule 13f-2 will enhance transparency and provide useful information to 

market participants regarding overall short sale activity. Furthermore, having the reporting 

obligation under Rule 13f-2 triggered by a reporting threshold that is calculated based on a 

monthly average of daily gross short positions in certain equity securities, rather than the 

 
49  See Comment Letter from Valerie Dahiya, Partner, Perkins Coie LLP (Apr. 26, 2022), at 3, available at 

https://www.sec.gov/comments/s7-08-22/s70822-20126839-287549.pdf (“Perkins Coie Letter”) (stating 
that “for institutional investment managers that only selectively utilize short positions, or who only do so 
passively, these additional compliance costs in relation to the institutional investment manager’s usage of 
short positions could in turn impose untended risks to the manager’s underlying investors if the institutional 
investment manager must divert additional time and resources for compliance and oversight”). 



23 

proposed daily calculation,50 is designed in part to alleviate concerns for Managers who only 

occasionally meet or exceed the prescribed reporting thresholds. 

In addition, the Commission did not receive any comments regarding the definition of 

“investment discretion” as proposed. The Commission is adopting Rule 13f-2(b)(3) as proposed 

to define the term “investment discretion” as having the same meaning as in Rule 13f-1(b) 

(which, among other things, incorporates the definition in section 3(a)(35) of the Exchange Act). 

In addition, Managers that will file reports on adopted Form SHO likely have experience 

reporting on Form 13F, for which this same definition is used.51 

2. Scope of Reported Securities 

a. Proposal 

Under the proposed rule, a Manager would have had to file a Form SHO report with 

regard to: 

• Any equity security of an issuer that is registered pursuant to section 12 of the 

Exchange Act52 or for which the issuer is required to file reports pursuant to section 

15(d) of the Exchange Act53 in which the Manager meets or exceeds either (1) a gross 

short position in the equity security with a U.S. dollar value of $10 million or more at 

the close of regular trading hours on any settlement date during the calendar month; 

or (2) a monthly average gross short position as a percentage of shares outstanding in 

the equity security of 2.5 percent or more (Threshold A); and 

 
50  See infra Part II.A.3 for more discussion of the reporting thresholds in Proposed Rule 13f-2 and Rule 13f-2 

as adopted. 
51  See infra Part VIII.B.1. Registered investment advisers, particularly those managing hedge funds, are the 

primary Managers likely to be affected by Rule 13f-2.  
52  15 U.S.C. 78l. 
53  15 U.S.C. 78o(d). 



24 

• Any equity security of an issuer that is not a reporting company issuer as described 

above in which the Manager meets or exceeds a gross short position in the equity 

security with a U.S. dollar value of $500,000 or more at the close of regular trading 

hours on any settlement date during the calendar month (Threshold B). 

As proposed, the reporting thresholds in Rule 13f-2(a)(1) and (2) (each a “Proposed 

Reporting Threshold”) applied to equity securities, as the term “equity security” is defined in 

section 3(a)(11) of the Exchange Act54 and 17 CFR 240.3a11-1 (“Rule 3a11-1”).55 This scope, 

which included both exchange-listed and over-the-counter securities, is consistent with the 

securities to which Rules 200, 203, and 204 of Regulation SHO apply.56 The proposed scope 

would have included exchange-traded fund (“ETF”) securities, but would not have required 

Managers, in calculating a Proposed Reporting Threshold or Form SHO data, to consider short 

positions the ETF held in individual underlying equity securities.57 And because the Proposed 

Reporting Thresholds were based on a Manager’s gross short position in the underlying equity 

security itself, the proposed rule would not have required the Manager to account for derivative 

exposure as part of the threshold calculation for the underlying equity security, but would have 

required Managers to report certain changes in their gross equity short positions derived from 

 
54  Section 3(a)(11) of the Exchange Act defines “equity security” as any stock or similar security or any 

security future on any such security; or any security convertible, with or without consideration, into such a 
security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or 
right; or any other security which the Commission shall deem to be of similar nature and consider 
necessary or appropriate, by such rules and regulations as it may prescribe in the public interest or for the 
protection of investors, to treat as an equity security. 15 U.S.C. 78c(a)(11). 

55  See Proposing Release, at 14956 n.59. 
56  See Regulation SHO Adopting Release, at 48012. 
57  Proposing Release, at 14958. 



25 

acquiring or selling the equity in connection with derivative activity, such as exercising an 

option.58  

b. Comments and Final Rule 

The Commission received several comments on Proposed Rule 13f-2’s and Proposed 

Form SHO’s proposed scope of securities, with commenters expressing a variety of views. Most 

commenters took an expansive view, exemplified by one such commenter’s statement that “all 

different securities and ETFs should be required to report all short sale data. The more 

information that is available to every investor and the Commission the better.”59 As discussed 

below, other commenters, by contrast, recommended narrowing the universe of “in scope” 

securities by, for example, aligning with similar Commission reporting and public dissemination 

regimes, limiting the scope to securities of U.S. reporting companies, or excluding ETFs, options 

and warrants and other convertibles, and derivatives. Some commenters focused on the impact 

on implementation and compliance costs related to Proposed Rule 13f-2 reporting requirements 

and recommended that derivatives, options, warrants and other convertibles, and ETFs be 

excluded from the scope of equity securities subject to Proposed Rule 13f-2 reporting 

requirements.60 

 
58  As stated in the Proposing Release, the Commission believed this proposed approach balances Managers’ 

reporting costs with the utility such data provides to regulators. See Proposing Release, at 14962. 
59  Comment from Samuel Meadows (Mar. 26, 2022), at 1, available at https://www.sec.gov/comments/s7-08-

22/s70822-273456.htm (“Samuel Meadows Comment”).  
60  See, e.g., MFA Letter, at 11-12 (recommending that, to simplify compliance, provide clarity, and reduce 

costs, Commission should limit the reporting requirements to stocks of U.S. reporting company issuers, and 
exclude derivatives and ETFs); SIFMA Letter, at 20 (recommending reduction of compliance costs by 
creating a list of equity securities that would be subject to Proposed Rule 13f-2 reporting requirements that 
would exclude “extraneous securities, such as options, warrants, convertibles, and ETFs”); Comment Letter 
from Frank Vivirito, Compliance Officer, XR Securities LLC (Apr. 25, 2022), at 2 (“XR Securities Letter”) 
(stating “I feel strongly that highly liquid, higher priced, active and efficient ETFs (and perhaps even some 
single name equities) with limited or no settlement issues” should be excluded from Proposed Rule 13f-2 
reporting requirements). 



26 

Comments on the Scope of Covered Securities  

Most commenters supported the applicability of Proposed Rule 13f-2 to short positions in 

ETFs, some expressing specific concerns about “improper” use of ETFs to leverage short 

positions.61 However, one commenter advocating for the exclusion of ETFs from the universe of 

“in-scope” securities stated that, in most circumstances, Managers short ETFs largely for 

hedging purposes and not for the same reasons that Managers short stocks of reporting company 

issuers; this commenter stated that such information “will provide the public, and the SEC, very 

little in terms of useful information.”62 

The Commission disagrees with the commenter that reporting about gross short positions 

in ETFs will not provide useful information to the public and the Commission. Establishing short 

positions in an ETF can provide short exposure to a diverse set of equity securities or create a 

directional short strategy such as leveraged shorting. Because of their multipurpose nature, ETFs 

are a substantial piece of the short-side market.63 ETFs are subject to the requirements of 

 
61  See, e.g., Comment Letter from Nick Dougherty (Mar. 27, 2022), at 2, available at 

https://www.sec.gov/comments/s7-08-22/s70822-20121466-273451.pdf (“Nick Dougherty Letter”); 
Anonymously Submitted Comment (Mar. 21, 2022), at 1, available at https://www.sec.gov/comments/s7-
08-22/s70822-20120739-272894.pdf. See generally, Anonymously Submitted Comment (Mar. 21, 2022), at 
2, available at https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm (recommending 
that “[a]ll securities, including ETFs, OTC stocks, swaps etc. should have their positions data recorded and 
submitted to the SEC daily”); Samuel Meadows Comment, at 1 (“I strongly believe that all different 
securities and ETFs should be required to report all short sale data.”).  

62  MFA Letter, at 12. 
63  ETFs are a popular trading tool that can be used in various ways, including, for example, to hedge a long 

position, or to establish a directional short position. See Exchange-Traded Funds, Investment Company Act 
Release No. 33646 (Sept. 25, 2019), 84 FR 57162 (Oct. 24, 2019) (“[ETFs] have become a popular trading 
tool, making up a significant portion of secondary market equities trading.”). See also Giovanny Moriano 
& Brian Baker, Best inverse and short ETFs – here’s what to know before buying them, Bankrate (Feb. 16, 
2023), available at https://www.bankrate.com/investing/best-inverse-etfs/ (describing traders’ use of short 
ETFs to hedge against falling prices in other positions, to make directional bets on securities or indexes, or 
to magnify returns through leveraged short ETFs); The Renaissance of ETFs, Oliver Wyman (2023), 
available at https://www.oliverwyman.com/our-expertise/insights/2023/may/exchange-traded-funds-are-
fueling-market-opportunities.html (stating “As of the end of December 2022, total ETF assets under 
management (AUM) have reached $6.7 trillion across the US and Europe, growing at approximately 15% 
compound annual growth rate (CAGR) since 2010…. We expect a significant part of this growth to come 

 



27 

Regulation SHO, and there is a benefit to applying the Rule 13f-2 reporting requirements to the 

same universe of securities subject to the Commission’s short sale rules. Further, short 

sale-related data regarding ETFs will provide important transparency to a significant segment of 

market activity to both the marketplace and regulators alike.64 

Some commenters recommended that fixed-income securities be added to the proposed 

scope of securities.65 These commenters believed that all investment vehicles, including fixed 

income securities, should be included within the scope of securities subject to potential reporting. 

These commenters generally believed that short positions in fixed income securities would 

provide additional transparency to the marketplace. One of these commenters believed that fixed 

income securities should be included under the rule because “bonds play a large role in market 

activities, along with the repo market” and that “corporate bond borrowing data provides an 

unparalleled insight into short positioning at a security and issuer level.”66 

Fixed income securities are not subject to the Commission’s short sale rules. Market 

participants, including Managers, are currently accustomed to complying with the short sale rules 

with regard to equity securities that meet the definition of short sales in Rule 200(a) of 

 
from active ETFs.”). Active ETFs can include inverse and short ETFs that seek to use short strategies or 
leverage. 

64  See Experiences of US Exchange-Traded Funds During the COVID-19 Crisis, INV. CO. INST. (Oct. 2020), 
available at https://www.sec.gov/comments/credit-market-interconnectedness/cll10-2.pdf (“Early in 2020, . 
. . ETF trading volume accounted for between 20 and 30 percent of total stock market trading on a daily 
basis . . . .”); see also Richard B. Evans et al., ETF Short Interest and Failures-to-Deliver: Naked Short-
Selling or Operational Shorting?, U. PA. WHARTON SCH. (Jan. 2018), available at 
https://jacobslevycenter.wharton.upenn.edu/wp-content/uploads/2018/08/ETF-Short-Interest-and-Failures-
to-Deliver.pdf (stating that ETFs constitute roughly 10% of U.S. equity market capitalization but over 20% 
of short interest, and that short interest for the ETF market has increased steadily over several years). 

65  See, e.g., Nick Dougherty Letter (Mar. 27, 2022), at 3 (stating that “fixed income securities should be 
included under Proposed rule 13f-2”); Anonymously submitted Comment (Mar. 21, 2022), at 1, available 
at https://www.sec.gov/comments/s7-08-22/s70822-20120739-272894.pdf. 

66  Anonymously submitted Comment (Mar. 21, 2022), at 1, available at https://www.sec.gov/comments/s7-
08-22/s70822-20120739-272894.pdf. 



28 

Regulation SHO.67 Further, the self-regulatory organizations (“SROs”) currently collect and 

provide data on short sales of equity securities as defined by Rule 200(a) of Regulation SHO. 

Consistent with the discussion in the Proposing Release, the aggregated short sale-related data 

that will be published by the Commission under Rule 13f-2 will provide additional context to 

market participants regarding equity securities that are subject to the requirements of Regulation 

SHO.68 For these reasons, the Commission is not including fixed income securities. 

Some commenters also recommended excluding options, warrants, and other convertibles 

from the rule.69 Other commenters recommended that derivatives be included within the scope of 

Proposed Rule 13f-270–including those not within the definition of equity security in section 

3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder.71 

Certain derivatives, options, warrants, and convertibles are themselves equity securities 

for purposes of section 3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder, and therefore 

for purposes of final Rule 13f-1.72 Derivatives and other securities that are not equity securities 

within the definitions of section 3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder, are 

not within the scope of the rule. Managers are currently accustomed to complying with 

requirements for equity securities under Rule 200(a) of Regulation SHO. The Commission is not 

including derivatives and other securities that are not equity securities under the definitions of 

 
67  See Proposing Release, at 14956 n.59. 
68  See id. at 14956.  
69  SIFMA Letter, at 20. 
70  See, e.g., Better Markets Letter, at 9 (stating that “[i]n order for the final rule to actually serve its purpose, it 

must require that institutional investment managers include their short interest that arises from derivatives 
positions”); WTI Letter, at 4 (stating that not including derivatives contracts such as options and security-
based swaps is a “huge hole that must be remedied” and “will inevitably result in firms exploiting the 
loophole…”); Samuel Meadows Comment, at 1 (stating that “[a]ny and all Short positions resulting from 
derivatives should be included in whether they meet a Reporting Threshold”).  

71  See supra nn. 54 & 55 and accompanying text; see generally Part II.A.2.a. 
72  Id. 



29 

section 3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder. Many commenters who 

requested that derivatives be included expressed concern that derivatives could be used to create 

substantial economic short positions, while avoiding Proposed Rule 13f-2’s reporting 

requirements.73 The Commission recognizes, as it did in the Proposing Release, that there is a 

risk that Rule 13f-2 could be a catalyst for growth in markets of economic equivalents of 

underlying equity securities as short sellers look for new avenues to take the economic 

equivalent of short positions while avoiding these proposed reporting requirements.74 Managers 

do not have to account for economic exposure to an underlying equity security created through 

the use of equity derivatives when calculating the reporting thresholds for reporting short sales of 

that underlying equity security. However, once a Manager meets or exceeds a reporting threshold 

for an underlying equity security, the Manager will then be required to report certain short 

activity for each settlement date during the reporting calendar month, and that disclosure will 

take into account activity in options, tendered conversions, secondary offering transactions,75 and 

other equity derivatives or activity that might affect the reported short positions on Form SHO, 

as discussed further below.76 Managers must also report gross short positions of each equity 

security resulting from short sales as defined in Rule 200(a) of Regulation SHO to the extent the 

 
73  See, e.g., Comment Letter from Oliver Davies, Apr. 20, 2022, available at 

https://www.sec.gov/comments/s7-08-22/s70822-20124155-280554.htm (expressing concern that “funds 
are using complex derivative positions like options and swaps to hide their true short positions”); 
Anonymously submitted Comment, Mar. 14, 2022, available at https://www.sec.gov/comments/s7-08-
22/s70822-20119368-272254.htm (positing that excluding derivative positions can create opportunities to 
avoid triggering the reporting thresholds through other economically equivalent instruments). 

74  See infra Part VIII.C.8; see also Proposing Release, at 15001. 
75  See infra n. 285. 
76  See infra Part II.A.4. 



30 

Manager’s positions meet the relevant thresholds.77 Finally, large positions in options are 

currently reportable under a separate requirement.78 In addition, there is a separate reporting 

regime for security-based swaps,79 which may also lessen the likelihood of Managers attempting 

to avoid the requirements of Rule 13f-2 by using these instruments. 

Comments on Creating a List 

Some commenters recommended narrowing the universe of “in-scope” securities to 

lessen the burden on Managers and to help to ensure compliance with Proposed Rule 13f-2. 

Certain commenters recommended that the Commission create and publish a list of securities 

subject to Form SHO reporting, much like the Commission’s Official List of Section 13(f) 

Securities (“13F List”) required by statute to be made available to the public pursuant to section 

13(f)(4) of the Exchange Act80 for use in the preparation of quarterly reports filed with the 

Commission for purposes of long position reporting under Rule 13f-1. One such commenter 

suggested that providing such a list would “promote greater efficiency in validating reported 

short positions and consistency in reporting of those positions among managers.”81 Another 

 
77  Option exercises or assignments can result in a short sale. See, e.g., Rule 201 Adopting Release, at 11263 n. 

433 (explaining that short sales that result from option exercises or assignments are short sales but are not 
covered by the Rule 201 of Reg. SHO’s price test because there is no national best bid). 

78  FINRA Rule 2360 requires FINRA member firms to report large options positions to the Large Options 
Positions Report (“LOPR”), which FINRA uses to surveil for potentially manipulative behavior, including 
attempts to corner the market in the underlying equity, leverage an option position to affect the price, or 
move the underlying equity to change the value of a large option position.   

79  See Regulation SBSR, 17 CFR 242.900 through 242.909.  
80  15 U.S.C. 78m(f)(4). 
81  Comment Letter from Sarah A. Bessin, Associate General Counsel & Nhan Nguyen, Assistant General 

Counsel, Investment Company Institute (Apr. 26, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-20126820-287527.pdf (“ICI Letter”) at 9 n.28; see also MFA Letter, at 13 (positing that 
having an “official list” of securities subject to Form SHO reporting would reduce the burden on Managers 
to make judgments about whether a particular security is in-scope for Form SHO reporting and would 
reduce inconsistencies among reporting Managers in making such judgments in the absence of such a list); 
see also SIFMA Letter, at 20 (suggesting that the “Form SHO List” include securities that are included on 
the 13F List while excluding securities that should not be covered by Form SHO, as well as the total shares 
outstanding for each security). 



31 

commenter recommended aligning Proposed Rule 13f-2 with the scope of other similar reporting 

and public dissemination regimes (e.g., Rule 13f-1, and prior Rule 10a-3T82) that are focused on 

a narrower set of securities, namely certain section 13(f) securities that are included on the 13F 

List.83 

Narrowing the scope of securities to the 13F List would effectively exclude certain equity 

securities that are subject to the requirements of Regulation SHO, which the Commission 

continues to believe would be inconsistent with the Commission’s objective to publish short 

sale-related data under Rule 13f-2 that will provide additional context to market participants 

regarding securities that are subject to the Commission’s current short sale rules.84 As stated 

above, market participants, including Managers, are currently accustomed to complying with the 

short sale rules with regard to equity securities generally, so narrowing the scope to the 13F List 

that periodically changes, or to a list created for purposes of Rule 13f-2 that is similar in concept 

to the 13F List, could result in reduced Rule 13f-2 reporting and, consequently, less transparency 

of short sale-related data. Narrowing the scope to securities that are included on the 13F List 

could also result in additional administrative costs and burdens to Managers to the extent that 

Managers have to perform additional monitoring to ensure that their Form SHO reports cover, 

and the calculations required to determine whether a reporting obligation under Rule 13f-2 has 

been triggered because a Reporting Threshold has been met, apply to, only the narrower scope of 

securities (a subset of the equity securities currently subject to the Commission’s short sale 

 
82  Rule 10a-3T and Form SH focused on certain section 13(f) securities and excluded options that are 

reportable on Form 13F. 
83  HSBC Letter, at 13-14 (recommending that Commission align the reporting requirements of Proposed Rule 

13f-2 to a narrower set of securities—e.g., the securities prescribed in Rule 13f-1—rather than with 
securities that are “in-scope” with Regulation SHO). 

84  See Proposing Release, at 14956.  



32 

rules). Such an outcome is inconsistent with the Commission’s objective of enhancing 

transparency, while balancing the interests of gathering and disclosing data that provides 

additional context to market participants regarding securities that are subject to the requirements 

of Regulation SHO against the potential costs to reporting Managers. 

Additionally, with respect to long position reporting, section 13(f)(1) expressly provides 

that the Commission shall make available to the public a list of all equity securities that are 

subject to such reporting.85 However, section 13(f)(2) does not require publication of such a list. 

Further, existing short sale-related reporting to exchanges and RNSAs does not rely on a 

published list of securities. For these reasons, it is not necessary to compile and periodically 

provide a list of securities covered by Rule 13f-2. 

Comments to Limit Scope to Equity Securities of U.S. Reporting Company Issuers 

Some commenters recommended tailoring the scope of securities subject to Rule 13f-2 

reporting to the equity securities of U.S. reporting company issuers.86 Many of these commenters 

raised concerns about the costs to Managers of developing new systems to capture trading of 

equity securities of non-reporting company issuers. Certain commenters focused on how a 

requirement to report short sales of equity securities of non-reporting company issuers would 

represent an expansion of reporting requirements beyond what is currently required under 

 
85  Section 13(f)(1) of the Exchange Act (15 U.S.C. 78m(f)(1)) requires any institutional investment manager 

exercising investment discretion over accounts holding at least $100 million in fair market value of certain 
equity securities to file reports on Form 13F with the Commission at the times set forth in 17 CFR 
240.13f-1 (“Rule 13f-1”). The statute directs the Commission to make available to the public, for a 
reasonable fee, a list of all equity securities described in section 13(d)(1) of the Exchange Act and to 
disseminate to the public the information contained in the reports. 

86  See, e.g., MFA Letter, at 11-12; Letter from Leigh R. Fraser, Partner, Ropes & Gray LLP (Apr. 26, 2022), 
at 9, available at https://www.sec.gov/comments/s7-08-22/s70822-20126853-287579.pdf (“Ropes & Gray 
Letter”). Cf. SIFMA Letter, at 5 (recommending, rather than separate reporting thresholds for reporting 
company issuers and non-reporting company issuers, a single threshold apply to U.S. equity securities 
included in a “Form SHO List” akin to the 13F List that “would include securities that are included on the 
13F List, while also excluding certain extraneous securities, such as options, warrants, convertibles, and 
ETFs that should not be covered by Proposed Form SHO reporting”). 



33 

existing reporting regimes under Exchange Act sections 13(d), 13(f)(1), 13(g), and 16.87 Other 

commenters believed that requiring Managers to report short position information in equity 

securities of non-reporting company issuers would be extremely costly and provide little public 

benefit.88 Another such commenter stated that because securities of non-reporting company 

issuers can be held by only a small number of U.S. investors, cannot be traded on U.S. securities 

exchanges, and can often be subject to contractual restrictions on transfer, short sales in such 

securities are rare due to the limitations on the number of shares available to borrow.89 Another 

commenter stated that trading (including short selling) in securities of non-reporting company 

issuers is limited, which potentially makes Managers that file Form SHO reports with respect to 

such securities more susceptible to retaliatory and manipulative trading strategies.90 As stated 

above, the Commission is adopting Rule 13f-2 and Form SHO to help enhance transparency 

regarding short selling in equity securities—including both exchange-listed and over-the-counter 

securities, and ETFs—that are already subject to Regulation SHO. Consistent with the discussion 

in the Proposing Release, through the publication of short sale-related data to investors and other 

market participants, the information published under Rule 13f-2 will provide additional context 

to market participants regarding equity securities that are subject to the requirements of 

 
87  See, e.g., Ropes & Gray Letter, at 9 (stating that a requirement to report short sale-related data regarding 

equity securities of U.S. private companies would represent a “significant expansion” of reporting 
requirements imposed in investors beyond what currently is required under existing reporting regimes 
under Exchange Act sections 13(d), 13(f)(1), 13(g), 13(h), and 16). 

88  See, e.g., MFA Letter, at 11-12 (stating that because non-reporting company issuer securities are not 
publicly traded, information about transactions in such securities would not likely have an effect on price 
efficiency or market liquidity, but could have negative consequences for Managers—e.g., increasing the 
risk of exposing Managers, their short positions, and trading strategies, which could facilitate retaliatory 
and manipulative trading strategies).  

89  Ropes & Gray Letter, at 8-9. 
90  MFA Letter, at 11-12.  



34 

Regulation SHO.91 To that end, the Commission continues to believe that transparency regarding 

short selling in over-the-counter (“OTC”) equity securities, many of which are non-reporting 

company issuers,92 is important to investors generally, including many retail investors. The 

Commission has previously stated that securities “that trade in the OTC market are primarily 

owned by retail investors.”93 Consistent with this view, it is important from a transparency 

perspective to include, as proposed, non-reporting issuers for purposes of reporting under Rule 

13f-2. While the Commission is cognizant that information on non-reporting company issuers 

will be more difficult to obtain and more costly to report than information on reporting company 

issuers, the Commission disagrees there would be little benefit to the public from such 

information, particularly given the extent of trading in OTC market securities by retail 

investors.94 Furthermore, OTC securities typically have lower prices, lower trading volume, and 

are by definition not traded on exchanges, making them potentially more prone to fraud.95 In 

addition, as discussed further below, publication of aggregated data approximately one month 

 
91  See Proposing Release, at 14956.  
92  See, e.g., Publication or Submission of Quotations Without Specified Information, Exchange Act Release 

No. 89891 (Sept. 16, 2020) (“Adopting Release for Amendments to Rule 15c2-11”), 85 FR 68124, 68125 
(Oct. 27, 2020) (“However, in other cases, there is no or limited current public information available about 
certain issuers of quoted OTC securities to allow investors or other market participants to make informed 
investment decisions.”). 

93  See, e.g., Publication or Submission of Quotations Without Specified Information, Exchange Act Release 
No. 89891 (Sept. 16, 2020), 85 FR 68124, 68125 (Oct. 27, 2020) (citing to Andrew Ang, et al., Asset 
Pricing in the Dark: The Cross-Section of OTC Stocks, 26 REV. FIN. STUDS. 2985–3028 (2013) (“Securities 
that trade in the OTC market are primarily owned by retail investors[,]”); see also Unraveling the Mystery 
of Over-the-Counter Trading, FINRA INV’R INSIGHTS (Jan. 4, 2016), available at 
https://www.finra.org/investors/insights/unraveling-mystery-over-counter-trading (“OTC equities are 
largely owned by retail investors, according to a 2013 study from Columbia University, who may be 
attracted to the low price of many OTC equities, including so-called "penny stocks" that trade at under $5 a 
share. That activity is typically very speculative.”). 

94  See id. See also infra Part VIII.C.6 for a discussion of costs related to tracking non-reporting companies, 
and infra Part II.A.3 for discussion of possible benefit. 

95  See, e.g., Adopting Release for Amendments to Rule 15c2-11, 85 FR 68124, at 68185.  



35 

following the reporting calendar month will alleviate concerns regarding potential retaliation 

against reporting Managers.  

Other commenters raised questions as to whether the Commission’s jurisdiction extended 

to equity securities not traded in the U.S. One such commenter, highlighting the disparity 

between Proposed Rule 13f-2 reporting and reporting of long positions in the same securities, 

questioned why it would be in the public interest to require more expansive disclosure with 

respect to short positions than long positions, and stated that the “proposed scope of the rule 

would provide U.S. investors with information that is of limited value, particularly with respect 

to non-U.S. securities.”96  

Exchange Act section 13(f)(2)’s cross-border reach is based on the territorial approach 

that the Commission has applied when crafting rules to implement other provisions of the 

Exchange Act.97 Consistent with that territorial approach (which is based on Supreme Court 

precedent, including Morrison v. National Australia Bank, Ltd. and its progeny) the Commission 

examines the relevant statutory provision to determine the domestic conduct that is covered by 

the provision.98 The Commission understands section 13(f)(2), by its terms, to apply to any 

institutional investment manager already subject to U.S. reporting requirements. This indicates 

that the relevant domestic conduct under section 13(f)(2) is being an institutional investment 

 
96  HSBC Letter, at 13-14 (recommending that the reporting requirements of Proposed Rule 13f-2 be limited to 

equity securities of reporting company issuers that are traded on a Commission-registered trading 
platform). 

97  See, e.g., Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, Exchange 
Act Release No. 74244 (Feb. 11, 2015), 80 FR 14563, 14649 (Mar. 19, 2015) (“2015 Regulation SBSR 
Adopting Release”) (discussing the territorial approach to the cross-border application of Title VII 
requirements for regulatory reporting and public dissemination of security-based swap transactions). 

98  561 U.S. 247. See, e.g., Abitron Austria GmbH v. Hetronix Int’l, Inc, 600 U.S. **, **, 2023 WL 4239255, 
at *4 (June 29, 2023) (stating that “[the Supreme Court has] repeatedly and explicitly held that courts must 
“identif[y] ‘the statute’s “focus”’ and as[k] whether the conduct relevant to that focus occurred in United 
States territory”). 



36 

manager operating in the U.S. securities markets such that the investment manager is subject to 

filing reports with the Commission. Thus, when that relevant domestic conduct is present here in 

the United States, section 13(f)(2)’s regulatory reporting obligation will generally apply. 

The Commission is adopting Rule 13f-2 and Form SHO to help enhance transparency 

regarding short selling in equity securities—including both exchange-listed and over-the-counter 

securities, and ETFs. The Commission continues to believe that, through the publication of short 

sale-related data to investors and other market participants, the information reported by 

Managers will provide important additional context to market participants regarding short sale 

activity in these equity securities by Managers. The Commission disagrees that the reported 

information would be of “limited value” as was suggested by a commenter. Transparency 

regarding short selling by Managers of securities of U.S. and non-U.S. issuers is important 

regardless of where those sales occur. 

Final Rule 

For the reasons discussed above, the Commission is adopting the scope of securities as 

originally proposed. Specifically, the final rule will cover equity securities as defined in section 

3(a)(11) of the Exchange Act and Rule 3a11–1 thereunder. This scope of securities includes both 

exchange-listed and OTC equity securities, including, inter alia, ETFs, certain derivatives, and 

options, warrants and other convertibles, which is consistent with the equity securities to which 

Rules 200, 203, and 204 of Regulation SHO apply.99 

 
99  See Regulation SHO Adopting Release, at 48012.  



37 

3. Reporting Thresholds 

a. Proposal 

To balance the interests of gathering and disclosing data and the potential costs to 

reporting Managers, the Commission proposed separate thresholds for short positions in 

reporting company issuers, or Threshold A, and non-reporting company issuers, or Threshold 

B.100 Threshold A, in Proposed Rule 13f-2(a)(1), involved a two-pronged approach that would 

have required reporting by Managers that have, with regard to each equity security of a reporting 

company issuer, either (i) a gross short position with a U.S. dollar value of $10 million or more 

at the close of regular trading hours on any settlement date during the calendar month, or (ii) a 

2.5 percent or higher monthly average gross short position as a percentage of shares 

outstanding.101 Threshold B, in Proposed Rule 13f-2(a)(2), involved a single-pronged approach 

that would have required reporting by Managers that have, with regard to each equity security of 

a non-reporting company issuer, a U.S. dollar value of $500,000 or more at the close of regular 

trading hours on any settlement date during the calendar month.102 The Proposed Reporting 

Thresholds were based on comment letters and analysis of Form SH data collected under Rule 

10a-3T, an interim temporary rule adopted by the Commission in October 2008, which required 

certain institutional investment managers to file weekly nonpublic reports with the Commission 

on Form SH regarding their short sales and short positions in certain section 13(f) securities, 

 
100  As discussed above, an issuer of a class of securities that is registered pursuant to Exchange Act section 12 

or for which the issuer is required to file reports pursuant to Exchange Act section 15(d) is referred to 
herein as a reporting company issuer; issuers not meeting those criteria are referred to herein as non-
reporting company issuers. 

101  Proposed Rule 13f-2(a)(1). See Proposing Release, at 14962 (describing in detail the design of Threshold 
A). 

102  Proposed Rule 13f-2(a)(2). See Proposing Release, at 14962 (describing in detail the design of Threshold 
B). 



38 

other than options.103 Rule 10a-3T required reporting of short positions that were either greater 

than 0.25 percent of shares outstanding or $10 million in fair market value.104 This temporary 

rule was adopted in the wake of the 2008 financial crisis in response to concerns about high 

levels of volatility associated with short selling.105 Proposed Threshold B was developed based 

on an analysis of OTC Markets data.106 The Proposed Reporting Thresholds were structured to 

make it more difficult for Managers with substantial gross short positions to avoid disclosure by 

trading below a Proposed Reporting Threshold, particularly with lower market capitalization 

securities. 

The approach to Threshold A, as described in the Proposing Release, was designed to 

ensure that a substantial short position in either a small capitalization security or a large 

 
103  Disclosure of Short Sales and Short Positions by Institutional Investment Managers, Exchange Act Release 

No. 58785 (Oct. 15, 2008), 73 FR 61678 (Oct. 17, 2008). The rule extended the reporting requirements 
established by the Commission’s Emergency Orders dated Sept. 18, 2008, Sept. 21, 2008, and Oct. 2, 2008, 
with some modifications. See Emergency Order Pursuant to Section 12(k)(2) of the Securities and 
Exchange Act of 1934 Taking Temporary Action to Respond to Market Developments, Exchange Act 
Release No. 58591 (Sept. 18, 2008), 73 FR 55175 (Sept. 24, 2008); Amendment to Emergency Order 
Pursuant to Section 12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action to Respond 
to Market Developments, Exchange Act Release No. 58591A (Sept. 21, 2008), 73 FR 55557 (Sept. 25, 
2008) (amending the Sept. 18, 2008 Emergency Order (“Order”) to clarify certain technical issues and 
when the information filed by the institutional investment managers on a nonpublic basis would be made 
public by the Commission on a delayed basis); Amendment to Order and Order Extending Emergency 
Order Pursuant to Section 12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action to 
Respond to Market Developments, Exchange Act Release No. 58724 (Oct. 2, 2008), 73 FR 58987 (Oct. 8, 
2008) (extending effectiveness of the Order through Oct. 17, 2008, and stating that the Forms SH filed 
under the Order would remain nonpublic to the extent permitted by law). 

104  See Proposing Release, at 14963-65 (discussing the analysis of Form SH data). 
105  Rule 10a-3T remained in effect through July 2009, at which time the Commission stated that it and its staff 

would be working with several SROs to make certain short sale volume and transaction data publicly 
available through SRO websites. See Proposing Release, at 14954 (providing background on Rule 10a-3T 
and related Form SH).  

106  See Proposing Release, at 14964 n.82 (“This analysis was performed using data from OTC Markets Group 
Inc. available through Wharton Research Data Services, https://wrds-
www.wharton.upenn.edu/pages/about/data-vendors/otc-markets-group/. The data were filtered to only 
include equities that had a closing price and short interest on September 30, 2020. Approximately 13% of 
the data did not have total shares outstanding available, representing approximately 14% of the dollar value 
of short interest. We use these data without shares outstanding as a proxy for non-reporting issuers. The 
Commission used September 2020 because that is the most recent date in which a dataset containing total 
shares outstanding for a broad set of OTC equities was available.”).  



39 

capitalization security could potentially trigger a reporting obligation under Threshold A.107 For 

example, it would be difficult for a Manager to trigger only a dollar threshold in a given security 

if the market capitalization of the reporting company issuer is small; likewise, it would be 

difficult for a Manager to trigger only a percentage threshold in a given security if the market 

capitalization of the reporting company issuer is large. The Commission believed that this would 

help to ensure transparency into short sale-related activity that would be beneficial to both 

market participants and regulators. As stated above, the Proposed Reporting Thresholds were 

structured to make it more difficult for Managers with substantial gross short positions to avoid 

disclosure by trading below a Reporting Threshold, particularly with lower market capitalization 

securities. The proposed U.S. dollar value-based prong was designed to capture Managers with a 

substantial short position, even if the position was relatively small compared to the market 

capitalization of the issuer.108 The prong based on percentage of shares outstanding was designed 

to capture Managers with gross short positions that are large relative to the size of the issuer and, 

therefore, could have a significant impact on the issuer.109 

Regarding Threshold B, as discussed in the Proposing Release, a $500,000 or more 

threshold for non-reporting company issuer securities is similar to the median dollar value of a 

position of 2.5 percent of the market capitalization of OTC stocks for which the Commission was 

able to obtain information on total shares outstanding.110 The Commission believed that this 

approach with regard to non-reporting company issuers would help to ensure added transparency 

into short sale-related activity that would be beneficial to both market participants and regulators, 

 
107  Id. at 14962. 
108  Id. 
109  Id. 
110  Id. at 14962-63. 



40 

because, as discussed in the Proposing Release, it would capture Managers with substantial short 

positions in an equity security of a non-reporting company issuer, even if such positions are 

relatively small compared to the market capitalization of the issuer.111 Rather than a two-pronged 

reporting threshold for equity securities of non-reporting company issuers, however, the 

Commission proposed a single-pronged, dollar value-based, reporting threshold for 

non-reporting company issuer securities given its understanding that the number of total shares 

outstanding for non-reporting company issuers may not be readily and consistently accessible to 

Managers.112 

As discussed in the Proposing Release, to determine whether the proposed dollar value 

prong of Threshold A (Proposed Rule 13f-2(a)(1)(i)) or Threshold B (Proposed Rule 13f-2(a)(2)) 

is met, a Manager would be required to determine its end of day gross short position on each 

settlement date during the calendar month and multiply that figure by the closing price at the 

close of regular trading hours on the relevant settlement date.113 In circumstances where such 

closing price was not available in calculating Threshold B, a Manager would be required to use 

the price at which it last purchased or sold any share of that security, which would be readily 

available to the Manager.114 

As discussed in the Proposing Release, to determine whether the second prong of 

Threshold A (Proposed Rule 13f-2(a)(1)(ii))—2.5 percent or higher monthly average gross short 

position as a percentage of shares outstanding in the equity security—is met, the Manager would 

be required to (a) identify its gross short position in the equity security at the close of each 

 
111  Proposing Release, at 14962-63. 
112  Id. at 14962. 
113  Id. at 14957. 
114  Id.41 

settlement date during the calendar month of the reporting period, and divide that figure by the 

number of shares outstanding in such security at the close of that settlement date, then (b) add 

together the daily percentages during the calendar month as determined in (a) and divide the 

resulting total by the number of settlement dates during the calendar month reporting period. The 

number of shares outstanding of the security for which information was being reported would 

have been determined by reference to an issuer’s most recent annual or quarterly report, and any 

subsequent update thereto, filed with the Commission.115 

b. Comments and Final Rule 

As discussed below, the Commission received numerous comments regarding various 

aspects related to the Proposed Reporting Thresholds. Generally, these comments varied, with 

some commenters recommending, for example, that the Commission raise the thresholds (which 

would trigger less gross short position reporting) and others recommending the Commission 

lower or eliminate the thresholds (which would trigger additional gross short position 

 
115  Id.  



42 

reporting).116 Some commenters expressed general support for the Proposed Reporting 

Thresholds, or expressed support for certain aspects of those thresholds.117 

Comments to Raise Threshold A 

Some commenters recommended increasing the proposed Reporting Threshold A by, for 

example, doubling the percent of shares outstanding threshold from 2.5 percent to 5 percent so as 

to be consistent with the existing reporting requirements of 17 CFR 240.13d-1 (“Exchange Act 

Rule 13d-1”)118 and the proposed reporting requirements of 17 CFR 240.10B-1 (“Exchange Act 

Rule 10B-1”)119 related to large positions in security-based swaps.120 Other commenters also 

 
116  See, e.g., ICI Letter, at 9-10 (supporting a higher threshold, stating that “a higher threshold would still 

provide the Commission with information on such large positions, while reducing the burdens on managers 
of reporting smaller positions that likely would have a lesser market impact”); K&L Gates Letter, at 4-5 
(supporting a higher threshold, and stating that “[u]nless the Reporting Thresholds are modified, we 
anticipate that the Commission will be inundated with reports providing significant detail about positions 
that, in many cases, are not sufficiently sizable to impact the larger markets or raise the type of concerns 
that the Proposal was intended to address”); but see WTI Letter (stating that “it is important to set the 
threshold as low as possible to mitigate any effects and impacts from firms attempting to game the 
threshold”). 

117  See, e.g., SIFMA Letter, at 20 (stating that “while certain SIFMA members believe that the threshold 
should be higher, other SIFMA members did not object to the proposed threshold of 2.5 percent of the 
issuer’s TSO or $10 million fair market value”); Schulte Roth & Zabel LLP Letter (Apr. 26, 2022), at 3, 
available at https://www.sec.gov/comments/s7-08-22/s70822-20126845-287561.pdf (“Schulte Roth & 
Zabel Letter”) (stating that “[w]e believe that the 2.5 percent threshold identifies those situations where a 
short position could lead to market manipulation”).  

118  Rule 13d-1 (requiring long-side equity securities holders to file a Schedule 13D or Schedule 13G if the 
security holder owns over 5% of an issuer’s equity securities). 

119  See Prohibition Against Fraud, Manipulation, or Deception in Connection With Security-Based Swaps; 
Prohibition Against Undue Influence Over Chief Compliance Officers; Position Reporting of Large 
Security-Based Swap Positions, Exchange Act Release No. 93784 (Dec. 15, 2021), 87 FR 6652, 6678 (Feb. 
4, 2022) (“Rule 10B-1 Proposal”). See also Reopening of Comment Period for Position Reporting of Large 
Security-Based Swap Positions, Exchange Act Release No. 97762 (June 20, 2023), 88 FR 41338 (June 26, 
2023) (proposing to require any person holding security-based swap positions to file a proposed Schedule 
10B if they hold in excess of $300 million in equity security-based swap positions or if the notional value 
of those security-based swap positions is 5% of the outstanding number of shares of a class of equity 
securities, whichever is less). 

120  See, e.g., Ropes & Gray Letter, at 6 (recommending increasing the threshold to 5% in order to “mitigate 
costs to investors and provide consistency with other reporting regimes”); K&L Gates Letter, at 5 (stating 
that 2.5% does not “represent a significant portion of an issuer’s outstanding equity securities,” and 
recommending increasing the threshold to more than 5% of an issuer’s voting equity securities in order to 
be consistent with the existing reporting requirements of Rule 13d-1); Perkins Coie Letter, at 6 
(recommending alignment with requirements of Rule 13d-1(a) that require filing of Schedule 13D or 13G 

 



43 

recommended doubling that same percentage of shares outstanding threshold from 2.5 percent to 

5 percent, because the commenters believed that the proposed 2.5 percent threshold was not 

sufficiently sizable to have a market impact.121 Additionally, one commenter believed that the 

lack of any reported instances of “short-side” manipulation did not justify a lower percentage 

threshold compared to Rule 13d-1 and proposed Rule 10B-1.122 

Other commenters proposed that the U.S. dollar value-based threshold of Threshold A be 

raised.123 One commenter suggested that it be increased from the proposed $10 million to $100 

million because a $100 million threshold would capture more substantial short positions and be 

consistent with the adjustment to the proposed percentage of shares outstanding threshold as 

compared to former Form SH (i.e., a tenfold increase from 0.25 percent under Form SH to 2.5 

percent under Proposed Form SHO).124 

For reasons set forth below and discussed more fully in Part VIII, increasing the proposed 

Threshold A percentage-based threshold from 2.5 percent or more of total shares outstanding to 

 
upon crossing a 5% threshold of ownership of any class of an equity security); ICI Letter, at 10 (stating that 
Commission identified 5% as a threshold over which a position could have a meaningful market impact in 
“recent” Rule 10B-1 proposal). 

121  K&L Gates Letter, at 5; see also ICI Letter, at 9-10 (“However, we believe that a higher threshold would 
still provide the Commission with information on such large positions, while reducing the burdens on 
managers of reporting smaller positions that likely would have a lesser market impact.”). 

122  One commenter believed that the proposed Rule 13f-2 reporting regime was overly expansive and 
“asymmetric” to existing or other proposed reporting regimes in multiples ways, such as the proposed 
percentage reporting threshold of 2.5% being lower than the 5% threshold in Rules 13d-1 and 10B-1. See 
SIFMA Letter, at 3-4 (stating that there is “no empirical evidence” that short selling requires an 
“asymmetric” reporting regime and that “[t]his conclusion is consistent with the SEC’s own reported 
enforcement actions, i.e., any reported instances of ‘short-side’ manipulation (e.g., ‘short and distort’ 
campaigns) are dwarfed by the instances of ‘long-side’ manipulation (e.g., ‘pump and dumps’). There thus 
is simply no basis for such asymmetric regulation.”). 

123  See, e.g., Virtu Letter, at 2 (positing that dollar value thresholds “are significantly lower than is 
necessary”); Perkins Coie Letter, at 2 (finding the $10 million (USD) gross short position threshold of 
Threshold A too low); XR Securities Letter, at 2 (citing circumstance illustrating that $10M prong of 
Threshold A may be too low). 

124  Schulte Roth & Zabel Letter, at 3. 



44 

5 percent (e.g., to be consistent with the existing 5 percent reporting threshold of Exchange Act 

Rule 13d-1 and the proposed reporting requirements of Exchange Act Rule 10B-1), as suggested 

by some commenters,125 is not warranted or appropriate. In this regard, because the rules are 

designed for different purposes and utilize different reporting thresholds to meet their respective 

objectives, the Commission does not believe, as one commenter states, that comparing Rule 

13f-2 with long-side Rule 13d-1, as well as comparing perceived instances of “short-side” and 

“long-side” manipulation, is an accurate assessment by which to determine Rule 13f-2’s 

Reporting Thresholds. Reporting under Exchange Act section 13(d) is intended to provide 

information to the public and the affected issuer about rapid accumulations of its equity 

securities in the hands of persons who have the potential to change or influence control of the 

issuer.126 Reporting under Rule 13f-2, in contrast, is intended to capture Managers with gross 

short positions that are large relative to the size of the issuer and could therefore have a 

significant impact on the issuer, especially for issuers with a small market capitalization where 

the dollar-based threshold is less likely to be breached.127 An increase in the percentage-based 

prong of Threshold A, from 2.5 percent to 5 percent, would reduce transparency into short 

positions in smaller stocks. Specifically, increasing the percentage from 2.5 percent to 5 percent 

would reduce transparency into stocks with less than a $400 million market capitalization. This 

reduction could be meaningful given that, short and distort campaigns and other market 

manipulations are more likely to occur in stocks with lower market capitalizations and less 

 
125  See supra nn. 121 & 122.  
126  See, e.g., Filing and Disclosure Requirements Relating to Beneficial Ownership, Release No. 34-14693 

(Apr. 21, 1978), 43 FR 18501, 18484 (Apr. 28, 1978) (stating that the “legislative history [of Exchange Act 
section 13(d)] reveals that it was intended to provide information to the public and the affected issuer about 
rapid accumulations of its equity securities in the hands of persons who would then have the potential to 
change or influence control of the issuer”). 

127  See Proposing Release, at 14961-64.  



45 

public information.128 As a result, the appropriate threshold for Rule 13d-1 is not necessarily the 

appropriate threshold for Rule 13f-2. Instead, the Commission continues to believe that a broader 

coverage of short position reporting (i.e., using a 2.5 percent reporting threshold) is more 

appropriate for Rule 13f-2, especially given that the reported data are aggregated and 

anonymized before public dissemination with a delay. Here, the Commission is designing a 

reporting threshold that is appropriate for the purposes of section 13(f)(2). Based on analysis of 

Form SH, a 2.5 percent or higher monthly average gross short position is an appropriate 

threshold.129 For example, one exchange estimates that median short interest for small-cap 

issuers is only about 3 percent,130 indicating that a single Manager breaching the 2.5 percent 

threshold would be significant for many issuers. Thus, a percentage-based Threshold A is 

appropriate to adopt as proposed.  

Nor does the Commission believe that raising the dollar-based threshold of Threshold A 

from $10 million to $100 million to be consistent with the tenfold increase in percentage 

threshold is warranted or appropriate. Based on its analysis of Form SH data as discussed in the 

Proposing Release,131 as well as the need to balance costs with the rule’s ultimate goal of 

transparency, $10 million strikes an appropriate balance of limiting costs of reporting to 

 
128  See infra Part VIII.C.1 (discussing market manipulations) and Part VIII.E.3 (discussing how thresholds are 

triggered at various dollar amounts).  
129  See infra Part VIII.E for discussion of different threshold options. 
130  See Short Interest in Decline, NASDAQ (Mar. 3, 2022), available at https://www.nasdaq.com/articles/short-

interest-in-decline. 
131  As discussed in the Proposing Release, the Proposed Reporting Thresholds were based on comment letters 

and analysis of Form SH data collected under Rule 10a-3T. Proposing Release, at 14963-64. Rule 10a-3T 
required reporting of short positions that were either greater than 0.25% of shares outstanding or $10 
million in fair market value. Comment letters to Rule 10a-3T itself generally concurred with the dollar 
reporting obligation but expressed concerns that the percentage obligation was too low. Suggestions for a 
percentage reporting obligation ranged from 1% to 5% of shares outstanding. See, e.g., Seward Kissel LLP, 
available at https://www.sec.gov/comments/s7-31-08/s73108-43.pdf; Investment Adviser Association, 
available at https://www.sec.gov/comments/s7-31-08/s73108-38.pdf; and Securities Industry and Financial 
Markets Association, available at https://www.sec.gov/comments/s7-31-08/s73108-52.pdf. 



46 

Managers, while increasing transparency into short positions, especially for equity securities of 

issuers with mid or large market capitalizations that may not be captured under the percentage 

threshold. While issuers with small market capitalizations may have only one or a few large short 

sellers, issuers with mid or large market capitalizations may have tens or even hundreds of large 

short sellers, which diffuses the percentage of short interest for each short seller. The 

Commission considered this when setting a dollar-based threshold of Threshold A such that large 

short sellers are captured for all equity issuers. 

Comments to Lower or Eliminate Reporting Thresholds 

Other commenters recommended that the Proposed Reporting Thresholds be reduced or 

eliminated. Some of these commenters were concerned that the Proposed Reporting Thresholds 

could be too lenient and under-inclusive,132 and some of those commenters supported removing 

the thresholds entirely because of the possibility of Managers intentionally maintaining short 

positions just below the thresholds to avoid reporting.133 One commenter stated that the final rule 

should “eliminate the proposed thresholds so as to reduce or eliminate the risk that unknown, 

hidden short positions could pose to investors and the markets.”134 However, eliminating 

thresholds to capture all short sale data may result in the inclusion of “transient” short sales,135 

such as short sales due to market making or customer facilitation activity rather than directional 

 
132  See, e.g., Comment from Peter Stauduhar (Mar. 6, 2022), available at https://www.sec.gov/comments/s7-

08-22/s70822-20118728-271591.htm (stating that “[t]he thresholds are a critical part of the success of this 
rule, and I urge the Commission to worry less about the burden the reporting will have on short sellers”). 

133  See, e.g., Comment from Travis Donovan (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-272287.htm; Comment from Steve B. (Mar. 14, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20119335-272221.htm (“Steve B. Comment”); 
Anonymously Submitted Letter (Apr. 2, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20122297-278355.htm (“I believe that all short sales should be recorded and reported. The 
minimum threshold should be a single short sale.”).  

134  Better Markets Letter, at 12.  
135  See Virtu Letter, at 2-3. 



47 

short sales. By providing a properly calibrated threshold this type of “noise” should be reduced 

and allow market participants to instead focus on substantial short sales that are more likely to be 

directional. The reduction of “noisy” short position information also sets Rule 13f-2 apart from 

existing short sale data regimes, such as those provided by FINRA and the exchanges, which do 

not have thresholds. On the other hand, the threshold cannot be set so high that substantial short 

sales by Managers are out of scope. The Reporting Thresholds, as adopted, will help ensure 

added transparency into short sale-related activity that would be beneficial to both market 

participants and regulators, and will result in reporting by Managers with a substantial gross 

short position in both reporting and non-reporting company issuers. 

Recommendations to Base Reporting Thresholds on a Single Metric 

Some commenters, often in conjunction with recommendations to increase the Proposed 

Reporting Thresholds, suggested applying a single threshold metric. One commenter proposed 

the Commission adopt a single U.S. dollar value-based threshold for all issuers in order to limit 

the impact of any potential ambiguity around identifying the number of shares outstanding for 

non-reporting company issuers.136 Another commenter, however, recommended that the 

Commission adopt a single threshold based on percentage of shares outstanding, stating that it 

would “mitigate unnecessary operational and cost burdens on Managers,” as the commenter 

believed that a U.S. dollar value-based threshold would require more difficult system 

buildouts.137 

 
136  See MFA Letter, at 4 (stating that “[a] dollar-based approach would be more simple and less costly for 

managers to employ”).  
137  See, e.g., ICI Letter, at 8-9 (stating “we recommend that the Commission adopt a single reporting threshold 

level that is an average short position in an equity security based on a percentage of shares outstanding 
rather than on a dollar value”); see also K&L Gates Letter, at 5 (recommending a threshold triggered only 
by “a position representing more than 5 percent of an issuer’s voting equity”). 



48 

The Reporting Thresholds are designed to require the filing of Form SHO by Managers 

with substantial gross short positions. The two-pronged approach of Threshold A measures the 

size of a Manager’s short position relative to both dollar amount and number of shares. The 

dollar value-based prong (Rule 13f-2(a)(1)(i)) captures Managers with substantial short 

positions, even if such positions are relatively small compared to the market cap of the issuer. 

The percentage of total shares outstanding-based prong (Rule 13f-2(a)(1)(ii)) captures Managers 

with gross short positions that are large relative to the size of the issuer and, therefore, could 

have a significant impact on the issuer. With respect to securities of non-reporting company 

issuers, however, the Commission understands that the number of total shares outstanding may 

not be readily and consistently accessible.138 For this reason, a single-pronged, dollar value-

based Reporting Threshold is an efficient way for Managers to determine whether they trigger 

Threshold B (Rule 13f-2(a)(2)) that avoids the additional cost and complexity of locating the 

number of total shares outstanding for the securities of a non-reporting company issuer that may 

be difficult or impossible to locate.139 

Comments Recommending the Use of the Same Threshold for Reporting Company and Non-

Reporting Company Issuers 

Another commenter recommended not having differing thresholds for reporting company 

issuers and non-reporting company issuers.140 This commenter believed having two different 

reporting thresholds “would be unnecessarily complicated and burdensome.”141 Furthermore, the 

 
138  Proposing Release, at 14962. 
139  Id. 
140  See SIFMA Letter, at 19-20 (stating that “the proposed distinction between the thresholds that would apply 

to Reporting Company securities and Non-Reporting Company securities would be unnecessarily 
complicated and burdensome”). 

141  Id. 



49 

commenter stated as an alternative the creation of a “Form SHO List” akin to the 13F List that 

would include total shares outstanding of each security to assist in threshold calculations.142 As a 

result of the potential difficulties in accessing the total shares outstanding for non-reporting 

company issuers discussed above, using a percent of total shares outstanding-based approach 

would not be appropriate for non-reporting company issuers. Requiring total shares outstanding 

for both thresholds would be operationally difficult, potentially inaccurate and therefore costly 

for Managers to determine for some non-reporting companies. Requiring a dollar-based metric 

for both thresholds could be both under-inclusive and over-inclusive, as the markets for reporting 

and non-reporting companies differ. For example, a high dollar threshold (e.g., $10 million) for 

both thresholds would under-include many non-reporting companies while a low dollar threshold 

(e.g., $500,000) would over-include reporting companies. For these reasons, the Commission is 

adopting Threshold B as proposed. 

For similar reasons, and as discussed in the “Scope of Reported Securities” section 

above, the Commission will not be publishing a “Form SHO List” with total shares outstanding 

to assist in Manager calculations, as one commenter suggested. The thresholds as adopted are 

designed to reduce operational burdens while capturing substantial short positions in both 

reporting and non-reporting company issuers. Adopting a much lower dollar threshold for non-

reporting company issuers than that for reporting company issuers results in Managers not being 

required to determine percentages of total shares outstanding and, due to sparse data in non-

reporting company issuer markets, Managers would avoid the difficulty of having to do so. A 

“Form SHO List” with total shares outstanding would not be necessary for Managers reporting 

 
142  SIFMA suggested that the “Form SHO List” include securities that are included on the 13F List, while 

excluding securities that should not be covered by Form SHO. Id. at 20. SIFMA further suggested that the 
“Form SHO List” include, for each security, the total shares outstanding. 



50 

positions in reporting company issuers because, unlike Rule 13f-1 securities, Rule 13f-2 covers 

equity securities as discussed above,143 rendering additional guidance on what securities qualify 

unnecessary. Additionally, as discussed above in the Scope of Reported Securities section, 

section 13(f)(1) expressly provides that the Commission shall make available to the public a list 

of all equity securities that are subject to such reporting,144 while section 13(f)(2) does not 

require publication of such a list. 

Comments regarding Other Concerns Related to Thresholds 

Implementation and Compliance Costs 

Some commenters stated that the Proposing Release did not adequately account for the 

burdens associated with monitoring for whether a Reporting Threshold is met, i.e., whether a 

Manager has a Form SHO reporting obligation.145 Specifically, these commenters stated that the 

Proposing Release did not address the costs of those Managers who would need to develop and 

implement reporting systems to monitor for whether a Reporting Threshold is met or exceeded, 

 
143  See supra Part II.A.2. 
144  Section 13(f)(1) of the Exchange Act (15 U.S.C. 78m(f)(1)) requires any institutional investment manager 

exercising investment discretion over accounts holding at least $100 million in fair market value of certain 
equity securities to file reports on Form 13F with the Commission at the times set forth in Rule 13f-1. The 
statute directs the Commission to make available to the public, for a reasonable fee, a list of all equity 
securities described in section 13(d)(1) of the Exchange Act and to disseminate to the public the 
information contained in the reports. 

145  See, e.g., Virtu Letter, at 2 (“the dollar value thresholds referenced in the Proposal are significantly lower 
than is necessary”); MFA Letter, at 4 (recommending a single, dollar-based threshold only); SIFMA Letter, 
at 5 (recommending elimination of different thresholds for reporting and non-reporting companies in favor 
of one uniform threshold for U.S. equity securities); ICI Letter, at 9 (recommending a single, percentage-
based threshold for both reporting and non-reporting company issuers); Ropes & Gray Letter, at 2 
(recommending that all thresholds “be determined using average positions over a month rather than daily 
positions.”).  



51 

that may or may not ultimately result in a reportable gross short position.146 The comments are 

addressed in the Economic Analysis, in Part VIII below. 

“Gross” Short Position versus “Net” Short Position 

Some commenters requested that the Reporting Thresholds be calculated based on “net” 

short position rather than “gross” short position as proposed. Multiple commenters expressed 

concern that using a gross short position calculation would not accurately reflect risk in the 

markets.147 However, other commenters supported the use of the proposed gross short position 

data either instead of or in conjunction with net short position data.148 One commenter proposed 

requiring net short position reporting by Managers that are solely reporting on Form SHO with 

regard to one issuer while requiring gross short position reporting for Managers with short 

 
146  See, e.g., MFA Letter, at 10-11; see also ICI Letter, at 5 (stating that Proposed Rule 13f-2 would require a 

Manager to continuously monitor and record any activity that could potentially be subject to future 
reporting on Form SHO). While the costs would likely be higher if Managers choose to monitor daily, Rule 
13f-2 does not require daily monitoring, either for reporting or non-reporting company issuers. Managers 
may choose to do this threshold calculation on a rolling basis, or to do the calculation after the month has 
ended. While some Managers may choose to incur the higher costs of daily tracking and calculation for 
purposes of compliance with Rule 13f-2, the final rule’s Reporting Threshold for reporting company issuers 
is not based on a Manager’s gross short position on a single trading date, reducing the need for daily 
tracking. See infra Part VIII.C.6.b. 

147  See, e.g., Virtu Letter, at 3 (stating that “the requirement to report such positions on a gross rather than net 
basis would likely distort the actual degree of short positions as it will capture circumstances where a firm 
is net long but may have short positions among its accounts.”); Perkins Coie Letter, at 3-4, 6. 
(recommending that “[r]ather than set a low threshold and over capture short position information, the SEC 
should revise the requirement to $10 million net short position as opposed to gross.”); Schulte Roth & 
Zabel Letter, at 2 (stating that “net short position data would more accurately reflect actual positions taken 
by institutional investment managers and provide useful transparency to the Commission and to the 
marketplace.”); ICI Letter, at 10 (recommending that “the Commission streamline and simplify how 
managers account reflect hedging positions by adopting a net short position threshold and eliminating the 
required indication of whether a position is hedged or not in Form SHO.”); Comment Letter from 
Anonymous Fund Manager at 1-2, available at https://www.sec.gov/comments/s7-08-22/s70822-
20126773-287490.pdf (“Anonymous Fund Manager Letter”) (recommending that the Commission “modify 
the proposed threshold requirements to reference short positions on a net ‘delta-adjusted’ basis as opposed 
to a gross basis or, in the alternative, exclude from the reporting obligations under the Proposed Rules 
‘bona fide hedging activity’ as such term would be defined in the final rules.”). 

148  See, e.g., Comment from Josh Allen (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-272295.htm; Comment from An Investor (Apr. 4., 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm (supported including both net and 
gross short positions in reporting). 



52 

positions in more than one issuer.149 One commenter proposed that, if a gross short position 

calculation is used, market makers should not be subject to adopted Rule 13f-2’s reporting 

requirements.150 However, another commenter supported applying the rule’s requirements to 

market makers.151 One commenter stated that, even though market makers do not typically carry 

overnight positions and would likely not trigger the Proposed Reporting Thresholds, market 

makers would still incur the costs of end-of-day calculations to determine whether they meet or 

exceed the Proposed Reporting Thresholds.152 

As discussed in the Proposing Release, under the proposal, a Manager would report its 

“gross” short position in an equity security without offsetting such gross short position with 

“long” shares of the equity security or economically equivalent long positions obtained through 

derivatives of the equity security.153 For example, if a Manager has investment discretion over 

multiple accounts, some of which have long positions in an equity security and some have short 

positions in the same equity security, only the total gross short position in the “short accounts” is 

 
149  Perkins Coie Letter, at 4 (stating that “the SEC should consider amending its proposal to require net 

position reporting by certain types of managers that do not regularly utilize short positions. For instance, 
the SEC could require net short position reporting by filers that are solely reporting on Form SHO with 
regards to one issuer. For any filer reporting more than one issuer, the SEC could require gross short 
position reporting.”). 

150  HSBC Letter, at 16 (stating that “[b]ecause Proposed Rule 13f-2 requires disclosure of gross positions, 
market makers could be required to report large positions, even if a market makers’ [sic] net position is 
close to zero (i.e., because such short positions are typically hedged via options or swaps). Subjecting 
market makers to Proposed Rule 13f-2 may, therefore, result in market participants receiving unhelpful and 
misleading information about the short sale market.”). 

151  See Samuel Meadows Comment, at 2 (stating that “Market Makers should NOT be except [sic] from 
reporting for any reason. Market Makers should report short sales the same as everyone else should they 
pass the Reporting Threshold.”). 

152  See SIFMA Letter, at 11-12 (stating that “[h]owever, as the Proposing Release notes, requiring Institutional 
Investment Managers to consider intraday short sale activity, which would not be captured in the ‘gross 
short position’ as reflected on their trade date stock records, in determining whether the threshold has been 
exceeded, would be incredibly onerous—particularly, for example, for market makers that generally may 
not carry large overnight short positions.”). 

153  Proposing Release, at 14956.  



53 

reported, without being offset by the long positions in the “long accounts.” Requiring a Manager 

to report its daily gross short position in a security will provide a more complete view of short 

positions held by Managers in a security, particularly once the data is aggregated for 

publication.154 Permitting Managers to “net” positions would dilute the usefulness of the data in 

providing market participants with a sense of substantial short positions. For example, requiring 

net short position reporting by Managers that are solely reporting on Form SHO with regard to 

one issuer, or for other types of Managers infrequently using short positions, as one commenter 

suggested, would provide minimal cost savings and create misleading data that could be difficult 

to aggregate and confusing to market participants. Further, the data collected and provided by 

FINRA155 and the exchanges is not netted.156 By providing aggregate gross positions reported by 

Manager in a security, the final rule will supplement such existing short sale information with 

additional context on substantial gross short sale positions. 

In addition, the Commission is making additional modifications, discussed further below, 

that should alleviate burdens on market makers that may otherwise need to undertake the 

 
154  In addition, commenters stated they would be uncertain how to “offset” positions when discussing the 

hedging indicator. See infra Part II.A.4.d.iii.(B). Netting would raise similar concerns.  
155  See, e.g., Short Interest – What It Is, What It Is Not, FINRA INV’R INSIGHTS (Jan. 25, 2023), available at 

https://www.finra.org/investors/insights/short-interest (“The short interest data is just a snapshot that 
reflects short positions held by brokerage firms at a specific moment in time on two discrete days each 
month. The Short Sale Volume Daily File reflects the aggregate volume of trades within certain parameters 
executed as short sales on individual trade dates.”). 

156  See, e.g., Frequently Asked Questions (FAQ) about Short Interest Reporting, FINRA, available at 
https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest/faq (“Q1: Rule 4560 applies 
to short interest positions resulting from: (1) a “short sale,” as defined by Regulation SHO Rule 200(a); or 
(2) where the transaction that caused the short position was marked “long,” consistent with Regulation 
SHO Rule 200(g), due to the firm’s or the customer’s net long position at the time of the transaction. For 
example, a sale may be marked as “long” because the overall net position in the security within an 
aggregation unit is long at the time of the sale. If the execution results in a short position in a specific 
account (or subaccount) held within the aggregation unit, this position is reportable pursuant to Rule 
4560.”; Q11: “Where, as part of a strategy, an account holds both a short and long position in the same 
security simultaneously, the short position is reportable as short interest pursuant to Rule 4560 and must be 
reported in full, i.e., not netted against the long position.”). 



54 

obligation of calculating reporting thresholds despite generally holding positions below such 

thresholds. Specifically, the Commission is modifying the threshold calculations to a monthly 

average of daily gross short positions rather than a single daily position, as discussed under the 

subheading “When the Reporting Obligation is Triggered” below. Further, as discussed in Part 

III below, the Commission is not adopting the proposed requirement to report “buy to cover” 

activity, which a commenter157 stated would be more difficult if gross positions are required to 

be reported. The Commission, in adopting Rule 13f-2, will require a Manager to report its 

“gross” monthly short position as proposed under Proposed Rule 13f-2(b)(4). 

When the Reporting Obligation is Triggered 

To ease reporting burdens and reduce costs, some commenters proposed decreasing the 

frequency of certain aspects of the U.S. dollar value-based aspects of the Reporting Thresholds 

by instead using monthly average positions, instead of the proposed “close of regular trading 

hours on any settlement date” frequency.158 Alternatively, one commenter suggested that the 

proposed monthly reporting requirement should only be triggered if a Manager holds a short 

position in excess of the Proposed Reporting Thresholds as of the last settlement day of the 

month.159 Commenters stated that by using average monthly positions rather than the proposed 

rule’s use of any settlement date within the reporting period, the reporting burden required of 

Managers would be substantially lessened, since Managers may transiently cross the reporting 

 
157  SIFMA Letter, at 24. 
158  See, e.g., Virtu Letter, at 3 (stating that “[w]e also object to the reporting requirement being triggered by the 

existence of a short position on any settlement date within a reporting period.”); Ropes & Gray Letter, at 2 
(stating that “[a]ll filing thresholds should be determined using average positions over a month rather than 
daily positions.”). 

159  SIFMA Letter, at 15 (advocating “that the proposed monthly reporting under Information Table 1 of 
Proposed Form SHO should be triggered only if the Institutional Investment Manager holds a gross short 
position in an equity security, as of the last day of such month, in excess of the threshold(s) for reporting.”). 



55 

thresholds through activities such as market making, hedging, and customer facilitation 

activity.160 Requiring reporting for Managers who temporarily cross these thresholds on an 

intraday basis through such activity, one commenter stated, would not adhere to the legislative 

intent of DFA section 929X.161 Commenters stated that transiently crossing these thresholds 

would not produce reported data that would be valuable to the Commission; for example, short-

term market disruptions may trigger reporting under the proposed frequency for Managers that 

do not hold substantial short positions.162 For reasons discussed below, the Commission is 

modifying Proposed Rule 13f-2(a)(1)(i) (the U.S. dollar value-based prong of Threshold A) to 

trigger reporting requirements when a Manager has a monthly average of daily gross short 

positions (“monthly average”) with a U.S. dollar value of $10 million or more at the end of the 

calendar month, rather than, as proposed, a $10 million or more gross short position at the close 

of regular trading hours on any settlement date during the calendar month.163 

Threshold A, as adopted, will require reporting by Managers that have, for each equity 

security of a reporting company issuer, either (1) a monthly average gross short position at the 

close of regular trading hours in the equity security with a U.S. dollar value of $10 million or 

more,164 or (2) a monthly average gross short position at the close of regular trading hours as a 

 
160  See Virtu Letter, at 2. 
161  See SIFMA Letter, at 4. 
162  See Ropes & Gray Letter, at 6-7. 
163  This change to “monthly average” is responsive, in part, to commenters’ concerns about certain aspects of 

the U.S. dollar value-based Reporting Thresholds. For reasons discussed below, however, the Commission 
is adopting Threshold B as proposed (Proposed Rule 13f-2(a)(2)), which employs an “at the close of 
regular trading hours on any settlement during the calendar month” approach. The Form SHO "Instructions 
For Calculating Reporting Threshold,” discussed below, explain in detail the method for determining 
whether the modified threshold is met. 

164  To determine whether this Reporting Threshold has been met, a Manager shall determine its gross short 
position at the close of regular trading hours in the equity security (as defined in Rule 13f-2) on each 
settlement date during the calendar month and multiply that figure by the closing price at the close of 
regular trading hours on the settlement date (“end of day dollar value”). The Manager shall then add all end 

 



56 

percentage of shares outstanding in the equity security of 2.5 percent or more.165 Using a 

“monthly average” dollar value for reporting company issuers will result in Form SHO reporting 

by Managers that consistently carry large gross short positions during the reporting month. This 

approach should reduce the reporting of non-directional, “transient” short sales activity166 and 

provide market participants with more focused information on substantial short positions held by 

Managers. The modification should also reduce the burdens of certain Managers, specifically 

those Managers, including market makers, that periodically meet or exceed the $10 million or 

more threshold on a given settlement date during a calendar month, but that do not typically 

carry a large gross short position throughout the month that will meet or exceed the monthly 

average reporting threshold, by eliminating the need to calculate (and potentially trigger) the 

threshold on a daily basis. This will help the Commission to distinguish directional short selling 

of Managers from short sale activity effected by market makers and liquidity providers.167 

 
of day dollar values during the calendar month and divide that sum by the number of settlement dates in the 
month to arrive at a “monthly average” for each equity security the Manager traded during that calendar 
month reporting period. 

165  The methods of calculation of the Reporting Thresholds are prescribed in “Instructions for Calculating 
Reporting Threshold” in Form SHO. Rule 13f-2 and the instructions in Form SHO, require that for 
purposes of determining whether a Manager meets or exceeds a Reporting Threshold, a Manager shall 
determine its gross short position “at the close of regular trading hours” in the equity security, rather than at 
the “end of day” as was provided for in the instructions to Proposed Form SHO. Accordingly, the 
Commission is making a modification to the instructions for calculating Threshold A and replacing “end of 
day gross short position” with “gross short position at the close of regular trading hours.” Addressing any 
potential ambiguity in terminology should facilitate more consistency in reporting by Managers and more 
comparability of the data reported on Form SHO. With this change, the calculation instructions for 
Threshold A provide that to determine whether the percentage threshold of Threshold A has been met, a 
Manager shall (a) determine its gross short position at the close of regular trading hours in the equity 
security (as defined in Rule 13f-2) on each settlement date during the calendar month, and divide that 
figure by the number of shares outstanding in such security at the close of regular trading hours on the 
settlement date, and (b) add up the daily percentages during the calendar month as determined in (a) and 
divide that sum by the number of settlement dates in the month to arrive at a “monthly average” for each 
equity security the Manager traded during that calendar month reporting period. The number of shares 
outstanding of the security for which information is being reported shall be determined by reference to an 
issuer’s most recent annual or quarterly report, and any subsequent update thereto, filed with the 
Commission. 

166  See supra n. 135 and accompanying text. 
167  See Proposing Release, at 14953. 



57 

In addition, similar to the discussion in the Proposing Release regarding the use of a 

monthly average gross short position of 2.5 percent or more of total shares outstanding,168 the 

Commission continues to believe that using a monthly average gross short position at the close 

of regular trading hours of $10 million or more, rather than an end of each settlement date 

calculation as was originally proposed, will reduce the risk that a Manager may time its short 

sales to avoid triggering the adopted reporting threshold.169 

Threshold B, as proposed, and as adopted, will require reporting by Managers that have, 

for each equity security of a non-reporting company issuer, a gross short position in the equity 

security with a U.S. dollar value of $500,000 or more at the close of regular trading hours on any 

settlement date during the calendar month.170 A single, dollar-based prong approach (using the 

$500,000 or more on any settlement date metric) for securities of non-reporting company issuers 

(Rule 13f-2(a)(2)) will capture Managers with large gross short positions, even if such positions 

are relatively small compared to the market capitalization of the issuer. As discussed above, the 

markets for non-reporting company issuers are more opaque and could benefit more from 

 
168  Proposing Release, at 14962 (“In addition, the Commission believes that requiring the reporting of short 

positions with a 2.5% or higher monthly average gross short position would capture Managers with gross 
short positions that are large relative to the size of the issuer, and could therefore have a significant impact 
on the issuer. Using a monthly average gross short position, rather than an end of month gross short 
position, is also designed to prevent the scenario where a Manager engages in trading activity on the last 
day of the month in order to avoid reporting.”). 

169  In addition, the Commission is making a modification to specify in Rule 13f-2 and in the instructions in 
Form SHO that, for purposes of determining whether a Manager meets or exceeds Threshold A, a Manager 
shall determine its gross short position “at the close of regular trading hours” in the equity security, rather 
than at the “end of day” as was provided for in the instructions to Proposed Form SHO. Reducing any 
potential ambiguity in terminology should facilitate more consistency in reporting by Managers and more 
comparability of the data reported on Form SHO. 

170  The methods of calculation of the Reporting Thresholds are prescribed in “Instructions for Calculating 
Reporting Threshold” in Form SHO. To determine the dollar value-based Reporting Threshold described in 
Threshold B has been met, a Manager shall determine its gross short position at the close of regular trading 
hours in the equity security (as defined in Rule 13f-2) on each settlement date during the calendar month 
and multiply that figure by the closing price at the close of regular trading hours on the settlement date. If 
such closing price is not available, a Manager shall use the price at which it last purchased or sold any share 
of that security. 



58 

transparency. Additionally, due to their lower liquidity, equity securities of non-reporting 

companies can be more sensitive to strategic trading than those of reporting companies.171 As a 

result, for those securities, a single dollar threshold that can be triggered on any day of a month is 

more appropriate than the two-prong threshold calculated as monthly averages for equity 

securities issued by reporting companies. 

Basing Reporting Thresholds on Form SH Data 

Some commenters maintained that the Commission should not have based the Proposed 

Reporting Thresholds on Form SH data, as the Form SH data was collected during “a period of 

abnormal market conditions that does not reflect recent changes in the markets,” and urged the 

Commission to more robustly support its rationale for selecting the Reporting Thresholds.172 

These commenters essentially suggested that the use of Form SH data was unrealistic, and 

suggested that the Commission consider whether the Reporting Thresholds are appropriate based 

on more recent data and analysis.173 In the Proposing Release, the Commission stated that to 

perform the underlying Reporting Thresholds analysis, Form SH data on daily short positions for 

November 2008 through February 2009 were filtered and matched to Center for Research in 

Security Prices, LLC for daily closing prices and Compustat for daily shares outstanding. The 

 
171  See infra Part VIII.E.3 (discussing difficulty in obtaining information on non-reporting company issuers, 

and that data is often stale and inaccurate). 
172  Comment Letter from Barbara Bliss, Associate Professor of Finance, et al. (Apr. 25, 2022), at 3, available 

at https://www.sec.gov/comments/s7-08-22/s70822-20126591-287247.pdf (“Law and Finance Professors 
Letter”) (“we believe the Commission could and should more robustly support its rationale for these 
thresholds before adopting any final rule.”); see also AIMA Letter, at 11-12 (commenter was critical of 
Reporting Thresholds based on “stale and limited” data). For a discussion of Form SH applicability to the 
current period, see infra Part VIII.C.6.a. 

173  See, e.g., AIMA Letter, at 12 (stating that the Commission should “review and analyze current short 
interest market data for reporting issuers to ensure that any final threshold based on a gross position’s dollar 
value accounts for the latest and most complete data”); Law and Finance Professors Letter, at 3 (stating that 
the Commission should “consider more carefully whether the stated disclosure thresholds are appropriate, 
based on more recent data and analysis, and whether there should be a mechanism that would permit these 
thresholds to change over time”); Two Sigma Letter, at 7 (stating that Form SH burden estimates are an 
“unrealistic benchmark”). 



59 

Commission recognized that the results of an analysis of Form SH data may not fully reflect the 

status quo but that the analysis used appropriate data because it involved the same type of entities 

(Managers) and the same activity (short positions).174 As discussed in the Proposing Release, the 

Commission believed that it struck a reasonable balance in proposing the Reporting Thresholds 

with regard to the fundamental economic tradeoff of the value of the data versus the cost of 

collecting the data.175 

The Commission disagrees with one commenter that stated that Form SH data was “stale 

and limited.”176 The Commission continues to believe that Form SH data is highly relevant for 

determining the Reporting Thresholds. Form SH is the only existing data source of individual 

Manager-level short sale positions.177 Form SH data was collected from October 17, 2008, until 

August 1, 2009, and the Commission analyzed daily data submitted from November 2008 until 

February 2009 as representative of short positions held by Managers. By the time Form SH was 

in effect, the global financial crisis was winding down, and is considered by some to have 

calmed by approximately June 2009.178 Thus, data was analyzed for several months during 

which the economy was returning to normalcy. Although the commenter suggested such data 

does not address “recent changes in the financial markets,” the commenter did not elaborate on 

what “recent changes” would have impacted an analysis of the Form SH data or the time period 

 
174  Proposing Release, at 14963 n.80. 
175  Proposing Release, at 14963-64, 15007. 
176  See AIMA Letter, at 11-12. 
177  While there are various limitations to be considered when using Form SH data, Form SH data are the most 

relevant and applicable source of data available for the purposes of estimating the costs of the design and 
analysis of Rule 13f-2. There are no other data sources, public or regulatory, which specifically track 
Managers’ short position activities in the U.S. See infra Part VIII.C.6.a. 

178  The National Bureau of Economic Research considers the global financial crisis as having officially started 
Dec. 2007 and ended June 2009. See, e.g., NAT’L BUREAU OF ECON. RESEARCH, BUSINESS CYCLE DATING, 
available at https://www.nber.org/research/business-cycle-dating.  



60 

in which the data was analyzed. Markets undergo periods of volatility and stability and are 

constantly evolving over time. The data from Form SH involves the same type of entities 

(Managers) and the same activity (short positions) as Form SHO. The time period for which the 

Form SH data was studied is sufficiently informative to provide a reasonable assessment of 

appropriate reporting thresholds for purposes of Form SHO.179 

4. Form SHO 

a. Reporting via EDGAR 

i. Proposal 

To enhance transparency of short sale-related data reported and published pursuant to 

Proposed Rule 13f-2, Proposed Rule 13f-2(a)(3) provided that Managers would file Form SHO 

(and any amendments thereto) with the Commission on EDGAR.180 The Commission believed 

that most Managers should be familiar with filing forms on EDGAR—for example, Form 

13F181—and relying on EDGAR to access registration statements, periodic reports, and other 

filings with the Commission that are made publicly available.182 The Commission believed that 

requiring Proposed Form SHO to be reported via EDGAR would enhance the accessibility, 

 
179  See discussion of Form SH in Part VIII.C.6.a. 
180  See Proposed Rule 13f-2(a)(3) (providing that “Form SHO and any amendments thereto must be filed with 

the Commission via the Commission’s Electronic Data Gathering, Analysis, and Retrieval System 
(“EDGAR”), in accordance with Regulation S-T. Certain information regarding each such equity security 
reported by institutional investment managers on Form SHO and filed with the Commission via EDGAR 
will be published by the Commission on an aggregated basis.”). 

181  EDGAR filing is mandatory for all public Form 13F submissions. See Rulemaking for EDGAR System, 
Exchange Act Release No. 34-40934 (Jan. 12, 1999), 64 FR 2843 (Jan. 19, 1999); see also Electronic 
Submission of Applications for Orders under the Advisers Act and the Investment Company Act, 
Confidential Treatment Requests for Filings on Form 13F, and Form ADV-NR; Amendments to Form 13F, 
Exchange Act Release No. 34-95148 (June 23, 2022), 87 FR 38943 (June 30, 2022). 

182  See, e.g., About EDGAR, available at https://www.sec.gov/edgar/about; see also Important Information 
about EDGAR, available at 
https://www.sec.gov/edgar/searchedgar/aboutedgar.htm#:~:text=EDGAR%2C%20the%20Electronic%20D
ata%20Gathering,and%20Exchange%20Commission%20(SEC) (“The [EDGAR] system processes about 
3,000 filings per day, serves up 3,000 terabytes of data to the public annually, and accommodates 40,000 
new filers per year on average.”).61 

usability, and quality of the Proposed Form SHO disclosures for the Commission, and would 

allow the Commission to download disclosures from Form SHO directly, facilitating efficient 

access, organization, and evaluation of the reported information.183 The Commission further 

believed that the improved quality and scope of information available for the Commission’s use 

in examining market behavior and recreating market events would bolster the Commission’s 

oversight of short selling activity and enhance investor protections.184 

ii. Comments and Final Rule 

Several commenters raised concerns about how the confidentiality of the data reported on 

Form SHO via EDGAR would be preserved.185 Most of these commenters spoke of a need to 

establish robust data security protocols for the “valuable and proprietary” information that would 

be reported on Proposed Form SHO via EDGAR. Several such commenters expressed concerns 

about cyberattacks or other breaches of account information.186 

While no technology system or infrastructure is impervious to cyberattack, the 

Commission employs an array of actions to safeguard and protect the confidentiality and security 

 
183  Proposing Release, at 14957.  
184  Id. 
185  See, e.g., K&L Gates Letter, at 5-6 (any final rule or final Form SHO should ensure “indefinitely” the 

confidentiality of information that could reveal the identity of the reporting Manager). 
186  See, e.g., AIMA Letter, at 14 (stating that the Commission has not explained how it will protect the 

commercially sensitive data that will be reported on Proposed Form SHO or acknowledged that its systems 
are susceptible to data breaches); MFA Letter, at 8 (positing that “the risk of increased cyberattacks or 
other breaches of confidential account information far outweigh any incremental benefit associated with 
requiring [Managers] to individually report short position information”); Two Sigma Letter, at 3-5 
(cautioning that information on Proposed Form SHO reports “will be private only so long as the 
Commission does not have its systems breached, its personnel do not misappropriate the information, the 
information is not unintentionally released, or policies do not change retroactively”); SIFMA Letter, at 22 
n.60 (citing cyber security, theft, and inadvertent data breach concerns as chief among the risks of 
providing sensitive and confidential information regarding short positions and short activity). 



62 

of all information reported to EDGAR, which will include data reported on Form SHO.187 The 

Commission has stated that it has “engaged in a multi-year, multi-phase effort to modernize the 

EDGAR system, including both internal and public-facing components. Security and 

modernization enhancements were deployed in June 2020, focusing on technology upgrades 

internal to the system.”188 Moreover, as discussed in Part I.A.4.f.ii below, the Commission is 

adopting an approach to the confidential treatment of information provided on Form SHO reports 

that all such information will be deemed subject to a confidential treatment request under 17 

CFR 200.83 (“Rule 83”). Accordingly, the Commission is adopting Rule 13f-2(a)(3) as 

proposed. 

b. Filing Form SHO Reports 

i. Proposal 

As described in the Proposing Release, Managers would use Proposed Form SHO for 

reports to the Commission required by Proposed Rule 13f–2. The Commission proposed that 

Managers would file a report on Proposed Form SHO with the Commission within 14 calendar 

days after the end of each calendar month with regard to each equity security in which the 

Manager meets or exceeds a Reporting Threshold.189 The Commission proposed that Managers 

would file the Form SHO with the Commission via the Commission’s EDGAR system in an 

eXtensible Markup Language (“XML”) specific to Form SHO (“custom XML” or “Form 

SHO-specific XML”),190 a structured machine-readable data language. The Commission also 

 
187  See Annual Report on SEC Website Modernization Pursuant to Section 3(d) of the 21st Century Integrated 

Digital Experience Act (Dec. 2022), available at https://www.sec.gov/files/21st-century-idea-act-report-
2022-12.pdf. 

188  Id.  
189  Proposing Release, at 14956. 
190  Id. at 14955. 



63 

proposed that Managers would either be able to file Form SHO using a fillable web form the 

Commission would provide on EDGAR to input Form SHO disclosures, or a Manager could use 

its own software tool to file Form SHO to EDGAR directly in Form SHO-specific XML.191 

Reporting via EDGAR, as described in the Proposing Release, would facilitate efficient access, 

organization, and evaluation of reported information by the Commission. 

The Commission stated in the Proposing Release that requiring Form SHO to be filed in 

custom XML format, since it is a structured, machine-readable data language, would facilitate 

more thorough review and analysis of the reported short sale disclosures by the Commission, 

which would increase the efficiency and effectiveness with which the Commission could identify 

manipulative short selling strategies.192 Furthermore, the Commission stated most Managers 

have experience filing EDGAR forms that use similar EDGAR Form-specific XML-based data 

languages, such as Form 13F and Form ATS-N.193 

As proposed, if a Manager uses the web-fillable Proposed Form SHO on EDGAR and 

encounters a technical error when filling out the form, such Manager would be required to 

correct the identified technical error before being permitted to file the Proposed Form SHO 

through EDGAR. If a Manager uses its own software tool to file a Proposed Form SHO filing to 

 
191  See id. at 14955. The filing options described for Proposed Form SHO are consistent with other EDGAR 

filings that are filed in form-specific XML-based languages. See, e.g., Regulation of NMS Stock Alternative 
Trading Systems, Exchange Act Release No. 83663 (July 18, 2018), 83 FR 38768 (Dec. 9, 2021) (requiring 
new EDGAR Form ATS-N to be filed in an XML-based language specific to that Form). 

192  See Proposing Release, at 14997 (“By requiring a structured machine-readable data language and a 
centralized filing location (EDGAR) for the disclosures on Proposed Form SHO, the Commission would be 
able to access and download large volumes of Proposed Form SHO disclosures in an efficient manner.”). 

193  See, e.g., Proposing Release at 14960, 14999 (first citing Form 13F, available at 
https://www.sec.gov/pdf/form13f.pdf) (then citing Regulation of NMS Stock Alternative Trading Systems, 
Exchange Act Release No. 83663 (July 18, 2018), 83 FR 38768 (Aug. 7, 2018)) (requiring new EDGAR 
Form ATS-N to be filed in an XML-based language specific to that Form); see also Money Market Fund 
Reforms, Investment Company Act Release No. 34441 (Dec. 15, 2021), 87 FR 7248 (Feb. 8, 2022) (Form 
N-CR); Securities Offering Reform for Closed-End Investment Companies, Exchange Act Release No. 
88606 (Apr. 8, 2020), 85 FR 33290 (June 1, 2020) (Form 24F-2). 



64 

EDGAR directly in Proposed Form SHO-specific XML, and a technical error is identified by 

EDGAR after the filing is sent, such Manager would receive an error message that the filing has 

been suspended, and would be required to correct the identified technical error and re-file the 

Proposed Form SHO through EDGAR.194 

As an alternative, the Commission also discussed whether Proposed Form SHO should be 

required to be filed in Inline eXtensible Business Reporting Language (“Inline XBRL”).195 The 

Commission stated that, compared to the proposal, the Inline XBRL alternative, which is both 

machine-readable and human-readable, would provide more sophisticated validation, 

presentation, and reference features for filers and data users.196 However, the Commission stated 

that given the fixed and constrained nature of the disclosures to be reported on Proposed Form 

SHO, the benefits of the Inline XBRL alternative would be muted, and therefore Managers 

would not be able to take advantage of customization and presentation features.197 Furthermore, 

the Commission stated in the Proposing Release that the alternative Inline XBRL approach 

would create greater initial implementation costs, such as licensing XBRL filing preparation 

software, because many Managers may not have prior experience structuring data in Inline 

XBRL.198 

 
194  The Commission stated in the proposing release that the XML schema (i.e., the set of technical rules 

associated with Proposed Form SHO-specific XML) for Proposed Form SHO would incorporate 
validations of each data field on Proposed Form SHO to help ensure consistent formatting and 
completeness. For example, letters instead of numbers in a field requiring only numbers, would be flagged 
by EDGAR as a “technical” error that would require correction by the reporting Manager in order to 
complete its Proposed Form SHO filing. Field validations act as an automated form completeness check 
when a Manager files Proposed Form SHO through EDGAR; they do not verify the accuracy of the 
information filed in Proposed Form SHO filings. Proposing Release, at 14960 n.72. 

195  See Proposing Release, at 15010-11. 
196  See id. 
197  See id. 
198  See id. 



65 

ii. Comments and Final Rule 

The Commission received some comments about the use of Form SHO-specific XML in 

filing Form SHO. In response to Q39 in the Proposing Release,199 which asked whether the use 

of Form SHO-specific XML would make the reported data more useful to users, one commenter 

stated that data prepared in consistent, structured format would be “significantly more functional 

and useful.”200 Regarding the costs and benefits of an Inline XBRL requirement as compared to 

Proposed Form SHO-specific XML, this commenter supported using XBRL in a comma-

separated value (“CSV”) format, which is a text file that uses delimiters such as commas to 

separate data fields.201 The commenter stated that this would be the most appropriate standard 

“for capturing high volume, granular data in a compact format,” and urged the Commission to 

adopt XBRL rather than custom XML.202 The commenter stated that XBRL-CSV has several 

advantages over the Commission’s proposed use of a custom XML format, such as reducing 

preparation costs and processing costs, as well as improving validation.203 In addition, the 

commenter disagreed with the Commission’s view in the Proposing Release that the benefits of 

the additional features of XBRL would be muted if used for Form SHO due to the fixed and 

constrained nature of the disclosures to be reported. The commenter stated that several other 

agencies, such as the FDIC and FERC, have recently adopted XBRL format over custom XML 

format. However, the commenter acknowledges that initial implementation costs will be higher 

and familiarization with the format will take longer for reporting entities. Alternatively, another 

 
199  Proposing Release, at 15012. 
200  Comment Letter from Campbell Pryde, President and CEO, XBRL US (Apr. 26, 2022), at 1 (“XBRL 

Letter”), available at https://www.sec.gov/comments/s7-08-22/s70822-20126860-287597.pdf. 
201  See id. at 2. 
202  See id. at 2-5. 
203  See id.  



66 

commenter supported the use of Form SHO-specific XML, stating that “XML is a widely used 

language and therefore implementation and maintenance would keep costs low and efficiency 

high,” and thought it would allow for efficient review of the reported data.204 

The Commission is adopting the custom XML data reporting requirement as proposed. 

As explained in the Proposing Release, the filing options for Form SHO are consistent with other 

EDGAR filings that are filed in Form-specific XML-based languages.205 The Commission also 

continues to believe that because many Managers have been using custom XML-based languages 

through other releases, they are more familiar with this language than other languages, such as 

XBRL, so the use of XML will promote efficiency in filing and review of Form SHO reports. 

Familiarity with custom XML formats will reduce implementation and ongoing compliance costs 

when compared to introducing XBRL-based formats that may be unfamiliar to Managers. 

Managers’ greater familiarity with custom XML formats should also reduce the possibility of 

data input errors when compared to XBRL formats. The above noted commenter likewise stated 

that XBRL formats would entail higher initial implementation costs and that familiarization with 

the XBRL formats would take longer for reporting entities. The costs of using XBRL formats in 

implementation and user retraining, along with the inconsistencies relative to other filings that 

use Form-specific XML-based languages, do not justify the potential data formatting benefits of 

XBRL. Further, the commenter stated a preference for using XBRL specifically in CSV format. 

In addition to the above concerns about XBRL-based languages generally, the Commission 

believes that custom XML format is more appropriate than an XBRL-CSV format for the 

 
204  Comment from An Investor (Apr. 4, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-

20122297-278355.htm. 
205  See, e.g., Regulation of NMS Stock Alternative Trading Systems, Exchange Act Release No. 83663 (July 

18, 2018), 83 FR 38768 (Dec. 9, 2021) (requiring EDGAR Form ATS-N to be filed in an XML-based 
language specific to that Form). 



67 

purposes of Form SHO because XML format is more human-readable than CSV format, and 

XML is more flexible when using more complex data. 

Finally, the Commission’s XML schema is designed to include validations for each data 

field on Form SHO to help ensure consistent formatting and completeness. The Commission 

continues to believe that requiring Form SHO to be filed via Form-SHO specific XML, a 

structured machine-readable data language, will facilitate more thorough review and analysis of 

the reported short sale disclosures by the Commission, increasing the efficiency and 

effectiveness of the Commission’s understanding of short selling and systemic risk. Additionally, 

most Managers have experience filing EDGAR forms that use similar EDGAR Form-specific 

XML-based data languages, such as Form 13F.206 

c. Timing of Reporting by Managers and Publication by 

Commission 

i. Proposal 

Under Proposed Rule 13f-2(a), a Manager would have been required to file the required 

information on Form SHO with the Commission within 14 calendar days after the end of each 

calendar month. Proposed Rule 13f-2(a)(3) provides that certain information reported on 

Proposed Form SHO would be published by the Commission on an aggregated basis. No time 

frame for publication by the Commission was provided in Proposed Rule 13f-2. In the Proposing 

Release, however, the Commission estimated that it would publish the aggregated information 

within one month after the end of the calendar month. 

 
206  See Form 13F, available at https://www.sec.gov/pdf/form13f.pdf. 



68 

ii. Comments and Final Rule 

Comments on the frequency of reporting and publication varied. Some commenters 

called for more frequent reporting by Managers and, by implication, more frequent publishing by 

the Commission of information from Form SHO reports. Several of these commenters suggested 

that technology permits more frequent—i.e., daily, if not monthly—reporting.207 Several of these 

comments also expressed concern that the Commission’s estimated month-long delay in 

publishing the aggregated information would produce stale data that would undermine the goal 

of greater transparency in the markets.208 The Commission acknowledges that the technology 

exists for frequent reporting of transactions and faster data processing. The Commission is 

concerned, however, about the accuracy of the data reported by Managers and the aggregated 

data published by the Commission pursuant to Rule 13f-2 reporting requirements. The 

Commission believes that the data reported by Managers on Form SHO is more likely to be 

complete and accurate if Managers are afforded sufficient time to gather, assemble, and review 

the reported data.209 The Commission continues to believe that 14 calendar days after the end of 

each month provides a reasonable period of time for Managers to meet their Rule 13f-2 reporting 

requirements. The Commission is also concerned that increasing the frequency of Commission 

 
207  See, e.g., Comment from Regina Murrell (Mar. 25, 2023) available at https://www.sec.gov/comments/s7-

08-22/s70822-20121170-273336.htm (suggesting that technology be used to report short positions daily); 
Anonymously Submitted Comment (Mar. 14, 2022) (calling for reporting to regulators within twenty-four 
hours); Anonymously Submitted Comment (Apr. 26, 2022) (calling for daily, if not intraday, Form SHO 
reporting rather than monthly reporting, as proposed); Anonymously Submitted Comment (Mar. 17, 2022) 
(stating that technology permits more frequent reporting and release of short sale-related data to the public 
in shorter timeframes); see also Better Markets Letter, at 13 (predicting that the Commission’s “fairly 
significant delay” in publishing the aggregated information derived from Form SHO reports will lead to 
published information that is “less timely and less informative”). 

208  See, e.g., Comment of Estaban Oliveras (Mar. 14, 2022) available at https://www.sec.gov/comments/s7-08-
22/s70822-20119372-272258.htm (commenting “If data is neither accurate nor timely, then what is the 
point of collecting data?”). 

209  See Proposing Release, at 14956. 



69 

publication of aggregated data may increase the risk of short squeezes or other manipulative 

activities that could interfere with the price discovery function of equity markets. The timeframes 

as proposed and as adopted balance such concerns with some commenters’ desire for faster 

transparency. 

Commenters taking the opposite view recommended that additional time be given for 

Manager reporting and Commission publication. One such commenter recommended that the 

Commission align the proposed timelines for preparing and filing Form SHO reports with 

existing filing requirements for other Commission reports and forms, to allow for better 

coordination of the process of including short sale-related data in multiple reporting 

frameworks.210 Another such commenter suggested an initial filing period be extended to within 

28 calendar days upon crossing the threshold and then 14 calendar days for any subsequent 

filing.211 Another commenter suggested that a minimum of 45 days before publication of 

aggregated data by the Commission was necessary to protect Managers from the risk that their 

positions and strategies would be used in a “short squeeze or other market-driven reaction” or as 

part of a copycat strategy.212 

While adopting the proposed timeframes will delay the public dissemination of aggregate 

short positions by about a month, the Commission believes a longer delay such as 28 days for 

initial filings or 45 days for all filings is unnecessary. FINRA’s current short interest reporting, 

 
210  ICI Letter, at 12 (stating that aligning Form SHO reporting requirements with those of Form N-Port, for 

example, would give Managers 30 days, rather than the proposed 14 days, after the end of a calendar to file 
a Form SHO). 

211  See Perkins Coie Letter, at 3 (stating a request to extend the initial filing period to within 28 calendar days 
upon crossing the threshold in order “to reduce the monitoring and compliance burdens for infrequent short 
position users”). 

212  MFA Letter, at 18. 



70 

for example, is published twice a month, resulting in a delay of about two weeks.213 The final 

rule here requires slightly more time than FINRA’s current reporting regimes because Managers 

need additional time following determination of whether they meet a Reporting Threshold at the 

end of each calendar month to prepare and file the data on Form SHO through EDGAR. 

Additionally, the Commission believes that providing Managers with a reasonable period of time 

to file complete and accurate short sale-related information in the first instance will reduce the 

need for Managers to file amendments to Form SHO. However, having an asymmetric filing 

deadline of 28 days for initial filing and 14 days thereafter, as one commenter suggested, would 

create negligible cost savings for Managers. Meanwhile, it may have detrimental effects on the 

timing of data aggregation and publication, which could unnecessarily affect the timing and 

quality of aggregated published data. 

Final Rule 

After considering comments, the Commission is adopting Rule 13f-2(a) as proposed, and 

continues to estimate that it will publish aggregated data derived from Form SHO reports within 

one calendar month after the end of the reporting calendar month.214 For example, for data 

reported by Managers on Form SHO for the month of October, the Commission expects to 

publish aggregated information derived from such data no later than the last day of November. 

The Commission continues to believe that 14 calendar days after the end of each calendar month 

 
213  See, e.g., FINRA, SHORT INTEREST REPORTING, available at https://www.finra.org/filing-

reporting/regulatory-filing-systems/short-interest (presenting “due dates” for reporting short interest to 
FINRA and publication of short interest data by FINRA). FINRA Rule 4560 requires FINRA member 
firms to report their short positions in exchange-listed and over-the-counter equity securities to FINRA 
twice each month. FINRA publishes the short interest reports it collects from member firms for all such 
equity securities. 

214  Publication of the aggregated information may be delayed for an initial period following effectiveness of 
Rule 13f-2 and Form SHO. 



71 

provides Managers with sufficient time for Managers that meet the Reporting Threshold to 

prepare and file Form SHO data. 

d. Contents of Form SHO 

Form SHO, as proposed, consists of two parts: Cover Page and Information Tables. As 

discussed more fully below: 

• The Cover Page presents certain identifying information about the Manager(s) filing the 

Form SHO report, the calendar month for which the Manager is reporting, the type of 

Form SHO report being made, and whether the Manager is filing the Form SHO report as 

an amendment;215 

• Information Table 1 presents a Manager’s monthly gross short position in the equity 

security on which information is being reported, as well as certain identifying 

information about that security and about the issuer of that security;216 and 

• Information Table 2 presents daily activity affecting a Manager’s gross short position 

during a calendar month reporting period, as well as certain identifying information about 

that security and about the issuer of that security.217 

i. Financial Identifiers 

(A)  Proposal 

The Commission proposed that a Manager provide the active LEI, if any, of each 

Manager listed on the Cover Page. The Commission also proposed that a Manager report on each 

of the Proposed Form SHO Information Tables the FIGI and CUSIP number of each security on 

 
215  See infra Part II.A.4.d.ii. 
216  See infra Part II.A.4.d.iii. 
217  See infra Part II.A.4.d.iv. 



72 

which information is being reported, and the active LEI, if any, of the issuer of those securities. 

These items are discussed in Special Instructions 8.c, 8.e, and 8.f regarding Columns 3, 5, and 6 

of Information Table 1, and in Special Instructions 9.c, 9.e, and 9.f regarding Columns 3, 5, and 

6 of Information Table 2. 

(B) Comments and Final Rule 

The Commission received only a few comments regarding the proposed requirement to 

report certain financial identifiers, including CUSIP and FIGI (which identify specific 

securities), and LEI (which identifies specific entities) on Form SHO.218 Two commenters stated 

that the Commission should only require that CUSIP be reported on Form SHO, and that the 

inclusion of additional financial identifiers could cause confusion.219 Another commenter stated 

that the LEI and the FIGI of issuers is “not commonly provided” in other holding reports and 

would therefore cause Managers to incur additional costs.220 Another commenter, citing 

“substantial CUSIP licensing costs,” expressed concern that requiring the reporting of CUSIP 

could create an “unnecessary financial burden” on Managers.221 However, another commenter 

stated that the inclusion of multiple financial identifiers in addition to CUSIP, such as FIGI and 

LEI, could help foster competition that ultimately reduces costs and improves data quality.222 

 
218  FIGI and LEI each serve different functions. FIGIs identify securities, whereas LEIs identify entities. Thus, 

a single issuer’s LEI could be associated with multiple FIGIs. Conversely, multiple FIGIs could be 
associated with the same issuer’s LEI. Furthermore, identifying reporting Managers on Form SHO would 
require an entity identifier (LEI) rather than a security identifier (FIGI). 

219  See, e.g., Comment Letter from CUSIP Global Services (Apr. 25, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126577-287237.pdf (“CUSIP Letter”); Comment 
Letter from American Bankers Association (Apr. 26, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126641-287311.pdf (“ABA Letter”).  

220  Jennifer Han, Executive Vice President, Chief Counsel and Head of Regulatory Affairs, Managed Funds 
Association (June 15, 2023), at 9, available at https://www.sec.gov/comments/s7-08-22/s70822-206120-
414822.pdf (“MFA Letter 2”). 

221  See Letter from Anonymous Fund Manager, at 9. 
222  See Comment Letter from Gregory Babyak, Glob. Head Regul. Affs., BLOOMBERG L.P., at 5 (May 2, 

2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20127745-288932.pdf. 



73 

In DFA section 929X, Congress specifically directed the Commission to include CUSIP 

in short sale disclosure rules.223 CUSIP is a universally recognized identifier that has been used 

for a wide array of financial instruments since 1964, allowing securities transactions to be easily 

identified, cleared, and settled, including short sales. Furthermore, market participants and 

investors are familiar with CUSIPs, which are widely and publicly available and used to identify 

most U.S. stocks.224 Many companies display their CUSIPs on their websites, and brokers and 

dealers often provide investors with search engines to look up stocks by CUSIPs.225 

Accordingly, while the Commission recognizes that there are licensing costs associated with the 

CUSIP, the Commission is adopting, as proposed, the requirement that Managers report in 

Column 5 of each of the Form SHO Information Tables the CUSIP for the equity security for 

which information is reported to help facilitate market participants’ understanding of the reported 

data. 

The Commission will also adopt, as proposed, the requirement that Managers report in 

Column 6 of each of the Form SHO Information Tables the FIGI of the equity security for which 

information is being reported, if a FIGI has been assigned. Like CUSIP, FIGI provides a 

methodology for identifying securities, and reporting a FIGI, if assigned, will provide additional 

 
223  Public Law 111-203, sec. 929X, 124 Stat. 1376, 1870 (July 21, 2010). 
224  See, e.g., FAST ANSWERS: CUSIP NUMBER, available at https://www.sec.gov/answers/cusip (referencing 

CUSIP Global Services).  
225  See, e.g., Chad Langager, How to Locate the CUSIP Number for a Stock, INVESTOPEDIA (Apr. 6, 2022), 

available at https://www.investopedia.com/ask/answers/06/cusipforspecificstock.asp. 



74 

identifying information that will provide additional clarity, not confusion, to market participants 

and the public. Unlike CUSIPs,226 however, FIGIs are provided for free.227 

To aid in the identification of the issuers referenced in Form SHO reports, the 

Commission is also adopting a requirement that Managers report in Column 3 of each Form 

SHO Information Table, the LEI, if any, of the issuer of the security about which information is 

reported on Form SHO.228 

With respect to the proposed requirement that a Manager provide its own LEI, if it had 

one, and, if available to the Manager making the Proposed Form SHO filing, the active LEI of 

each Manager listed on the Form SHO Cover Page as an “Other Manager Reporting for” the 

Manager making the Proposed Form SHO filing, the Commission sought comment on whether it 

should require every Manager filing a Proposed Form SHO to obtain an LEI.229 One commenter 

supporting the requirement to report financial identifiers on Form SHO stated that all Managers 

should be required to obtain and maintain a non-lapsed LEI, as opposed to the proposal, which 

stated that Managers would be required to report their LEI, if any.230 Another commenter, 

 
226  See, e.g., Fees for CUSIP Assignment, CUSIP GLOB. SERVS., available at 

https://www.cusip.com/pdf/FeesforCUSIPAssignment.pdf (“For an offering requiring a single CUSIP 
identifier, the assignment fee is $200.”).  

227  See, e.g., Unlock the Power of Efficiency with Open Symbology, OPENFIGI, available at 
https://www.openfigi.com/. 

228  This practice is in keeping with current requirements of other Commission forms. For example, the 
registrant filing Form N-PORT need not report LEIs for counterparties that do not have one. In addition, as 
noted above, to avoid any suggestion that a Manager filing a Form SHO report has an obligation to monitor 
the status of an issuer’s LEI, Instructions 8.c and 9.c of Form SHO—“Column 3. Issuer LEI. If the issuer 
has an LEI, enter the issuer’s active LEI—have been revised to remove the term “active.” See supra n. 36. 

229  See Proposing Release, at 14965. Because the Cover Page, as proposed, would also present the name and, if 
available to the Manager making the Proposed Form SHO filing, the active LEI of each Manager listed on 
the Form SHO Cover Page as an “Other Manager Reporting for” the Manager making the Proposed Form 
SHO filing, the query covered those Managers as well.  

230  Anonymously Submitted Comment (Apr. 4, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20122297-278355.htm (“Every manager that has a part of trading any form of security or 
derivative on any market should be forced to have a Legal Entity Identifier (LEI). That way, specific bad 
actors can be easily identified.”). 



75 

however, expressed uncertainty regarding such a requirement, stating that registration or renewal 

of an LEI is “not monetarily costless.”231 

The Commission acknowledges that LEIs do provide a precise and consistent means of 

identification of legal entities. However, after considering the comments received, and because 

LEIs would supplement existing identifying information provided for Managers and issuers 

listed in Form SHO filings, the Commission is not requiring Managers subject to Rule 13f-2 to 

obtain (and maintain non-lapsed) LEIs to provide on the Cover Page of Form SHO reports and, 

when appropriate for the “Other Manager(s) Reporting for this Manager” section of the Form 

SHO Cover Page to be completed, to provide a non-lapsed LEI for each Manager listed in the 

“Other Manager(s) Reporting for this Manager” of the Form SHO Cover Page. However, the 

Commission may consider this issue in the future. 

ii. Cover Page 

(A)  Proposal 

As proposed, and pursuant to Special Instructions 2-5 of Proposed Form SHO, a Manager 

would report on the Cover Page: (i) certain basic information, including its name, mailing 

address, business telephone and facsimile numbers, and active LEI, if any, as well as the name, 

title, business telephone and facsimile numbers of the Manager’s contact employee for the Form 

SHO report, and the date the report is filed; (ii) the period end date—i.e., the last settlement date 

of the calendar month for which the Manager is reporting; (iii) the type of Form SHO report 

 
231  See Comment Letter from Aaron Franz, available at https://www.sec.gov/comments/s7-18-21/s71821-

20120685-272855.pdf (“I’m uncertain that Managers should be required to obtain an LEI. Registration or 
renewal of an LEI is not monetarily costless. The same information can be submitted by Managers without 
a tracking number with a cost.”). 



76 

being filed;232 and (iv) whether the Form SHO is being filed as an amendment.233 The Manager 

filing the report will include the representation that “all information contained herein is true, 

correct and complete, and that it is understood that all required items, statements, schedules, lists, 

and tables, are considered integral parts of this form.”234 

(B)  Comments and Final Rule 

Other than with respect to financial identifiers as discussed above, the Commission did 

not receive any comments on the contents of the Cover Page. As a result, the Commission is 

adopting Special Instructions 2-5 of Form SHO as proposed, with minor technical modifications. 

For greater precision (but no change in the meaning) in the terminology used in Form SHO as 

adopted, an LEI that is currently in effect is referred to as a “non-lapsed LEI” rather than an 

“active LEI” (the terminology used in Proposed Form SHO). Also, the Cover Page contact 

information for the reporting Manager and its “Contact Employee” has been updated to require 

the use of email rather than facsimile.235 

 
232  The Commission proposed that the reporting Manager designate the report type for the Form SHO by 

checking the appropriate box in the “Report Type” section of the Cover Page and include, where 
applicable, the name and active LEI of each other Manager reporting for this Manager. If all of the 
information that a Manager is required by proposed Rule 13f-2 to report on related Form SHO is reported 
by another Manager (or Managers), the Manager shall check the box for Report Type “FORM SHO 
NOTICE,” include on the Cover Page the name and active LEI (if available) of each of the other Managers 
reporting for this Manager, and omit the Information Tables. If all of the information that a Manager is 
required by proposed Rule 13f-2 to file on Form SHO is included in the report, the Manager shall check the 
box for Report Type “FORM SHO ENTRIES REPORT,” omit from the Cover Page the name and active 
LEI of each other Manager reporting for this Manager, and include the Information Tables. If only a part of 
the information that a Manager is required by proposed Rule 13f-2 to file on Form SHO is included in the 
report filed by the Manager, the Manager shall check the box for Report Type “FORM SHO 
COMBINATION REPORT,” include on the Cover Page the name and active LEI of each of the other 
Managers reporting for this Manager, if available, and include the Information Tables. See Proposing 
Release, at 14958. 

233  If the Manager is filing the Form SHO report as an amendment, then the Manager must check the 
“Amendment and Restatement” box on the Cover Page and enter the Amendment and Restatement number. 
Each amendment must include a complete Cover Page and Information Tables. Amendments must be filed 
sequentially. See Proposing Release, at 14960-61. 

234  See Proposing Release, at 14958. 
235  See supra n. 37 and accompanying text. 



77 

iii. Information Table 1: “Manager’s Monthly Gross Short 

Position” 

(A)  Proposal 

Under Proposed Rule 13f-2, Managers meeting a Reporting Threshold would report 

certain information, including end of month gross short position information regarding 

transactions that have settled during the calendar month being reported, and certain hedging 

information that would help to indicate whether the reported gross short position is directional or 

non-directional in nature.236  

Specifically, as proposed, the Manager would report the following information on 

Information Table 1: 

• In Column 1, a Manager would enter the last day of the calendar month being reported by 

the Manager on which a trade settles. This information would identify the month being 

reported by the Manager.  

• In Column 2, a Manager would enter the name of the issuer to identify the issuer of the 

equity security for which information is being reported. 

• In Column 3, a Manager would enter the issuer’s active LEI, if any. The LEI provides 

standardized information that would enable the Commission and market participants to 

more precisely identify the issuer of each equity security for which information is being 

reported.  

• In Column 4, consistent with section 13(f)(2), a Manager would enter the title of the class 

of the equity security for which information is being reported.  

 
236  Id. at 14959.  



78 

• In Column 5, consistent with section 13(f)(2), a Manager would enter the nine (9) digit 

CUSIP number of the equity security for which information is being reported, if 

applicable. 

• In Column 6, a Manager would enter the twelve (12) character, alphanumeric FIGI of the 

equity security for which information is being reported, if a FIGI has been assigned. Like 

CUSIP, FIGI provides a methodology for identifying securities.  

• In Column 7, a Manager would enter the number of shares that represent the Manager’s 

gross short position in the equity security for which information is being reported at the 

close of regular trading hours on the last settlement date of the calendar month of the 

reporting period. The term “gross short position” means the number of shares of the 

security for which information is being reported that are held short, without inclusion of 

any offsetting economic positions (including shares of the equity security for which 

information is being reported or derivatives of such security). 

• In Column 8, a Manager would enter the U.S. dollar value of the shares reported in 

Column 7, rounded to the nearest dollar. A Manager would report the corresponding 

dollar value of the reported gross short position by multiplying the number of shares of 

the security for which information is being reported by the closing price at the close of 

regular trading hours on the last settlement date of the calendar month. In circumstances 

where such closing price is not available, the Manager would use the price at which it last 

purchased or sold any share of that security. This additional information regarding the 

dollar value of the reported short position would provide additional transparency and 

context to market participants and regulators.  



79 

• In Column 9, a Manager would indicate whether the identified gross short position in 

Column 7 is fully hedged (“F”), partially hedged (“P”), or not hedged (“0”) at the close of 

the last settlement date of the calendar month of the reporting period.237 

(B) Comments and Final Rule 

Comments regarding the contents of Information Table 1 raised concerns about the 

proposal to require hedging information in Column 9. As discussed below, the Commission is 

adopting Information Table 1, as proposed, except that the Commission will not require 

Managers to report hedging information as originally proposed in Column 9 of the table. 

Comments Regarding Hedging Indicators 

Implementation Challenges 

The proposal would have required Managers to report on Information Table 1 whether 

they were “fully hedged” or “partially hedged” based on whether a Manager held an offsetting 

position that completely or partially reduced the risk of price fluctuations for its position in that 

equity security, respectively.238 Further, the proposal required Managers to report on Information 

 
237  As stated in the proposal, a Manager would indicate that a reported gross short position in an equity 

security is “fully hedged” if the Manager also holds an offsetting position that reduces the risk of price 
fluctuations for its entire position in that equity security, for example, through “delta” hedging (in which 
the Manager’s reported gross short position is offset 1-for-1), or similar hedging strategies used by market 
participants. A Manager would report that it is “partially hedged” if the Manager holds an offsetting 
position that is less than the identified price risk associated with the reported gross short position in that 
equity security. This additional hedging information would help to indicate whether the reported gross short 
position is directional or non-directional in nature. More specifically, a short position that is not hedged 
could be an indicator that the short seller has a negative view of the security, believes that the price of the 
equity security will decrease, and accepts the market risk related to its short position. A short position that 
is fully hedged could be an indicator that the short seller has a neutral or positive view of the security and is 
engaged in hedging activity to protect against potential market risk. A short position that is partially hedged 
could be an indicator that the short seller has a negative, neutral, or positive view of the security. Whether 
the hedge itself is full, partial, or non-existent might provide further context to market participants 
regarding the short seller’s view of the equity security. Hedging information also can assist with 
distinguishing position trading, which typically has corresponding hedging activity, from other strategies 
such as arbitrage. 

238  Proposing Release, at 14959.  



80 

Table 1 that their short position was “not hedged” if the Manager did not hold any offsetting 

positions.239 A number of commenters raised concerns about the costs to implement this 

proposed requirement.240 One such commenter expressed concerns that the requirement to report 

hedging status would be “operationally difficult to implement,” as the reporting would be 

produced by back-office systems that “generally do not have any linkage information to allow 

them to match a hedge to a short position,” necessitating the development of costly new 

systems.241 One industry group commenter expressed a concern about “complications that can 

arise from the hedging classification,” particularly for large portfolios for which it will not 

always be clear when a position is intended to be a hedge for another position, or clear or 

obvious whether a position acts as “one-to-one offset” of price risk for another position.242 

Non-Universal Terminology 

Some commenters expressed concerns about the meaning of “fully hedged” and 

“partially hedged” under the proposed rule. These commenters expressed the view that because 

there is no universal definition of hedging in the marketplace, or clear guidance on this matter 

from the Commission, Managers can reasonably come to different conclusions regarding the 

extent to which similar positions are hedged.243 Because the meanings of “fully” and “partially” 

 
239  Id. 
240  See, e.g., MFA Letter, at 4 (stating that inclusion of hedging classification on Form SHO would be costly 

and time consuming for reporting Managers to produce); Virtu Letter, at 3 (advocating that requirement to 
report short positions as fully, partially, or not hedged would be “operationally difficult to implement” and 
should be eliminated).  

241  Virtu Letter, at 3.  
242  AIMA Letter, at 13. 
243  See, e.g., ICI Letter, at 10; see also Comment Letter from Mehmet Kinak, Head of Equity Trading, T. 

Rowe Price, et al. (Apr. 26, 2022), at 4, available at https://www.sec.gov/comments/s7-08-22/s70822-
20126777-287493.pdf (“T. Rowe Price Letter”) (stating that hedging data may be “especially vulnerable to 
lack of consistency in terms of how various managers apply the classification.”); AIMA Letter, at 13 
(predicting that hedging classification will involve “level of subjectivity that is unlikely to be applied 
uniformly across Managers” and that determining such classification will “prove even more complicated 
for a large quantitative portfolio”).81 

hedged are subject to interpretation, these commenters believed that the reporting of hedging 

data would be inconsistent, imprecise, potentially misleading, and subject to misinterpretation. 

Several such commenters posited that due to what they described as the ambiguity of the hedging 

definitions, the proposed hedging reporting could result in inaccurate or misleading data—such 

as misleading market signals of Managers’ sentiments—as Managers may interpret the hedging 

indicators differently.244 Similarly, a commenter stated that due to the lack of detail surrounding 

the “partially hedged” designation in particular, the data may be misleading as to the level of 

price risk associated with certain positions.245 A commenter stated that there is no universal 

definition of what constitutes a “hedge” and that the Commission’s guidance in the Proposing 

Release and the instructions in Proposed Form SHO as to how a Manager determines whether or 

when a position is fully or partially hedged, or not hedged, are insufficient to create a universal 

understanding and consistent reporting.246 That commenter further stated that the Commission 

provided only one example (the use of delta hedging in a one-to-one offset between short and 

long positions), even though Managers use a variety of other hedging techniques, such as 

portfolio hedging, ETFs, baskets of securities, and securities that have historic trading 

correlations, among others.247 Under these circumstances, several commenters predicted, 

Managers would likely default to a “partially hedged” designation,248 resulting in data of limited 

 
244  See, e.g., AIMA Letter, at 13; MFA Letter, at 16. 
245  See ICI Letter, at 10. 
246  See MFA Letter, at 16-17. 
247  See id. 
248  See, e.g., MFA Letter, at 17. The MFA Letter suggested that “almost all short positions held by a large 

manager will be partially hedged—for example, if a manager has discretion over one fund with a short 
position, and another unrelated fund with a long position, the manager would be required to report the short 
position as “partially hedged” when in fact, the short position is not hedged at all.” Depending on the facts 
and circumstances, the commenter is correct that the positions in the two funds managed by the same 
Manager may have to be aggregated under Rule 200(c) of Regulation SHO for marking purposes. 



82 

utility.249 These commenters stated that due to what they viewed as the ambiguous and 

non-universal nature of the terms, many Managers may simply default to marking transactions as 

“partially hedged” when it is unclear to what extent the positions are hedged, due to the wide 

range of positions encompassed by the proposed partially hedged indicator.250 To mitigate this 

concern and to improve transparency, some commenters critical of the hedging indicators 

suggested reducing the qualitative nature of the proposed terms by dividing the “partially 

hedged” term into smaller, well-defined units or even percentage increments.251 More 

specifically, these commenters expressed concern that the proposed hedging classifications could 

prove challenging to apply consistently across Managers and could result in significant costs for 

data of limited value. 252 One commenter stated that the act of market participants reporting the 

proposed hedging classification would create a chilling effect.253 

 
249  See, e.g., Ropes & Gray Letter, at 5 (stating that difficulty in defining “fully,” “partially,” or “not,” hedged 

would likely lead to inconsistent reporting that, in turn would limit the “meaningfulness” of the reported 
information to investors and the Commission); T. Rowe Price Letter, at 4 (raising concern that lack of 
consistency in how reporting Managers would apply the hedging classification could lead to “weaknesses” 
in the hedging data reported that would make the Commission’s publication of aggregated hedging 
classifications across reporting Managers of little value to, and potentially misinterpreted by, the public); 
MFA Letter, at 4 (stating “[b]ecause (i) there is no universal definition of “hedging” in the industry, and (ii) 
the reported gross short position must encompass short positions aggregated across funds, clients and 
affiliated managers, any hedging-related designation would be meaningless. Inclusion of this data would 
result in inconsistent reporting and would be costly and time consuming for managers to produce.”); 
SIFMA Letter at 21 (stating information reported in Column 9 of Proposed Form SHO would be 
“inherently inconsistent and precise and, therefore, of very little value to regulators in that it could be 
highly misleading”); see also AIMA Letter, at 13 (stating hedging classification will involve “level of 
subjectivity that is unlikely to be applied uniformly across Managers”). 

250  See, e.g., Ropes & Gray Letter (arguing that the possible exaggerated use of the partially hedged indicator 
is “unlikely to elicit comparable reporting across managers”). 

251  See Comment from Peyton Bailey (Mar. 14, 2022) (“Peyton Bailey Comment”), available at 
https://www.sec.gov/comments/s7-08-22/s70822-272291.htm (proposing to use percentage points or 
“majority” (>50%) and “minority” (≤50%) hedging indicators instead of partially hedged); Nick Dougherty 
Letter (proposing to use percentage points); WTI Letter (proposing to use percentage points); Comment 
from Alex Fleming (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
317348.htm (proposing to use numerical or percentage scale). 

252  See MFA Letter, at 4, 16-17. 
253  See Comment Letter from Joshua Russell (Oct. 26, 2022), available at https://www.sec.gov/comments/s7-

08-22/s70822-20147825-314190.pdf. 



83 

Another commenter stated that although a change in hedging status may correspond with 

a change in manager sentiment, it is also possible that such a change may simply be the result of 

other unrelated objectives, such as rebalancing a portfolio.254 Similarly, another commenter 

agreed that the purpose of defensive tactics that hedging strategies often entail, such as hedging a 

long position, contrasts with the purpose of unhedged short strategies.255 That commenter 

expressed the view that such “defensive” hedging should not be included in the reporting as it 

would provide limited utility to the public. Some commenters took the position that reporting on 

“bona fide” hedging activity would not align with the goals in the Proposing Release and that 

such activity is unlikely to be abusive or manipulative.256 

Some commenters that supported requiring hedging indicators generally rejected 

complaints about the costs and burdens related to the proposed reporting of hedging status as part 

of Information Table 1, stating that with modern technology, the requirements are “easily 

automated and with minimal cost incurrence.”257 Support for the collection of hedging 

information generally came from commenters favoring steps to enhance the transparency of short 

sale-related data to facilitate a better understanding of short selling dynamics.258 One commenter 

stated that the hedging classification, if made public, would illustrate market sentiment, and that 

it would help to uncover “short and distort” campaigns, particularly in sectors that have higher 

 
254  See T. Rowe Price Letter, at 4. 
255  See K&L Gates Letter, at 2. 
256  See K&L Gates Letter, at 2-3, T. Rowe Price Letter, at 2-4, Anonymous Fund Manager Letter, at 1. 
257  Letter from Andrew Patrick White, CEO & Founder, FundApps (Mar. 2, 2022), available at 

https://www.sec.gov/comments/s7-08-22/s70822-20118368-271239.pdf.  
258  See, e.g., Comment Letter from Anonymous (March 14, 2022) (positing that managers should report 

whether, and to what extent, they are hedged, along with an explanation of what that means; such 
information is valuable in determining a manager’s position with regard to the associated risks); see also 
Comment Letter from Biotechnology Innovation Organization (Apr. 25, 2022) at 3, available at 
https://www.sec.gov/comments/s7-08-22/s70822-20126539-287214.pdf (“BIO Letter”) (positing that 
transparency into hedging data would facilitate understanding of price and behavior dynamics). 



84 

than normal rates of short selling.259 The commenter further explained that under the status quo, 

it is unclear whether short positions are used for hedging long positions or whether they are 

being used to speculate on perceived overvaluation in the market in recent years.260 Another 

commenter stated that publishing hedging information regarding the actions of hedge funds and 

other large market participants would inform the decision making of retail investors.261 Other 

commenters posited that the proposed “not hedged” indicator would provide the most useful 

information to the market because unhedged short positions may be the most likely to be riskier 

or manipulated.262 

Final Rule 

After considering the comments received,263 the Commission is not adopting the hedging 

reporting requirement as proposed. Specifically, when filing Form SHO Information Table 1, a 

 
259  BIO Letter, at 7. 
260  Id. at 2. 
261  Peyton Bailey Comment. 
262  See Comment from Max Knaus (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-

22/s70822-316957.htm; Comment Letter from Brendan Casey (Oct. 30, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20149998-319181.pdf. 

263  One commenter stated that the proposed hedging requirement “fails to appreciate the difficulty—
particularly for multi-service broker-dealers that use aggregation units and investment funds with multiple 
strategies—of calculating and determining such information for reporting purposes.” SIFMA Letter, at 20. 
Under Regulation SHO, a person shall be deemed to own a security only to the extent it has a net long 
position in that security. See Rule 200(c). See also Rule 200(g)(1) (an order shall be marked long only if the 
seller is deemed to own the security and the security is in the physical possession or control of the broker or 
dealer or it is reasonably expected that the security will be in the physical possession or control of the 
broker or dealer by settlement date). Under Rule 200(f), a broker must aggregate all of its positions in a 
security to determine its net position, unless it qualifies for independent trading unit aggregation. If the 
broker or dealer qualifies for independent aggregation units, each independent trading unit shall aggregate 
all of its positions in a security to determine its net position. See Rule 200(f). Qualification requires that the 
independent aggregation unit meet four conditions. See Rule 200(f)(1) through (4). For instance, all traders 
in an aggregation unit must pursue only the particular trading objective(s) or strategy(s) of that aggregation 
unit and may not coordinate that strategy with any other aggregation unit. See Rule 200(f)(3). In adopting 
Rule 200(f), the Commission stated that “conditions are necessary to prevent potential abuses associated 
with establishing aggregation units within multi-service broker-dealers.” Regulation SHO Adopting 
Release, at 48011. Thus, to be eligible for the aggregation unit exception, the broker or dealer’s units must 
operate independently, with defined trading strategies, and one unit’s trades or positions cannot be used to 
offset or hedge another unit’s trades or positions. See, e.g., Rule 200(f)(3); see also Regulation SHO 

 



85 

Manager will not be required to indicate whether the identified gross short position in Column 9 

of Information Table 1 is fully hedged (“F”), partially hedged (“P”), or not hedged (“0”) at the 

close of the last settlement date of the calendar month of the reporting period; Column 9 will be 

removed from Information Table 1 of Form SHO as adopted. 

While the Commission laid out the rationale behind the hedging reporting requirement in 

the Proposing Release, comments received, as discussed above, persuaded the Commission that 

such reported data may not result in as consistent and accurate data as it originally envisioned. In 

addition to the definitional challenges discussed above, the Commission recognizes the 

challenges of applying the Rule 13f-2 reporting requirements in the scenario when a Manager 

has investment discretion over multiple accounts. For example, purchases and sales in different 

accounts may not be intended to hedge one another, but the proposal would have required that 

the Manager indicate that it was “partially-hedged” nonetheless. Such information would not be 

an accurate reflection of the Manager’s hedging status, and thus would not be useful. As another 

example, a Manager that has purchased a few shares of a security (for example, 100 shares) for 

which it holds a substantial short position (for example, 1 million shares) would have had to 

report that it was “partially hedged” without regard for the scale of such purchases in relation to 

the position for which it would have had to report it was hedging. That said, the Commission 

 
Adopting Release, at 48011 (each unit must be engaged in separate trading strategies). While information 
barriers between aggregation units may be useful, as the commenter suggests, such barriers alone are not 
sufficient for eligibility for Rule 200(f). See e.g., Rule 200(f)(3); see also Regulation SHO Adopting 
Release at 48011 (conditions are intended to limit potential for abuse associated with coordination among 
units and to maintain the independence of the units). Thus, a broker or dealer that has created multiple units 
with fungible trading strategies as a means of affecting order marking may not be eligible for aggregation 
unit treatment under Rule 200(f) of Regulation SHO. See e.g., In re Morgan Stanley & Co., LLC, 34-90046 
(Sept. 30, 2020) (settled case), available at https://www.sec.gov/litigation/admin/2020/34-90046.pdf (long-
only and short-only aggregation units were not independent and separate trading strategies, but were 
instead operated by the same employees, managed by the same manager, and consisted of the same trading 
strategies).  



86 

continues to believe, as did some commenters favoring the proposed requirement, that if accurate 

data on hedging could be collected, such information would be useful to regulators. 

The Commission considered whether, as suggested by a commenter, the hedging 

indicator could be simplified so that Managers would be required only to report whether a 

position is not hedged. 264 While short positions that are unhedged may involve greater risk, this 

alternative could be too easily circumvented by, for example, simply purchasing a nominal 

number of shares of the security and stating the position is therefore hedged (or partially hedged 

under the rule as proposed). The Commission also considered another commenter’s suggestion 

that hedged short positions should be exempted from reporting.265 This alternative would create a 

similar circumvention scenario to the one mentioned above (i.e., using a nominal long position to 

create an exempt hedged position). 

Accordingly, the Commission is not adopting the hedging reporting requirement as 

proposed. 

iv. Information Table 2: “Daily Activity Affecting 

Manager’s Gross Short Position During the Reporting 

Period” 

(A)  Proposal 

As proposed, Information Table 2 of Form SHO captures daily activity that increases or 

decreases a Manager’s short position for each settlement date during the calendar month 

reporting period. More specifically, on proposed Form SHO, a Manager would report the number 

 
264  See Comment from Max Knaus (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-

22/s70822-316957.htm; Comment Letter from Brendan Casey (Oct. 30, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20149998-319181.pdf. 

265  Perkins Coie Letter, at 6 (stating that “[o]r, alternatively, the SEC should consider exempting hedged short 
positions from reporting on Form SHO”). 



87 

of shares of the equity security that: (i) were sold short; (ii) were purchased to cover, in whole or 

in part, an existing short position in the security; (iii) were acquired through the exercise or 

assignment of an option, through a tendered conversion, or through a secondary offering 

transaction,266 that reduces or closes a short position on the (underlying) security; (iv) were sold 

through the exercise or assignment of an option that creates or increases a short position on the 

(underlying) security; (v) resulted from other activity not previously reported in the Information 

Table that reduces or closes, or creates or increases a Manager’s short position on the security, 

including, but not limited to, ETF creation or redemption activity. Pursuant to Proposed Rule 

13f-2, Managers would assemble, review, and file the required information with the Commission 

on new Form SHO within fourteen (14) calendar days after the end of the calendar month. As 

noted above, the Commission would then publish aggregated information derived from the data 

reported on new Form SHO, aggregated across all reporting Managers, within one month after 

the end of the reporting calendar month. 

Specifically, as proposed, the Manager would report the following information on 

Information Table 2 for each date during the reporting period on which a trade settled (settlement 

date) during the calendar month. 

 
266  The term “sale” under the Securities Act includes contract of sale. See Securities Offering Reform, 

Exchange Act Release No. 52056 (July 19, 2005), 70 FR 44722, 44765 (Aug. 3, 2005); Short Selling in 
Connection With a Public Offering, Exchange Act Release No. 56206 (Aug. 6, 2007), 72 FR 45094, 45102 
(Aug. 10, 2007). The Commission has previously stated that, in a short sale, the sale of securities occurs at 
the time the short position is established, rather than when shares are delivered to close out that short 
position, for purposes of section 5 of the Securities Act of 1933 (“Securities Act”). See, e.g., Commission 
Guidance on the Application of Certain Provisions of the Securities Act of 1933, the Securities Exchange 
Act of 1934, and Rules Thereunder to Trading in Security Futures Products, Exchange Act Release No. 
46101 (June 21, 2022), 67 FR 43234, 43236 (June 27, 2002) (see Questions 3 and 5); Short Selling in 
Connection With a Public Offering, 72 FR 45094.  



88 

• In Column 1, a Manager would enter the date during the reporting period on which a 

trade settled for the activity reported. This would identify the settlement date activity 

being reported. 

• In Column 2, consistent with section 13(f)(2), a Manager would enter the name of the 

issuer, to identify the issuer of the security for which information is being reported. 

• In Column 3, a Manager would enter the issuer’s active LEI, if the issuer had an active 

LEI. The LEI provides standardized information that would enable the Commission and 

market participants to more precisely identify the issuer of each equity security for which 

information is being reported. 

• In Column 4, consistent with section 13(f)(2), a Manager would enter the title of the class 

of the security for which information is being reported. 

• In Column 5, consistent with section 13(f)(2), a Manager would enter the nine (9) digit 

CUSIP number of the equity security for which information is being reported, if 

applicable. 

• In Column 6, a Manager would enter the twelve (12) character, alphanumeric FIGI of the 

equity security for which information is being reported, if a FIGI has been assigned. Like 

CUSIP, FIGI provides a methodology for identifying securities. 

• In Column 7, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the equity security for which information is being reported that 

resulted from short sales and settled on that date. 

• In Column 8, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that were 

purchased to cover, in whole or in part, an existing short position in that security and 



89 

settled on that date. This activity information would allow the Commission and other 

regulators to more quickly identify a potential “short squeeze,” which could be evidenced 

by short sellers closing out short positions by purchasing shares in the open market. If it 

appeared that a short squeeze may have occurred through potential manipulative behavior 

involving short selling, the Commission could perform further analysis regarding the 

squeeze. Increased risk of detection could deter some market participants seeking to 

orchestrate a short squeeze. 

• In Column 9, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that are acquired 

in a call option exercise that reduces or closes a short position on that security and settled 

on that date. The exercise or assignment of an option position can reduce or close a short 

position in the underlying equity security. 

• In Column 10, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that were sold in 

a put option exercise that created or increased a short position on that security and settled 

on that date. Options can be used to create economic short exposure such that an exercise 

or assignment of an option could create or increase a short position in the underlying 

equity security. 

• In Column 11, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that were sold in 

a call option assignment that created or increased a short position on that security and 

settled on that date. Options can be used to create economic short exposure such that an 



90 

exercise or assignment of an option could create or increase a short position in the 

underlying equity security. 

• In Column 12, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that were 

acquired in a put option assignment that reduced or closed a short position on that 

security and settled on that date. The exercise or assignment of an option position can 

reduce or close a short position in the underlying equity security. 

• In Column 13, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that are acquired 

as a result of tendered conversions that reduced or closed a short position on that security 

and settled on that date. Holders of convertible debt often hold short positions to hedge 

their convertible position. When the shares of the convertible debt are converted, they can 

reduce or close a short position in the equity security. 

• In Column 14, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that were 

obtained through a secondary offering transaction that reduces or closes a short position 

on that security and settled on that date. Purchasing securities in a secondary offering267 

can reduce or close a short position in the equity security.  

 
267  Such offering purchases must be reported whether they occurred outside or within the restricted period of 

17 CFR 242.105, Rule 105 of Regulation M, which makes it unlawful for a person who sells short a 
security that is the subject of an offering to purchase in the offering if the short sale occurred during the 
restricted period. Rule 105 originally prohibited persons from covering short sales with offering purchases 
but was amended to prohibit any purchases of offering shares if the person sold short during the restricted 
period (with limited exceptions) “to end the progression of schemes and structures engineered to 
camouflage prohibited covering.” Short Selling in Connection with a Public Offering, Exchange Act 
Release No. 34-54888 (Dec. 6, 2006), 71 FR 75002 at 75005 (Dec. 13, 2006). The amendment was 
designed to address a proliferation of trading strategies and structures attempting to accomplish the 
economic equivalent of the activity that the rule seeks to prevent, specifically, attempts to obfuscate the 

 



91 

• In Column 15, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that resulted 

from other activity not previously reported in Information Table 2 that creates or 

increases a short position on that security and settled on that date. Other activity to be 

reported includes, but is not limited to, shares resulting from ETF creation or redemption 

activity. 

• In Column 16, for the settlement date set forth in Column 1, a Manager would enter the 

number of shares of the security for which information is being reported that resulted 

from other activity not previously reported on Information Table 2 that reduces or closes 

a short position on that security and settled on that date. Other activity to be reported 

includes, but is not limited to, shares resulting from ETF creation or redemption activity. 

The Commission stated in the Proposing Release that it believes that the information in 

Columns 9, 12, 13, 14, and 16 of proposed Information Table 2 would be useful in providing the 

Commission additional context and transparency into how and when short positions in the 

reported equity security are being closed out or reduced.268 The Commission also stated that the 

information in Columns 10, 11, and 15 would be useful in providing the Commission additional 

context and transparency into how and when short positions in the reported equity security are 

being created or increased.269 

Such daily activity information would provide market participants and regulators with 

additional context and transparency into whether, how, and when reported gross short positions 

 
prohibited “covering” of the short sale. See, e.g., Short Selling in Connection with a Public Offering, 
Exchange Act Release No. 34-56206 (Aug. 6, 2007), 72 FR 45094 (Aug. 10, 2007).   

268  Proposing Release, at 14960. 
269  Id. 



92 

in the reported equity security are being closed out (or alternatively, increased) as a result of the 

acquisition or sale of shares of the equity security resulting from call options exercises or 

assignments; put options exercises or assignments; tendered conversions; secondary offering 

transactions;270 and other activity. The Commission stated that it believed that such activity data 

would also assist the Commission in assessing systemic risk and in reconstructing unusual 

market events, including instances of extreme volatility. 

(B) Comments and Final Rule 

The Commission solicited and received comment on the categories of short sale activity 

data that a Manager would be required to report on new Form SHO Information Table 2. 

Commenters differed on the appropriate level of transparency of the short sale-related data 

presented. Some commenters called for robust—if not complete—transparency of short 

sale-related data, while other commenters expressed concerns about the breadth of the activity 

information to be reported, the related cost burdens to report such information, and data security. 

Individual investor commenters, generally, were critical of the opacity of current short 

position and short activity data disclosure. A group consisting of retail investors stated there was 

a “lack of transparency around short positions, the inability to adequately quantify short interest, 

and the ability for firms to skirt regulation through derivative positions such as options and 

security-based swaps.”271 Some individual investor commenters viewed Proposed Rule 13f-2 

and related Form SHO as a first step toward achieving the full transparency in disclosure they 

 
270  See supra n. 263. 
271  WTI Letter. 



93 

perceived as necessary for a fair and efficient market.272 To these commenters, greater 

transparency is a means to level the playing field for retail investors.273  

Other commenters acknowledged the Commission’s authority to promulgate rules to 

capture short sale-related data but took the position that Form SHO reporting should be limited 

to the bare minimum necessary to satisfy the statutory mandate of DFA section 929X (i.e., 

Exchange Act section 13(f)(2)).274 These commenters expressed concerns about requiring the 

reporting of anything beyond the data elements expressly specified in section 13(f)(2) of the 

Exchange Act.275 Expressing concerns that the data required in Information Table 2 of Proposed 

 
272  Id. See also Anonymously Submitted Comment (Mar. 11, 2022), available at 

https://www.sec.gov/comments/s7-08-22/s70822-20119226-272030.htm (“any and all information” should 
be accessible by any investors); Anonymously Submitted Comments (Apr. 26, 2022, May 10, 2022, Oct. 9, 
2022, Oct. 26, 2022); Comment from Erin Ashford (Oct 9, 22), available at 
https://www.sec.gov/comments/s7-08-22/s70822-309605.htm (calling for “robust and complete 
transparency”); cf. Anonymously Submitted Comment (Mar. 17, 2022) (raising concerns about data 
integrity when the reporting system is based on reporting). 

273  See, e.g., Comment from Richards (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-317124.htm (“Market fairness and transparency is an important part of this democracy. It helps 
to level the playing field.”); Anonymously Submitted Comment (Oct. 19, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20146713-312005.pdf (“In summary, I, like many others, 
support the above proposal to increase transparency in the markets, and to somewhat level the playing field 
for smaller, independent investors and retail alike.”); Comment from Jonathan Patterson (Mar. 14, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-272193.htm ("Shedding some light into the 
transactions of short sellers would be very supportive for retail investors and would help to level the 
playing field.”).  

274  See T. Rowe Price Letter, at 2 (urging a measured approach to meeting the 929X reporting obligation so 
that “the public reporting of short sale information only satisfies the specific data elements and minimum 
frequency of dissemination referenced in section 929X and goes no further.”); Comment Letter from 
Robert Sloan, Managing Partner, S3 Partners, LLC (May 20, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20129426-295541.pdf (recommending reporting be 
limited to public disclosure of “only those data elements required by Section 13(f)(2)”) (“S3 Letter”); see 
also AIMA Letter (positing that Information Table 1 of Form SHO, without the requirement to report 
hedging information, would alone be sufficient for the Commission to carry out its statutory mandate and 
achieve its goals). 

275  See, e.g., SIFMA Letter, at 2 (positing that “expansive reporting regime contemplated under the Proposed 
Rules would extend significantly beyond what Congress intended in passing Section 929X . . . .”); 
Comment Letter from James Toes, President & CEO, et al., Security Traders Association (Apr. 26, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-20126796-287509.pdf (“STA Letter”) 
(criticizing rulemaking proposal as going far beyond mandate of 929X of Dodd-Frank Act to prescribe 
rules providing for public disclosure of short sales and recommending more alignment of Proposed Rule 
13f-2 reporting requirements with those of Form 13F); T. Rowe Price Letter, at 2. 



94 

Form SHO is too granular and contains an excessive amount of commercially sensitive 

information that, if misappropriated, would lead to commercial harm, these commenters 

recommended that, at a minimum, the scope of information required to be reported on 

Information Table 2 of Proposed Form SHO be substantially limited, or that Information Table 2 

be eliminated altogether.276 Some of these commenters suggested that the Commission rely 

instead on existing sources of short-sale related data, such as CAT or short sale-related data 

provided to FINRA and the exchanges.277 Other commenters questioned the utility of the 

reported information proposed to be required.278 

Several commenters expressly or effectively questioning the need for Information Table 

2, also raised the concern that the short activity monitoring necessary to comply with the 

reporting requirements of Proposed Form SHO would require any Manager that engages in short 

selling to expend significant time and resources to enhance or revamp its systems to monitor 

activity continuously, without certainty as to if or when its short selling activity would meet or 

 
276  See, e.g., Two Sigma Letter, at 3-4 (raising concerns about potential data breaches and unintended public 

dissemination of daily short position data); see also AIMA Letter, at 14 (citing negative ramifications for 
Managers, markets and the Commission if commercially sensitive and valuable data reported in 
Information Table 2 were to be compromised). See also discussion in supra Part II.A.4.a.ii. 

277  See, e.g., AIMA Letter, at 2 (calling for elimination of Information Table 2 because it is “too granular”); 
MFA Letter, at 4 (calling for elimination of Information Table 2 in favor of “less burdensome alternative”); 
see also Ropes & Gray Letter, at 2 (stating that much of the information to be reported under Proposed 
Rule 13f-2 “is, or soon should be” available from existing reporting regimes—e.g., CAT, and information 
reported by broker-dealers to FINRA and the exchanges); SIFMA Letter, at 15-19 (recommending 
elimination of Information Table 2 altogether or alternatively that reporting of short activity data be limited 
to reporting only gross short positions at the end of each settlement day when a reporting threshold is 
breached (excluding detailed purchase and sale activity); cf. T. Rowe Price Letter, at 3 (recommending that 
Commission not use the permissive authority granted in section 13(f)(2) of the Exchange Act to gather 
additional information that would not be beneficial to the market and would be challenging for Managers to 
compile). See also discussion in supra Part II.A.4.a.i. 

278  See, e.g., Ropes & Gray Letter, at 3, 6 (stating that it would be difficult to “to discern market sentiment or 
levels of activity from the net number published by the Commission, and the utility of publishing daily net 
transactions data to market participants will also likely be limited”); see also K&L Gates Letter, at 2 
(questioning the “value and impact” of the information called for under Proposed Rule 13f-2, that would 
supplement information currently available from other sources). 



95 

exceed the reporting thresholds.279 These commenters concluded that the costs to operationalize 

Rule 13f-2 had not been adequately weighed against any benefits to regulators or the public.280  

Final Rule 

The Commission continues to believe that publication of aggregated short position data, 

on a delayed basis, is a reasonable means of minimizing the potential negative impacts of short 

position and short activity disclosures on short selling and allaying data security concerns raised 

by commenters while at the same time increasing transparency.281 This rationale applies to 

Information Table 2, which is about daily activities. Eliminating Information Table 2 would not 

further the goal of enhancing the transparency of short sale-related data.282 And for reasons 

stated below, the data available from existing sources of short sale-related information have 

 
279  See, e.g., Two Sigma Letter, at 7 (commenting that the “commercial risk and operational burdens created 

by daily reporting of individual short positions” was not adequately justified in the Proposing Release); 
MFA Letter, at 9-10 (raising concern that costs and consequences of Proposals would have a chilling effect 
on institutional investment managers’ pursuit of short strategies); Perkins Coie Letter, at 2-3 (stating that 
the benefits of the reported information would be outweighed by compliance costs for Managers that do not 
regularly utilize short positions “[F]or institutional investment managers that only selectively utilize short 
positions, or who only do so passively, these additional compliance costs in relation to the institutional 
investment manager’s usage of short positions could in turn impose untended risks to the manager’s 
underlying investors if the institutional investment manager must divert additional time and resources for 
compliance and oversight. This appears to be yet another affirmative reporting requirement that will 
increase compliance and overhead cost, without a [commensurate] benefit.”). 

280  See, e.g., MFA Letter, at 14 (describing categories of information required in Information Table 2 as 
“unclear, requir[ing] complicated judgments on the part of [M]anagers, and . . . likely to yield 
inconsistencies in reporting and results that are not accurate.”); Ropes & Gray Letter, at 3 (positing that 
reporting under Proposed Rule 13f-2 would impose “significant costs” on Managers, would not result in 
disclosure of “actionable information to market participants,” and is not necessary to allow the Commission 
to perform “effective market surveillance”); see also S3 Letter, at 2 (predicting that short activity 
monitoring required by Information Table 2 of Form SHO will be a “substantial lift” for Managers’ 
administrative systems); SBAI Letter, at 2 (positing that proposed Form SHO data collection framework 
not justified from a cost benefit perspective and provides “very limited” additional insight in an untimely 
manner). 

281  Proposing Release, at 14955. 
282  See Proposing Release, at 14987-14988, 14991 (discussing how existing sources of short sale-related data 

are not sufficiently granular, for example, to provide sufficient insights to further understanding of short 
selling strategies, to distinguish short sale transactions that impact short positions and those that do not, or 
into the timing with which short positions are established or covered). 



96 

limitations, so they do not extinguish the need for additional transparency in the short sale 

market.283 

The data to be reported in the following columns of Information Table 2 in Proposed 

Form SHO will provide regulators with additional context and transparency into how and when 

reported gross short positions were closed out or increased, which will help the Commission 

assess systemic risk.284 These columns are as follows: 

• Column 7: Number of Shares Sold Short 

• Column 8: Number of Shares Purchased to Cover an Existing Short Position 

• Column 9: Number of Shares Purchased in Exercised Call Option Contracts 

• Column 10: Number of Shares Sold in Exercised Put Option Contracts 

• Column 11: Number of Shares Sold Short in Assigned Call Option Contracts 

• Column 12: Number of Shares Purchased in Assigned Put Option Contracts 

• Column 13: Number of Shares Resulting from Tendered Conversions 

• Column 14: Number of Shares Obtained Through Secondary Offering Transaction285 

• Column 15: Other Activity that Creates or Increases Manager’s Short Position 

• Column 16: Other Activity that Reduces or Closes Manager’s Short Position 

However, the Commission is modifying the design of Information Table 2 of Proposed 

Form SHO to help reduce the costs and burdens of complying with the reporting requirements of 

 
283  See infra Part VIII.B.4. 
284  Proposing Release, at 14959. 
285  A secondary offering transaction for purposes of this requirement means an offering, other than an initial 

public offering, or “IPO,” for the same class of security that is the subject of the short sale. Such an offering 
could be made by the issuer and include newly created and or treasury shares and could also include or be 
made exclusively by selling shareholders.  



97 

Proposed Rule 13f-2 without sacrificing the level of transparency of short sale activity data made 

available to market participants as prescribed in Proposed Rule 13f-2(a)(3). 

Under the reporting regime of Proposed Rule 13f-2, Managers would have been required 

to report each category of short activity information included in Columns 7-16 (above) of 

Information Table 2 of Proposed Form SHO.286 The Commission, for each individual column, 

would then tabulate the information reported to determine and publish the net activity in each 

reported equity security, as aggregated across all reporting Managers. That net activity would be 

expressed by a single identified number of shares of the reported equity security and be 

determined by offsetting the purchase and sale activity reported by Managers in Columns 7-16 of 

Information Table 2 of Proposed Form SHO. 

Under the adopted version of Information Table 2, Columns 7-16 of Information Table 2 

of Proposed Form SHO are replaced by a single, new Column 7, in which Managers will report 

net activity in the security for which information is being reported (represented as a number of 

shares). More specifically, Special Instruction 9.g of Form SHO, as adopted, requires Managers 

to report net change in short position reflecting how the gross short position in shares of the 

security for which information is being reported are being closed out—or alternatively, 

increased—as a result of the acquisition or sale of share activity determined by offsetting 

prescribed types of purchase and sale activity. Those prescribed types of purchase and sale 

activities correspond to the purchase and sale activities identified in Columns 7-16 of Proposed 

Form SHO. The net activity will be determined by Managers—rather than by the Commission—

and reported to the Commission. The Commission will then aggregate the reported daily net 

change numbers across Managers for public dissemination. Under the adopted version of 

 
286  See Special Instructions 9.g of Proposed Form SHO. 



98 

Information Table 2, the Commission will receive less granular information from reporting 

Managers than was proposed. The Commission, however, will receive net activity information 

from reporting Managers for each settlement date during the calendar month which will provide 

additional context and transparency into whether the reported gross short positions in the 

reported equity security are being closed out (or alternatively, increased) as a result of the 

acquisition or sale of shares of the equity security resulting from call options exercises or 

assignments; put options exercises or assignments; tendered conversions; secondary offering 

transactions; and other activity. The Commission believes that this is a reasonable approach that 

considers both those comments that supported additional transparency with regard to short sale-

related information that would result from Information Table 2 reporting, and also comments 

about cost and data security concerns with regard to such reporting. This reported net activity 

information will assist the Commission in assessing systemic risk and in reconstructing unusual 

market events, including instances of extreme volatility.287 

These modifications in the final rule for Information Table 2 of Form SHO result in no 

change to the net activity information that will be made publicly available by the Commission. 

Under Proposed Rule 13f-2 and Proposed Form SHO, the Commission would publish net 

activity information for each reported equity security, aggregated across all categories of activity 

in Columns 7-16 of Information Table 2 of Proposed Form SHO, and aggregated across all 

reporting Managers. Under Rule 13f-2 and Form SHO, the Commission will publish this same 

net activity information for each reported equity security as originally proposed by the 

 
287  See infra Part VIII.C.1 for a discussion of how the Rule 13f-2 (and the adopted CAT amendment) will 

enhance the Commission’s ability to protect investors and investigate market manipulation by providing a 
clearer view into the short selling market and improving the Commission’s and other regulators’ 
reconstruction of significant market events.   



99 

Commission.288 And for this reason, Information Table 2 as adopted will not sacrifice 

transparency to market participants. 

e. Filing Amendments 

i. Proposal 

To facilitate the Commission’s process of aggregating the short sale-related information 

reported on Form SHO for publication, the Commission proposed that amendments to Form 

SHO must restate the Form SHO in its entirety. To inform the Commission that the filing is an 

amendment of a previously filed Form SHO, the Commission proposed that a Manager must 

check the box on the Form SHO Cover Page to indicate that the filing is an “Amendment and 

Restatement.” On the Cover Page of each Amendment and Restatement filed, the Commission 

proposed that a Manager must provide a written description of the revision being made, explain 

the reason for the revision, and indicate whether data from any additional Form SHO reporting 

period(s) (up to the past 12 calendar months) is/are affected by the amendment. If other reporting 

periods have been affected, the Commission proposed that a Manager shall complete and file a 

separate Amendment and Restatement for each previous calendar month so affected and provide 

a description of the revision being made and explain the reason for the revision. 

In cases where a revision is reported in an Amendment and Restatement that changes a 

data point reported in the Form SHO by twenty-five (25) percent or more, the Commission 

proposed that the Manager must notify the Commission staff via the Office of Interpretation and 

Guidance of the Division of Trading and Markets (“TM OIG”) at [email protected] 

within two (2) business days after filing the Amendment and Restatement. 

 
288  Proposing Release, at 14961. 



100 

ii. Comments and Final Rule 

The Commission received some comments on the issue of amendments and restatements. 

One comment stated that the notification requirement for an amendment of 25 percent or more is 

too large, and that lower percentage revisions can be considered significant.289 The commenter 

further recommended that the notification requirement for amendments be reduced to revisions 

of 15 percent or more and that the number of revisions allowed for individual Managers be 

limited.290 Another commenter stated that if a non-material error has been made, a Manager 

should not have to restate Form SHO in its entirety, and that a simple note or addendum should 

suffice.291 This commenter also encouraged the Commission to adopt a materiality threshold for 

other errors or omissions, i.e., if the error does not “materially impact the data the Commission 

intends to publish, then the Manager should not be required to restate Proposed Form SHO in its 

entirety,” stating that this would “eliminate the need for the Commission to collect even more 

commercially sensitive and valuable data and, in turn, relieve Managers of the time and costs 

that would be required to calculate, populate, and re-file an entirely new Proposed Form 

SHO.”292 

The Commission is adopting procedures for filing and amending Form SHO consistent 

with the Proposing Release but modified to no longer require Managers to separately notify the 

Commission that the reporting discrepancies presented in an Amendment and Restatement have 

occurred. A Manager that determines or is made aware that it has filed a Form SHO with errors 

that affect the accuracy of the information reported must file an amended Form SHO within ten 

 
289  Comment Letter from Anonymous (Mar. 21, 2022), available at https://www.sec.gov/comments/s7-08-

22/s70822-20120739-272894.pdf. 
290  See id. 
291  AIMA Letter, at 15. 
292  Id.101 

(10) calendar days of discovery of the error. The Commission continues to believe that filing an 

amended Form SHO within 10 calendar days of discovery of the error will provide Managers 

with a reasonable period of time to prepare the Form SHO amendment, while helping to ensure 

that accurate information is received by the Commission in a timely manner. 

The Commission is adopting the requirement, as proposed, that amendments to a 

previously filed Form SHO restate the Form SHO in its entirety, as described in Special 

Instruction 3 to Form SHO. Form SHO Special Instruction 3.a provides that on the Cover Page 

of each amended and restated Form SHO filing, a Manager must: check the box to indicate that 

the filing is an “Amendment and Restatement,” provide a written description of the revision 

being made, explain the reason for the revision, and indicate whether data from any additional 

calendar month reporting period(s) (up to the past 12 calendar months) is/are affected by the 

amendment. Consistent with the proposed procedures for filing an amended Form SHO, if other 

reporting periods have been affected, a Manager must complete and file a separate Amendment 

and Restatement for each previous calendar month so affected, and provide a description of the 

revision being made and explain the reason for the revision. As proposed and discussed further 

below, the Commission will provide aggregated data on a rolling twelve-month basis, with prior 

months’ data updated as necessary to reflect data from Amendments and Restatements. The 

Commission continues to believe that limiting the requirement to file an amended Form SHO to 

twelve months will reduce the burden and cost on Managers.293 In response to comments 

requesting a materiality threshold, requiring a Form SHO to be restated in its entirety should add 

little if any additional burden, as the Manager will have already compiled such data, and thus no 

additional data collection will be required other than to correct the data point that is being 

 
293  Proposing Release, at 14960. 



102 

amended. A materiality threshold could create additional complexity in determining how and 

when to file an amendment to Form SHO, and as such, the Commission is adopting the 

straightforward approach that any revision requires the Manager to restate Form SHO in its 

entirety when filing an amendment. 

The Commission is not adopting, however, the requirements that a Manager provide the 

Commission notice of the revision(s) reported in an Amendment and Restatement and an 

explanation of the reason(s) for the revision(s), as prescribed in Proposed Form SHO Special 

Instruction 3.b and 3.c;294 and each of those Special Instructions in Proposed Form SHO is 

deleted from Form SHO as adopted. This change will reduce compliance costs for Managers 

filing Amendments and Restatements by not requiring them to provide a separate notice 

regarding information that has been reported, and therefore is available, to the Commission via 

EDGAR, without sacrificing transparency. 

Consistent with the proposed procedures for publishing data reported on or derived from 

Form SHO reports—including any Amendments and Restatements, the Commission plans to 

update prior months’ aggregated Form SHO data on EDGAR to reflect information reported in 

Amendments and Restatements and will add an asterisk (i.e., *) or other mark for any updated 

data for which a Manager notified Commission staff that it filed an Amendment and Restatement 

that changes a data point reported in the Form SHO by 25 percent or more to highlight for 

market participants that the published aggregated data includes significantly revised data. The 

 
294  Special Instruction 3.b of Proposed Form SHO provided that if a data being reported in an Amendment and 

Restatement affects the data reported on the Form SHO reports filed in at least three of the immediately 
preceding Form SHO reporting periods, the Manager, within two (2) business days after filing the 
Amendment and Restatement, must provide the Commission staff, via TM OIG at 
[email protected], with notice of (1) this circumstance; and (2) an explanation of the reason for 
the revision. Special Instruction 3.c of Proposed Form SHO provided that if a revision reported in an 
Amendment and Restatement changes a data point reported in the Form SHO that is being amended by 
25% or more, the Manager must notify the Commission staff via TM OIG at [email protected] 
within two business days after filing the Amendment and Restatement. 



103 

Commission will publish the aggregated Form SHO data for the latest reporting period along 

with aggregated Proposed Form SHO data for the prior twelve months on a rolling basis. The 

published aggregated Form SHO data will include a disclaimer that the Commission does not 

ensure the accuracy of the data being published.295 Maintaining these requirements will help 

preserve the integrity of the reported short sale data and alert market participants to any potential 

issues with published data.296 

f. Confidential Treatment 

i. Proposal 

The instructions to Proposed Form SHO provided that all information that would reveal 

the identity of a Manager filing a Proposed Form SHO report with the Commission would be 

deemed subject to a confidential treatment request under 17 CFR 240.24b–2 (“Rule 24b-2”).297 

As discussed in the Proposing Release, the Commission proposed to publish only aggregated 

data derived from information provided in Proposed Form SHO reports. Proposed Form SHO, by 

its terms, ensured that information reported on the form that could reveal the identity of the 

reporting Manager would be deemed subject to a confidential treatment request. Pursuant to 

section 13(f) of the Exchange Act, the Commission may prevent or delay public disclosure of all 

other information reported on Proposed Form SHO in accordance with the Freedom of 

Information Act (“FOIA”), section 13(f)(4) and (5), Rule 24b–2(b) under the Exchange Act, and 

any other applicable law. 

 
295  See Proposing Release, at 14961. 
296  See id. 
297  Id. at 14957.  



104 

ii. Comments and Final Rule 

The Commission received a single comment regarding confidential treatment. Stating 

that there are a variety of valid reasons beyond the example provided in the Proposing Release 

that a Manager might seek confidential treatment of information reported on Proposed Form 

SHO, the commenter urged the Commission to adopt a more flexible process for seeking 

confidentiality that would enable Managers and the Commission staff to determine whether 

confidential treatment is appropriate.298 The Commission is adopting an approach consistent with 

the Proposing Release but modified to refer to Rule 83 (17 CFR 200.83), and to provide that all 

information will be deemed subject to a confidential treatment request under Rule 83. 

As proposed, the instructions to Form SHO expressly provided that all information that 

would reveal the identity of a Manager filing a Proposed Form SHO report with the Commission 

would be deemed subject to a confidential treatment request under Rule 24b–2, as described in 

the “Filing of Form SHO” section of the General Instructions to Form SHO. Because the 

Commission does not intend those filings to be public, Rule 83 includes appropriate and less 

burdensome procedures and, accordingly, is revising the General Instructions to provide that data 

will also be deemed subject to a confidential treatment request under Rule 83. 

As with the Proposed Rule, the Commission currently plans to publish only aggregated 

data derived from information provided in Proposed Form SHO reports. While it is possible a 

person may be able to determine the identity of a Manager (or reverse engineer a Manager’s 

trading strategies) in a situation where only one person was selling short, especially where the 

short seller has publicly disclosed that it has a short position in a specific security, the 

 
298  Schulte Roth & Zabel Letter, at 5 (urging the Commission to permit confidential treatment requests with 

respect to the data to be included in the aggregated data to be published by the Commission on a case-by-
case basis). 



105 

Commission continues to believe that excluding such data from the aggregated data published by 

the Commission could affect the integrity of the data. The Commission anticipates that the risk 

of exposing a single short seller will be mitigated by the delay in publication of the aggregated 

data. 

The Commission does not anticipate disclosing information in Form SHO, other than to 

the extent the data is included in the Commission’s aggregated disclosures, and the Commission 

will deem the information included in Form SHO as being subject to a confidential treatment 

request under Rule 83. Accordingly, the Commission is further revising the General Instructions 

to provide that all information included in the Form SHO is deemed subject to a confidential 

treatment request under Rule 83. Pursuant to section 13(f) of the Exchange Act, the Commission 

may prevent or delay public disclosure of all other information reported on Form SHO in 

accordance with FOIA, section 13(f)(4) through (5), Rule 83, and any other applicable law.299 

g. Preventing Duplicative Reporting 

i. Proposal 

The rules to prevent duplicative reporting of information regarding short positions and 

short activities of an equity security in Proposed Form SHO were partially modeled after those in 

Form 13F.300 More specifically, as described in the General Instructions to Proposed Form SHO, 

if two or more Managers, each of which would be required by Proposed Rule 13f–2 to file 

Proposed Form SHO for the reporting period, exercise investment discretion with respect to the 

same security, only one such Manager would be required to report information regarding that 

 
299  The Commission will follow Rule 83 procedures in addressing any requests for information reported on 

Form SHO deemed subject to a confidential treatment request. 
300  See “Rules to Prevent Duplicative Reporting” in the “General Instructions” of Form 13F, available at 

https://www.sec.gov/pdf/form13f.pdf. 



106 

security in its Proposed Form SHO report. The Commission proposed that if a Manager were 

required to file a Proposed Form SHO report with respect to a security and chose to rely on the 

duplicative reporting provisions of the General Instructions to Proposed Form SHO, then such 

Manager would be required to identify on the cover page of its Proposed Form SHO report any 

other Managers filing a Proposed Form SHO report with respect to such security on behalf of the 

Manager, in the manner described in Special Instruction 5 of Proposed Form SHO. Duplicative 

reporting could result in unnecessary costs to Managers and could make the aggregated data 

published by the Commission less accurate. 

ii. Comments and Final Rule 

The Commission did not receive any comments regarding duplicative reporting, and for 

the reasons stated in the Proposing Release, is adopting Special Instruction 5 to Form SHO as 

proposed. 

h. Verification of Short Sale Data 

i. Proposal 

The Commission stated in the Proposing Release that it does not intend to verify the 

accuracy of the data reported by Managers, but may consider doing so in the future after 

assessing whether such verification would be useful or necessary to enhance the integrity of the 

data.301 The Commission further stated that field validations act as an automated form 

completeness check when a Manager files Proposed Form SHO through EDGAR, and that the 

validations do not verify the accuracy of the information filed in the Proposed Form SHO 

filings.302 

 
301  Proposing Release, at 14955. 
302  Proposing Release, at 14960 n.72. 



107 

ii. Comments and Final Rule 

The Commission received many comments on the issue of Manager reporting and data 

verification. The comments supported implementing a Commission verification system for 

reported data, stating that reporting as proposed would lead to inconsistencies. Commenters 

expressed concerns regarding the self-reporting of data, citing the potential for errors or 

intentional manipulation of data.303 One commenter stated that Managers have incentives to 

report inaccurately, especially if there is concern over unveiling short selling strategies.304 Other 

commenters cited examples of instances of potential issues with data resulting from 

under-reporting, over-reporting, and misreporting.305 One commenter stated, without further 

detail, that orders were being mismarked as short exempt in order to circumvent the short sale 

circuit breaker of Rule 201 of Regulation SHO.306 Other commenters suggested that the 

Commission verify the accuracy of reported data via a random audit, such as auditing reporting 

at a rate applicable to five percent of reported data per quarter.307 Several commenters also 

 
303  See, e.g., Comment from Dale Eaglen (Feb. 25, 2022), available at https://www.sec.gov/comments/s7-08-

22/s70822-20117894-270815.htm; Comment from Michael Behrens (Feb. 25, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-270806.htm (“Michael Behrens Comment”); Comment 
from Stephen (Mar. 4, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20118671-
271537.pdf; Comment from Kevin B. (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20119357-272243.htm; see also Steve B. Comment (expressing concern that “[s]hort positions 
are currently ‘self regulated’”), Comment Letter from Mike Monisky (Mar. 4, 2022) available at 
https://www.sec.gov/comments/s7-08-22/s70822-20118657-271529.pdf (expressing concerns about 
misreporting of securities transactions to FINRA) (“Mike Monisky Letter”), Comment from Jonathan 
Dumaine (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20119364-
272250.htm (expressing general concern for potential for abuse whenever self-reporting on forms is 
involved) (“Jonathan Dumaine Comment”). 

304  Comment from J. T. (Oct. 2, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
309405.htm. 

305  See, e.g., Michael Behrens Comment; Mike Monisky Letter; Jonathan Dumaine Comment. 
306  See Michael Behrens Comment. 
307  See, e.g., Michael Behrens Comment; Comment from Jana Caperton (Mar. 12, 2022), available at 

https://www.sec.gov/comments/s7-08-22/s70822-20119201-272007.htm; Comment from Jim Lee (May 26, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-295810.htm (“Jim Lee Comment”); 
Comment from Gerry T. (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-

 



108 

suggested that short sale transactions be placed on a publicly available, immutable log, perhaps 

using blockchain technology, as a solution to the issue of verification.308 Finally, one commenter 

suggested that it should be the duty of exchanges and broker-dealers to report eligible short 

positions.309 

The Commission is adopting the reporting requirement as proposed. Consistent with the 

Commission’s statement in the Proposing Release, the Commission does not intend to verify the 

accuracy of the data received from the Managers but may consider doing so after assessing 

whether such verification would be useful or necessary to enhance the integrity of the data. The 

reporting Managers are responsible for the completeness, timeliness, and accuracy of 

information included in their mandatory filings to the Commission. The Commission has the 

ability to conduct examinations to help evaluate whether reporting Managers are in compliance 

and, where necessary, the Commission may bring enforcement actions where potential violations 

are believed to have occurred. 

i. New Reporting Regime—Comments and Final Rule 

Rather than create a new reporting regime by adopting the Proposals, several industry 

commenters urged the Commission to leverage the existing data frameworks of FINRA, CAT, 

and other data filed with the Commission (e.g., Form N-PORT).310 These commenters stated that 

 
317082.htm; Comment Letter from Wayne C. Smith (Dec. 3, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20152504-320238.pdf. 

308  See, e.g., Comment from Joseph M. Grato (Mar. 21, 2022), available at https://www.sec.gov/comments/s7-
08-22/s70822-20120589-272777.htm (“Joseph Grato Comment”); Jim Lee Comment. 

309  Jonathan Dumaine Comment. 
310  See, e.g., Ropes & Gray Letter, at 2; Two Sigma Letter, at 9-10; ICI Letter, at 5; see also K&L Gates 

Letter, at 2 (stating that the Proposal “is unnecessary and, on balance, overly burdensome given the 
sufficiency of existing data availability”); Virtu Letter, at 2 (stating that the Commission “has not proffered 
a regulatory need or justification for why the current reporting regime is inadequate”); SIFMA Letter, at 13 
(“respectfully disagree[ing] with the Commission’s assertions that the data available to it through the 
existing reporting regimes is not sufficient to allow the SEC to meet its obligations under Section 929X”); 

 



109 

leveraging existing reporting frameworks would alleviate compliance burdens and associated 

costs,311 and that existing reporting frameworks were already sufficient for short interest 

reporting.312 These commenters stated, and the Commission acknowledges,313 that there are 

multiple sources of existing public and non-public data related to short sales. FINRA and most 

exchanges collect and publish daily aggregate short sale volume data, and on a one month 

delayed basis publish aggregated information regarding short sale transactions. FINRA collects 

and aggregates short interest data from broker-dealer member firms, by security, twice each 

month. 

In assessing how the Commission might leverage existing data to satisfy the mandate of 

section 929X, it is important to note differences in reporting entities, timing, and the specific data 

being collected in existing public and non-public sources of short sale-related data. The letters 

submitted by industry commenters critical of the Proposed Rule 13f-2 reporting regime did not 

explain with any specificity how the Commission could leverage existing sources of short data so 

that the Commission would receive equal or comparable data to that which will be reported on 

Form SHO, nor did Commenters articulate how short data that is currently available to market 

 
Perkins Coie Letter, at 2; AIMA Letter, at 8-10 (stating that “[w]ith tailored refinements to FINRA 
reporting and the combination of the proposed CAT amendments…the Commission can still fulfill the 
statutory mandate and achieve the goals outlined in the Proposal but without creating additional reporting 
requirements, burdens and costs for many market participants”); SBAI Letter, at 2 (stating that instead of 
implementing a new reporting regime, the Commission should “[f]ocus should instead lie on making 
enhancements to FINRA’s existing collection and activity fit for purpose.”); T. Rowe Price Letter, at 3 
(stating that “[g]iven the extensive data already available to the SEC through FINRA’s existing short 
interest reporting, stock exchanges’ reporting of short sale activity, and the [CAT], the SEC should extract 
the short data it desires from these sources, rather than create new reporting obligations for managers 
whose activity is already captured by these existing frameworks.”).  

311  See, e.g., Ropes & Gray Letter, at 2; SIFMA Letter, at 19.  
312  See, e.g., SIFMA Letter, at 9-10; K&L Gates Letter, at 2; Virtu Letter, at 2. 
313  See Proposing Release, at 14953-4. 



110 

participants is comparable to data which would be reported on Form SHO and published by the 

Commission, rather the comments referenced leveraging of existing sources generally.314 

After considering the viewpoints of commenters, the Commission believes that a new 

reporting regime will increase transparency into short positions consistent with the goals of DFA 

929X, and that market participants and regulators alike will benefit from the required Form SHO 

disclosures, as they are distinct from existing short sale reporting regimes. Further, the short sale-

related information that will be collected under Rule 13f-2 and Form SHO will fill an 

information gap for market participants and regulators by providing insights into increases and 

decreases in reported short positions. As stated in the Proposing Release, the Commission 

believes that the short position data reported pursuant to Rule 13f-2 on Form SHO will 

supplement the short sale information that is currently publicly available from FINRA and the 

exchanges.315 In the Proposing Release, the Commission elaborated on the limitations of using 

existing data, such as the CAT or FINRA data, to reconstruct market events like the “meme” 

stock events of January 2021.316 The Commission stated that while some existing sources report 

daily short sale volume, there are several limitations with regard to using existing data sources to 

accurately represent the short exposure of Managers. The short sale data reported on Form SHO 

will include the daily “net” activity by reporting Managers on each settlement date during the 

calendar month in the security for which information is being reported, and such information is 

not currently available from FINRA or the exchanges. Moreover, because FINRA’s existing 

 
314  See, e.g., Virtu Letter, at 2 (stating that the Commissions should “explore ways to utilize the existing 

sources of data that already are available to the SEC rather than establishing yet another pool of short sale 
data.”). 

315  See Proposing Release, at 14981-82. See also infra Part VIII.B.4. 
316  See Proposing Release, at 14981-82. 



111 

short interest data reports aggregate short positions on a bimonthly basis,317 those reports do not 

reflect the timing with which short positions increase or decrease in the two-week period 

between the two reporting dates. The short sale data reported on Form SHO will help to fill that 

information gap. The Commission continues to believe that publication of this additional 

aggregated information can help to further inform market participants regarding overall short 

sale activity by Managers with substantial short positions and will provide regulators as well as 

market participants with important information regarding the timing of increases and decreases 

in the reported short positions.318 Finally, compared to other existing reporting regimes, the 

Reporting Thresholds in Rule 13f-2 are designed to require the reporting of only substantial, 

hence more informative, short positions.319 

Further, the Commission understands that while FINRA makes publicly available short 

sale-related data pertaining to both exchange-traded equity securities and OTC equity securities 

that is reported to it by its member firms,320 some of the exchanges require payment of a fee to 

access short sale-related data, which may make it difficult for some investors to access the data. 

The reporting regime under Rule 13f-2, by contrast, will provide aggregated short sale-related 

data in a readily accessible location (i.e., EDGAR or the Commission website), free and 

accessible to all investors and other market participants. The Commission continues to believe 

 
317  The short interest data reported reflects aggregate short positions as of the specified reporting dates. 
318  Proposing Release, at 14995. 
319  With regard to Threshold B, as discussed in the Proposing Release, a $500,000 or more threshold for non-

reporting company issuer securities is similar to the median dollar value of a position of 2.5 percent of the 
market capitalization of OTC stocks for which the Commission was able to obtain information on total 
shares outstanding. Hence, it is proportional to Threshold A in capturing substantial short positions. See 
supra Part II.A.3.a for additional discussion of Reporting Thresholds.  

320  In mid-to-late Dec. 2022, FINRA began publishing short sale information for exchange-traded as well as 
OTC equity securities. See Equity Short Interest Files, FINRA, available at https://www.finra.org/finra-
data/browse-catalog/equity-short-interest/files. 



112 

that providing free, accessible, and more complete information to market participants regarding 

short sale-related data will aid market participants in their understanding of the level of negative 

sentiment about a particular equity security and the actions of short sellers collectively and aid 

the Commission’s oversight of short selling.321 

Other industry commenters were concerned about reporting burdens for smaller 

Managers, and one such commenter predicted that the increased reporting costs resulting from 

the Proposals and other related Commission proposed rulemakings could lead to industry 

consolidation and decrease competition and investor choice.322 The Commission continues to 

believe that application of the Reporting Thresholds will not result in Rule 13f-2 applying to a 

significant number of small entities, especially considering the modification to Threshold A to be 

based on a monthly average gross short position rather than the proposed daily calculation.323  

In response to comments about reporting burdens, the Commission is not adopting the 

proposed hedging requirement, not adopting Proposed Rule 205 and “buy to cover” reporting to 

CAT, and is streamlining Information Table 2, thus reducing the costs of reporting from the 

proposed rule and form as compared to Rule 13f-2 and Form SHO as adopted.324 

B. Data Aggregation and Publication of Information by the Commission 

1. Proposal 

The Commission proposed to require Managers exercising investment discretion over 

short positions meeting specified thresholds to report information relating to end-of-the-month 

 
321  Proposing Release, at 14952. 
322  See, e.g., MFA Letter, at 2 (positing that combined costs of compliance with the Proposals and other related 

Commission proposed rulemakings would be “insurmountable for small and newly-formed advisers”); 
Anonymous Fund Manager Letter, at 7-8. See infra Parts VIII.B, VIII.C.6.f, VIII.D.2 for a discussion of 
interactions between the economic effects of the adopted rule and other Commission rulemakings. 

323  See infra Part IX.  
324  See generally infra Part VIII. 



113 

short positions on Information Table 1, and certain daily activity affecting such short positions 

on Information Table 2, of a new Form SHO. The Commission would aggregate the reported 

data by security, including daily short sale activity data, and then, on a delayed basis, make such 

aggregated data available to the public. As proposed, data would be aggregated across all 

reporting Managers for each reported equity security prior to publication. The Commission 

stated its belief that publicly disclosing the identity of individual reporting Managers may not be 

necessary to advance the policy goal of increasing public transparency into short selling activity, 

and that aggregating across reporting Managers would help safeguard against the concerns noted 

above related to retaliation against short sellers, including short squeezes, and the potential 

chilling effect that such public disclosure may have on short selling.325 

As proposed, the Commission would publish aggregated information derived from data 

reported on Proposed Form SHO. The Commission estimated that it will publish such aggregated 

information within one month after the end of the reporting calendar month—e.g., for data 

reported by Managers on Proposed Form SHO for the month of January, the Commission would 

expect to publish aggregated information derived from such data no later than the last day of 

February. This additional time prior to publication of data by the Commission following receipt 

of the monthly Proposed Form SHO reports would be used to aggregate the data received from 

the reporting Managers, and would also help to reduce the risk of imitative trading activity by 

market participants and help to protect report Managers’ proprietary trading strategies.326 In 

proposing an approach for reporting the short sale-related information gathered, the Commission 

sought to balance calls to level the playing field for retail investors by, for example, taking steps 

 
325  See Proposing Release, at 14955. 
326  See id., at 14955. 



114 

to enhance the transparency of short sale-related data, with, among other things, concerns 

raised—primarily by institutional investors—regarding potential “chilling effect[s]” on short 

selling and potential issuer and investor retaliation against an identified short seller.327 

The Commission also presented, and sought comment on, an alternative approach for its 

publishing of information reported on proposed Form SHO that would offer greater transparency 

and less anonymization of the published short sale-related data.328 Specifically, under this 

alternative, the Commission would publish the information reported to it at the individual 

Manager level rather than aggregate that information across all reporting Managers.329 Before 

publication, a reporting Manager’s identifying information would be removed to anonymize the 

information published. 

2. Comments 

Several commenters raised concerns about potential negative consequences of more 

detailed short position disclosures—particularly, negative effects on liquidity and price 

discovery, the facilitation of copycat trading, and the greater susceptibility of holders of short 

positions to short squeezes.330 These commenters also preferred an “aggregation” approach to 

the alternative of publishing data at the individual Manager level, due to the commercially 

 
327  See id., at 14955.  
328  See id., at 14967. 
329  Id. 
330  E.g., SBAI Letter, at 2 (concluding that “only aggregate, anonymized, and delayed public reporting of short 

positions” mitigates concerns about the potential risks of short position disclosures); Two Sigma Letter, at 
1-3 (expressing concerns that disclosure of individual short positions could lead to revelation of 
commercially sensitive systematic investment strategies and to front-running and other actions that 
undermine those strategies, and that such disclosures would provide incomplete information, and 
potentially misleading signals, to investors); see also T. Rowe Price Letter, at 2 (raising concerns about the 
effects the rulemaking proposal would have on liquidity and price discovery); Law and Finance Professors 
Letter, at 2-3 (stating potential chilling effect on short selling if identities of short sellers are publicly 
disclosed). 



115 

sensitive investment and trading information that Managers are required to report under Rule 

13f-2.331 

These commenters stated, however, that aggregation would not go far enough to lower 

the risk that the trading and investment behavior reported would be attributable to a single 

Manager or set of Managers.332 Commenters stated that the risk of Manager attribution would be 

heightened when only one Manager or a small set of Managers report a short position in the 

relevant security. Under these circumstances, market participants could use the information 

reported on Form SHO to extrapolate an individual Manager’s overall position, and potentially 

the Manager’s strategies or portfolio management methods across different clients.333 One 

commenter expressed concern that Manager attribution/identification could result in retaliation 

against Managers by market participants.334 

By contrast, other commenters favored the alternative approach of publishing reported 

information at the individual Manager level after removing all identifying information of the 

 
331  E.g., Schulte Roth & Zabel Letter, at 4 (alternative proposal to publish anonymized short sale-related data 

reported on an individual Manager would risk eviscerating potential confidentiality protections of reporting 
Managers and jeopardize the confidentiality of a Manager’s positions, strategies or proprietary business 
information); MFA Letter, at 3 (stating the need for “robust data security protocols” to protect information 
reported pursuant to Proposed Rule 13f-2). 

332  E.g., MFA Letter, at 3 (stating that publishing aggregated short position data can help mitigate the risk of 
identification of Manager(s), but is not “foolproof, . . . the effectiveness will depend on what data is 
published and with what frequency”); AIMA Letter, at 4 (stating that “even if the data is anonymized, 
market participants could still identify certain reporting Managers.”); see also SIFMA Letter, at 5 (positing 
that reporting anonymized short sale data at the Manager level without first aggregating such information is 
inconsistent with the directive in 929X of DFA and could expose investment strategies of institutional 
investment managers and their clients to their detriment); T. Rowe Price Letter, at 2 (positing that 
“attribution or anonymized manager-level data in public reports would be inappropriate and . . . create 
unacceptable risks to . . . [market] participants and discourage a useful source of liquidity provision.”). 

333  See, e.g., ICI Letter, at 7-8 (further stating that risk of Manager identification “may be especially high” for 
[regulated investment] funds that currently disclose their identities as well as their individual short 
positions on Form N-PORT filings with the Commission). 

334  MFA Letter, at 9 (citing potential for retaliation against short sellers if Manager’s confidential information 
reported on Proposed Form SHO is leaked). 



116 

reporting Manager that the Commission sought comment on in the Proposing Release.335 While 

expressing general support for rulemaking that increases transparency of short sale-related data, 

proponents of this alternative approach also criticized Proposed Rule 13f-2 for not going far 

enough.336 These commenters pointed to a need for complementary reporting of long and short 

positions, and downplayed industry concerns about potential risks of greater transparency of 

short sale data, including, the costs and challenges of operationalizing Rule 13f-2 and the threat 

of “copycat trading” if short positions are disclosed pursuant to Rule 13f-2.337 These commenters 

supported publishing short sale-related data that is “current.”338 Two such commenters suggested 

that the Commission publish, or at least share on a confidential basis with issuers of the 

securities for which information is reported on Form SHO, the names of the firms shorting 

 
335  See, e.g., Better Markets, at 13; Comment from An Investor (Apr. 4, 2022), available at 

https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm; Comment from Rick Sweeney 
(Oct. 10, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-309597.htm (Rick Sweeney 
Comment). But see Samuel Meadows Comment (“It would be strongly against retails best interests to have 
the reports published at the managers level. This would make finding and understanding the scope of 
shorting very difficult. I believe it is best to have the report aggregated with other reporting Managers 
reports. Ease of access to this information is critical in creating fairer markets.”); Comment Letter from 
Matthew D. Brusch, Interim President and CEO, National Investor Relations (Apr. 28, 3033), at 4, 
available at https://www.sec.gov/comments/s7-08-22/s70822-20127576-288806.pdf (“NIRI Letter”); K&L 
Gates Letter, at 5-6. See Proposing Release, at 14967. 

336  In addition to underscoring the need for transparency in the reporting of short sale-related data, commenters 
recommended ways to enhance the transparency of U.S. stock market transactions with the creation of a 
“transparent and publicly viewable platform” through which U.S. stock market securities would be traded, 
and the use of block chain technology to allow verification of transactions in real time. See, e.g., Joseph 
Grato Comment; Anonymously Submitted Comment (Mar. 7, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-271636.htm; Comment from Jason Payne (Mar. 7, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-20118798-271634.htm; Comment from Lex 
Stultz (Mar. 13, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20119199-
272005.htm; Comment from Devon Turcotte (Mar. 15, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20119399-272285.htm. 

337  See WTI Letter. These and other commenters expressed concern for the danger to “fair and free” U.S. 
markets posed by “the lack of transparency, the inability to adequately quantify short interest, and the 
ability of firms to skirt regulations through derivative positions such as options and security-based swaps.” 
These commenters also called for symmetry in the level of disclosures and transparency for short positions 
as is currently the case for long positions, to allow retail and institutional investors to conduct the same type 
of analysis regarding short positions as is currently possible for long positions using data from Form 13F. 

338  See, e.g., NIRI Letter, at 4 (stating that the alternative approach to publishing Form SHO reports would 
bring short position information to the marketplace faster, closer in real time to when the Form SHO is 
filed). 



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securities.339 Other commenters further recommended that the Commission glean more from and 

build upon the experience of the European Union (“EU”) with publishing short sale-related data 

in developing an approach for gathering and reporting such data.340 A few commenters also 

pointed out ways that, by monitoring the published information from Form SHO reports, the 

public and reporting companies could serve as watchdogs for the SEC, a “first line of defense 

against abusive practices.”341 

3. Final Rule 

The approach taken for publishing short sale-related data reported on Form SHO must 

balance competing interests of public transparency against the potential negative impacts on 

price discovery, and of short position and short activity disclosures on short selling as well as 

data security concerns. After considering the comments received, the Commission continues to 

believe that the indirect costs of publishing information reported at the individual Manager level 

would likely exceed those of publishing information aggregated across all reporting Managers.342 

More specifically, the Commission continues to believe that if the Commission were to release 

the information reported on Form SHO as filed, there would be a greater potential to reveal a 

 
339  See id. (recommending confidential disclosures of short position and identifying Manager information 

reported on Form SHO to an issuer whenever a “large short position” is reported for a security of that 
issuer, or alternatively, only to those issuers that request such confidential information); Letter from Tim 
Quast, President and Founder, Modern Networks IR LLC (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122528-278558.pdf (urging Commission to publish the 
names of reporting Managers) (“Modern IR Letter”). 

340  Better Markets Letter, at 13 (suggesting reliance on “EU’s experience with publishing much more 
comprehensive, specific, and current information” in developing an approach for gathering and reporting 
short sale data that enhances the usability of short position information to be published pursuant to 
Proposed Rule 13f-2 without “inviting some of the more damaging consequences” of doing so). More 
generally, a few commenters recommended harmonizing Proposed Rule 13f-2 requirements with 
potentially overlapping EU and UK regulations. See, e.g., WTI Letter, at 2-3; HSBC Letter, at 14-15. 

341  E.g., Anonymously Submitted Comments (Oct. 14, 2022, Oct. 24, 2022, Oct. 29, 2022, Oct. 31, 2022, Nov. 
1, 2022); Rick Sweeney Comment. 

342  See infra Part VIII.E.2.a. 



118 

reporting Manager’s trading strategies and to signal whether a Manager has a large and 

potentially vulnerable short position. It would also make it easier for a market participant to 

deduce the identity of a reporting Manager, even if that Manager’s identity remains 

anonymous.343 The easier it is for a market participant to deduce the identities of individual short 

sellers, the greater the risk of retaliation, copycat trading and other market activity that might 

have an undesired chilling effect on price discovery.344 For these reasons, and in response to 

commenters that raised concerns about potential negative consequences of more detailed short 

position disclosures, the Commission believes that the anticipated benefit of enhanced 

transparency by publishing reported information at the individual Manager level after removing 

all identifying information of the reporting Manager does not justify the costs were the 

Commission to take that approach in publishing information reported to it on Form SHO.  

Some commenters suggested the Commission adopt an approach similar to that of the EU 

structure whereby individual short sellers’ names are made public.345 The final rule, as modified, 

addresses the potential risk of retaliation towards individual short sellers, and the potential 

chilling of the incentive of gathering information and price discovery.346 For more discussion of 

the EU’s approach and the Commission’s decision to aggregate and publish anonymized data 

instead, see Part VIII.E.1.c. 

Further, aggregating across reporting Managers will address certain non-financial costs 

and burdens identified by commenters by helping to safeguard against the concerns raised about 

potential chilling effects on short selling and data security regarding the information reported by 

 
343  Id. 
344  Id. 
345  See WTI Letter at 2-3; Better Markets Letter at 13 and 16. See also Proposing Release, at 15005. 
346  See supra Part II.A.2.b. 



119 

Managers on Form SHO.347 Additionally, the Commission anticipates that many potential 

negative effects on the market will be mitigated by the delay in publication of the aggregated 

data. Accordingly, the Commission is adopting as proposed the approach of publishing, on a 

delayed basis, aggregated short sale-related data reported on Form SHO and treating each filed 

Form SHO confidentially. 

III. Proposed Amendment to Regulation SHO to Aid Short Sale Data Collection 

A. Proposed Rule 205 

Under Proposed Rule 205, a broker-dealer would be required to mark a purchase order as 

“buy to cover” if, at the time of order entry, the purchaser (i.e., either the broker-dealer or 

another person) has a gross short position in such security in the specific account for which the 

purchase is being made at such broker-dealer. A broker-dealer would be required to mark a 

purchase order as “buy to cover,” regardless of the size of such purchase order in relation to the 

size of the purchaser’s gross short position in such security in the account, and regardless of 

whether the gross short position is offset by a long position held in the purchaser’s account at the 

broker-dealer at the time of order entry. Unlike the netting requirements under Rule 200 of 

Regulation SHO, the “buy to cover” order marking determination under Proposed Rule 205 

would be made on a “gross” basis. Under the proposed rule, short positions held by the purchaser 

in any account(s) other than the purchasing account, as well as offsetting long positions held by 

the purchaser in the purchasing account or any other account(s), would not be considered by a 

broker-dealer when making a “buy to cover” order marking determination. The Proposed CAT 

Amendments, discussed below, would require CAT reporting firms to report “buy to cover” 

order marking information to CAT. 

 
347  Id. 



120 

B. Comments 

Some commenters expressed support to adopt Proposed Rule 205, and generally 

applauded the potential added transparency that “buy to cover” order marking could help 

provide.348 Other commenters stated that the proposed rule would assist the Commission in 

monitoring short selling activity and help to ensure compliance with the requirements of 

Regulation SHO.349 

The Commission also received numerous comments that opposed the adoption of 

Proposed Rule 205.350 In opposing Proposed Rule 205, these commenters voiced concerns 

regarding the extensive costs and burdens associated with anticipated systems changes necessary 

to implement and report “buy to cover” order marking as proposed.351 A number of these 

 
348  See, e.g., Comment from Mark Tate (Mar. 1, 2022), available at https://www.sec.gov/comments/s7-08-

22/s70822-20118151-271054.htm (“Mark Tate Comment”) (believed that increased information about 
marking trades as “buy to cover” is a “good thing for the market”); Comment from An Investor (Apr. 4, 
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm (expressing 
general support for Proposed Rule 205 and the “gross” short position approach); Comment from Jean 
Garcia-Gomez (Oct. 9, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-309610.htm 
(“Jean Garciz-Gomez Comment”) (expressing general support for “buy to cover” order marking); 
Comment from Aladdin Erzrumly (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-312058.htm (expressing general support for “buy to cover” order marking); Comment from 
Brian Herrmann (Jan. 20, 2023), available at https://www.sec.gov/comments/s7-08-22/s70822-323670.htm 
(expressing general support for Proposed Rule 205). 

349  See, e.g., Better Markets Letter (stating that “buy to cover” order marking should assist the Commission in 
monitoring short sale activity and actually ensure compliance with Regulation SHO requirements); ICI 
Letter (Apr. 26, 2022) (stating that, to the extent that the Commission requires information on close outs of 
open short positions, ICI supports the proposed approach of amending Rule 205 of Regulation SHO to 
require a broker-dealer to mark transactions as “buy to cover,” and supports the simplified single account 
gross short position approach as proposed); BIO Letter (stating that “buy to cover” reporting would assist 
in understanding “the full lifecycle of short positioning in the biotechnology industry”). 

350  See, e.g., SIFMA Letter; Virtu Letter; AIMA Letter; Comment Letter from Joanna Mallers, Secretary, FIA 
Principal Traders Group (Apr. 27, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
20127313-288259.pdf (“FIA PTG Letter”); Comment Letter from Howard Meyerson, Managing Director, 
Financial Information Forum (Apr. 25, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-20126605-287256.pdf (“FIF Letter”); STA Letter; XR Securities Letter; Comment Letter from 
Kirsten Wegner, Chief Executive Officer, Modern Markets Initiative (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122473-278481.pdf (“MMI Letter”).  

351  See, e.g., FIA PTG Letter, at 2 (requiring the reporting of orders on an order-by-order basis with either a 
“buy to cover” or bona fide market making attestation appears unnecessary from an added transparency 
perspective and therefore unnecessarily costly); MMI Letter, at 2; Virtu Letter, at 3 (“If this aspect of the121 

commenters stated that a “buy to cover” order mark does not currently exist and would require 

broker-dealers to effectively redesign and update their order creation systems and 

communications protocols to accommodate the recording and downstream reporting of a “buy to 

cover” order mark.352 One commenter stated that all industry participants (which it described as 

“all institutions and all broker-dealers”) will also need to create a new “buy to cover” order type 

and capture that in their respective books and records protocols and regulatory reporting 

systems.353 One commenter suggested that costs to implement changes necessary to comply with 

the requirements of Proposed Rule 205 could range from $5 million to $10 million, or more.354 

Some commenters that opposed the adoption of Proposed Rule 205 expressed general 

concerns that the proposed single account “gross” short position methodology (which, by design, 

does not require the broker-dealer to consider the purchaser’s other positions held in that 

account, in other accounts at the broker-dealer, or elsewhere) could routinely result in inaccurate 

“buy to cover” order marking reporting by broker-dealers.355 Some commenters also questioned 

whether the proposed “buy to cover” order marking reporting would provide regulatory benefits, 

 
Proposal were adopted, firms would have to reprogram their systems to recognize a ‘buy to cover’ order. 
We believe that this would be exceedingly burdensome, costly, and challenging for broker-dealers to make 
the required changes and provide the required information.”); STA Letter, at 4 (stating that “buy to cover” 
as proposed would “impose tremendous costs on industry firms by essentially forcing them to keep two 
separate position aggregations” and suggesting that there be an exemption for firms with “low” amounts of 
“buy to cover” order types); FIF Letter, at 10; XR Securities Letter, at 2; SIFMA Letter, at 3; FIA PTG 
Letter, at 2. 

352  See, e.g., SIFMA Letter, at 23-24; Virtu Letter, at 3; FIF Letter, at 3; STA Letter, at 6; XR Securities Letter, 
at 2; FIA PTG Letter, at 2-3. 

353  See FIF Letter, at 3. 
354  See SIFMA Letter, at 24. 
355  See, e.g., Virtu Letter, at 5; AIMA Letter, at 16; SIFMA Letter, at 22-23; FIF Letter, a 6. 



122 

including identifying signals of a “short squeeze,” as was suggested by the Commission in the 

proposing release.356 

Commenters highlighted the inherent differences and resulting complexities between 

Proposed Rule 205’s single account “gross” short position methodology for purchases, and 

Regulation SHO’s all accounts net position order marking requirements for sales. These 

commenters generally stated that if Proposed Rule 205 were adopted, broker-dealers would be 

required to create and maintain, at great expense, two separate order marking systems that utilize 

very different methodologies—one for determining whether a purchase order should be marked 

as “buy” or “buy to cover,” and another for determining whether a sell order should be marked as 

“long” or “short.”357 Some of these commenters suggested that if the Commission were intent on 

adopting a “buy to cover” order marking reporting requirement, it should instead consider 

utilizing the Commission’s “alternative” approach.358 These commenters stated that utilizing this 

“alternative” approach would help to ensure that Proposed Rule 205 would operate in a manner 

that is more consistent with current Regulation SHO order marking requirements, which would 

effectively help reduce complexity and interpretive confusion for broker-dealers. Another 

 
356  See e.g., Virtu Letter, at 6 (“The Proposal’s rationale for requiring broker-dealers to mark transactions a 

‘buy to cover’ – i.e. to facilitate the identification of potential ‘short squeeze’ activity – is equally 
unpersuasive. As described above, the data that will be reported under this provision will bear little 
resemblance to a firm’s actual short sale positions and therefore will not yield meaningful information that 
would allow the Commission to target short squeeze activity.”); SIFMA Letter, at 23 (believed there is only 
a remote chance that Proposed Rule 205 reporting might identify signals of a short squeeze that would not 
otherwise be identifiable to the Commission through other currently available information). 

357  See, e.g., STA Letter, at 4; FIF Letter, at 8; FIA PTG Letter, at 2-3; MMI Letter, at 2; SIFMA Letter, at 24; 
XR Securities Letter, at 2; Virtu Letter, at 5. 

358  See, e.g., MMI Letter at 2; FIF Letter, at 2. In the Proposing Release, the Commission explained that it had 
considered an “alternative approach” that would have required the broker-dealer, when making a “buy to 
cover” order marking determination, to net all positions (long positions and short positions) held by the 
purchaser in any account, whether at the broker-dealer itself, or elsewhere. See Proposing Release, at 
14968. 



123 

commenter suggested that the Commission consider an exception for firms with “low” amounts 

of “buy to cover” order types.359 

One commenter stated that additional guidance or clarification would be necessary if the 

Commission adopted Proposed Rule 205.360 Another commenter stated that Proposed Rule 205 

fails to recognize that broker-dealers would need to rely on representations from 

purchasers/account holders in order to accurately report “buy to cover” order marking 

information, similar to how broker-dealers currently rely on account holders when marking sale 

orders “long” or “short.”361 One commenter stated that this would be especially true where the 

broker-dealer does not custody the purchaser’s positions (i.e., where the customer’s positions are 

custodied “away,” such as at a prime broker or bank), and for a number of operational reasons, 

be equally true even when the broker-dealer custodies the purchaser’s positions.362 

The Commission is not adopting Proposed Rule 205 in light of questions raised by 

commenters regarding potential operational issues with the requirement as proposed that merit 

further consideration, and the Commission will continue to evaluate the issues raised to 

determine if any further action is appropriate. 

IV. Amendments to CAT 

In July 2012, the Commission adopted 17 CFR 242.613 (“Rule 613 of Regulation 

NMS”), which required national securities exchanges and national securities associations (the 

“Participants”)363 to jointly develop and submit to the Commission a national market system plan 

 
359  STA Letter, at 5. 
360  XR Securities Letter, at 2. 
361  SIFMA Letter, at 23. 
362  SIFMA Letter, at 23. 
363  The Participants include: BOX Exchange LLC; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; 

Cboe C2 Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe Exchange, Inc.; 
 



124 

to create, implement, and maintain a CAT that captures customer and order event information for 

orders in NMS securities.364 The goal of Rule 613 was to create a modernized audit trail system 

that provides regulators with more timely access to a sufficiently comprehensive set of trading 

data, thus enabling regulators to more efficiently and effectively reconstruct market events, 

oversee market behavior, and investigate misconduct. On November 15, 2016, the Commission 

approved the national market system plan required by Rule 613, the National Market System 

Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan”).365 

Section 6.4(d) of the CAT NMS Plan provides that each Participant, through its 

Compliance Rule,366 must require Industry Members367 to record and electronically report 

certain information to the CAT Central Repository. Compliance rules have been adopted by each 

Participant. As such, any broker-dealer that is a member of a national securities exchange or a 

member of a national securities association must report each order and reportable event, which 

includes the original receipt or origination, modification, cancellation, routing, execution (in 

 
Financial Industry Regulatory Authority, Inc.; Investors’ Exchange LLC; Long-Term Stock Exchange, Inc.; 
MEMX LLC; Miami International Securities Exchange LLC; MIAX Emerald, LLC; MIAX PEARL, LLC; 
Nasdaq BX, Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; Nasdaq PHLX LLC; The 
Nasdaq Stock Market LLC; New York Stock Exchange LLC; NYSE American LLC; NYSE Arca, Inc.; 
NYSE Chicago, Inc.; and NYSE National, Inc. 

364  See Consolidated Audit Trail, Exchange Act Release No. 67457 (July 18, 2012), 77 FR 45722 (Aug. 1, 
2012).  

365  Exchange Act Release No. 79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (“CAT NMS Plan 
Approval Order”). The CAT NMS Plan is Exhibit A to the CAT NMS Plan Approval Order. See CAT 
NMS Plan Approval Order, 81 FR 84943 at 84696. The CAT NMS Plan functions as the limited liability 
company agreement of the jointly owned limited liability company formed under Delaware state law 
through which the Participants conduct the activities of the CAT (the “Company”). Each Participant is a 
member of the Company and jointly owns the Company on an equal basis. The Participants submitted to 
the Commission a proposed amendment to the CAT NMS Plan on Aug. 29, 2019, which they designated as 
effective on filing. Under the amendment, the limited liability company agreement of a new limited liability 
company named Consolidated Audit Trail, LLC serves as the CAT NMS Plan, replacing in its entirety the 
CAT NMS Plan. See Exchange Act Release No. 87149 (Sept. 27, 2019), 84 FR 52905 (Oct. 3, 2019). 

366  “Compliance Rule” means, with respect to a Participant, the rule(s) promulgated by such Participant as 
contemplated by section 3.11 of the CAT NMS Plan. See CAT NMS Plan, section 1.1. 

367  An “Industry Member” means a member of a national securities exchange or a member of a national 
securities association. See CAT NMS Plan, section 1.1. 



125 

whole or in part) and allocation of an order, and receipt of a routed order to the CAT.368 This 

requirement is designed to provide regulators, including the Commission, access to 

comprehensive information regarding the lifecycle of orders, from origination to execution, as 

well as the post-execution allocation of shares. 

Broker-dealers, through the Compliance Rule adopted pursuant to the CAT NMS Plan, 

are required to report certain short sale order data, including for sell orders, whether an order is 

long, short, or short exempt,369 but not other short sale order data, including when a buy order is 

designed to close out an existing short position, or whether a market participant is relying on the 

bona fide market making exception to the Regulation SHO locate requirement in Rule 203. To 

supplement the short sale-related data that would be reported by Managers to the Commission 

pursuant to Proposed Rule 13f-2 and on Proposed Form SHO, the Commission proposed to 

amend the CAT NMS Plan to require the Participants to require CAT reporting firms to report 

certain additional short sale-related data to the CAT, as discussed below. 

A. Proposal to Require “Buy to Cover” Order Marking 

The Commission proposed that Industry Members be required to report to the CAT “buy 

to cover” information, which was proposed to be collected pursuant to Regulation SHO through 

Proposed Rule 205 (discussed above). Specifically, the Commission proposed to amend section 

6.4(d)(ii) of the CAT NMS Plan by adding new paragraph 6.4(d)(ii)(D) which would require the 

Participants to update their Compliance Rules to require Industry Members to report for the 

original receipt or origination of an order to buy an equity security, whether such buy order is for 

 
368  “Central Repository” means a repository responsible for the receipt, consolidation, and retention of all 

information reported to the CAT pursuant to Rule 613 of Regulation NMS and the CAT NMS Plan. See 
CAT NMS Plan, section 1.1. 

369  Section 1.1 of CAT NMS Plan defines “Material Terms of the Order,” which includes, for sell orders, 
“whether the order is long, short, [or] short exempt[.]” 



126 

an equity security that is a “buy to cover” order as defined by Proposed Rule 205(a).370 This 

provision would have required Industry Members to identify “buy to cover” equity orders 

received or originated by Industry Members and Customers371 as “buy to cover” orders in order 

receipt and order origination reports submitted to the CAT Central Repository. 

The Commission, as discussed in Part III above, is not adopting Proposed Rule 205 

which would have established a new “buy to cover” order marking requirement. Accordingly, 

the Commission is likewise not adopting an amendment to add new paragraph 6.4(d)(ii)(D) to 

the CAT NMS Plan which would have required the Participants to update their Compliance 

Rules to require Industry Members to report “buy to cover” order marking information to CAT. 

B. Proposal to Require Reporting of Reliance on Bona Fide Market Making 

Exception 

The Commission also proposed to require CAT reporting firms that are reporting short 

sales to indicate whether such reporting firm is asserting use of the bona fide market making 

exception under Regulation SHO for the locate requirement in Rule 203(b)(2)(iii) (i.e., the 

BFMM locate exception) for the reported short sales. Specifically, the Commission proposed to 

amend section 6.4(d)(ii) of the CAT NMS Plan to add a new paragraph (E) which would require 

Participants to update their Compliance Rules to require Industry Members to report to the CAT, 

for the original receipt or origination of an order to sell an equity security, whether the order is a 

short sale effected by a market maker in connection with bona fide market making activities in 

 
370  See Proposed section 6.4(d)(ii)(D) of the CAT NMS Plan; Proposed Rule 205(a) of Regulation SHO, 17 

CFR 242.205(a)). 
371  Section 1.1 of the CAT NMS Plan defines the term “Customer” as (a) the account holder(s) of the account 

at a registered broker-dealer originating the order; and (b) any person from whom the broker-dealer is 
authorized to accept trading instructions for such account, if different from the account holder(s). See also 
17 CFR 242.613(j)(3). 



127 

the security for which the BFMM locate exception is claimed.372 The Commission believed that 

this information would provide valuable data to both the Commission and other regulators 

regarding the use of this narrow exception. The Commission believed that requiring Industry 

Members to identify short sales for which they are claiming the bona fide market making 

exception would provide the Commission and other regulators an additional tool to determine 

whether such activity qualifies for the exception, or instead could be indicative of, for example, 

proprietary trading instead of bona fide market making activity. 

Rule 203(b)(1) of Regulation SHO generally prohibits a broker-dealer from accepting a 

short sale order in an equity security from another person, or effecting a short sale in an equity 

security for its own account, unless the broker-dealer (i) has borrowed the security, (ii) has 

entered into a bona fide arrangement to borrow the security, or (iii) has reasonable grounds to 

believe that the security can be borrowed so that it can be delivered on the date delivery is 

due.373 This is generally referred to as the locate requirement. Rule 203(b)(2) of Regulation SHO 

provides an exception to the locate requirement for short sales effected by a market maker in 

connection with bona fide market making activities.374 To qualify for the BFMM locate 

exception,375 a market maker must be engaged in bona fide market making activities at the time 

they effect a short sale. The Commission adopted this narrow exception to Regulation SHO’s 

 
372  See Proposed section 6.4(d)(ii)(E) of the CAT NMS Plan. 
373  17 CFR 242.203(b)(1). 
374  17 CFR 242.203(b)(2). The Commission has provided guidance on indicia of bona fide market making 

activities eligible for the locate exception. See Regulation SHO Adopting Release (setting forth examples 
of activities that would not be considered to be bona fide market making activities); see also Exchange Act 
Release No. 58775 (Oct. 14, 2008), 73 FR 61698 at 61690 (Oct. 17, 2008) (“2008 Regulation SHO 
Amendments”) (adopting amendments to Regulation SHO and providing additional guidance on what 
constitutes bona fide market making). Only market makers that are engaged in bona fide market making 
activity in the security at the time they effect a short sale are eligible for the locate exception. See 2008 
Regulation SHO Amendments, at 61699. 

375  Rule 204 of Regulation SHO also provides an extended close-out period for a fail to deliver resulting from 
bona fide market making activities. 17 CFR 242.204. 



128 

locate requirement for market makers that may need to facilitate customer orders in a fast 

moving market without possible delays associated with complying with such a requirement.376 

Comments and Final Rule 

Some commenters supported requiring CAT reporting firms to report the use of the 

BFMM locate exception to CAT.377 These commenters were in favor of the potential added 

transparency that BFMM locate exception reporting could provide.378 Other commenters stated 

that such reporting would help the Commission to monitor short selling activity and ensure 

compliance with Regulation SHO’s requirements, and stated that it is important that the 

Commission have the surveillance tools and data such as BFMM locate exception reporting to 

improve the Commission’s oversight of financial markets and compliance with existing 

regulations and otherwise “police” the markets.379 

 
376  See Regulation SHO Adopting Release, at 48015 n.67; see also Emergency Order Pursuant to Section 

12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action to Respond to Market 
Developments, Exchange Act Release No. 58166 (July 15, 2008); Amendment to Emergency Order 
Pursuant to Section 12(k)(2) of the Securities Exchange Act of 1934 Taking Temporary Action to Respond 
to Market Developments, Exchange Act Release No. 58190 (July 18, 2008) (excepting from the Emergency 
Order bona fide market makers); see also Proposing Release, at 14970-71 (Mar. 16, 2022) (“To qualify for 
the bona fide market making exception, however, a firm must be engaged in bona fide market making at 
the time of the short sale in question. The Commission adopted this narrow exception to Regulation SHO’s 
locate requirement for market makers that may need to facilitate customer orders in a fast moving market 
without possible delays associated with complying with such a requirement.”). 

377  Virtually all these comments were submitted by individual investors, with the vast majority being 
submitted through an identical (or nearly identical) base letter from a grassroots advocacy campaign “by, 
and for, retail investors.” These commenters stated that they were part of a self-identified group called “We 
the Investors” (“WTI”). WTI supported the adoption of BFMM locate exception reporting. WTI also 
suggested that the BFMM locate exception be eliminated altogether. See WTI Letter. 

378  See e.g., Michael Behrens Comment; Mark Tate Comment; Comment from Taj Reilly (Mar. 14, 2022), 
available at https://www.sec.gov/comments/s7-08-22/s70822-20119322-272211.htm; Comment from 
Sebastian Stankiewicz Comment (Mar. 15, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-272501.htm; Comment from An Investor (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm; Jean-Garcia Gomez Comment; 
Comment from Andrew Gatley (Oct. 31, 2022), available at https://www.sec.gov/comments/s7-08-
22/s70822-317527.htm. See also WTI Letter. 

379  See e.g., Better Markets Letter; WTI Letter. 



129 

Other commenters opposed the adoption of BFMM locate exception reporting to CAT.380 

These commenters generally believed that the costs and burdens associated with the proposal, 

including costs to update systems to accommodate BFMM locate exception reporting to CAT, 

would materially outweigh the benefit of the information reported to CAT.381 These commenters, 

however, did not provide cost estimates. The Commission continues to believe, as stated in the 

Proposing Release, that Industry Members will incur an initial, one-time external expense for 

software and hardware to facilitate reporting of the new data elements to CAT, and separately 

estimated such costs for Industry Members that report directly to the CAT, and those that use 

third-party reporting agents for CAT reporting. The Commission continues to believe that the 

ongoing burden associated with reporting to the CAT is already accounted for in the existing 

information collections burdens associated with Rule 613 and the CAT NMS Plan Approval 

Order submitted under Office of Management and Budget (OMB) number 3235-0671.382 

One commenter stated that adopting the proposed BFMM locate exception would be 

operationally difficult and costly to implement.383 This commenter stated that, under the 

proposal, the BFMM locate exception information would be required to be reported at the time 

the short sale order is effected, requiring that order entry systems, and other downstream 

systems, be updated to allow the BFMM locate exception information to be reported to CAT.384 

To implement the rule, the Commission expects that Industry Members will incur an initial, one-

time external expense for software and hardware to facilitate reporting of the new data elements 

 
380  See e.g., SIFMA Letter; Virtu Letter; STA Letter; XR Securities Letter; FIA PTG Letter. 
381  See e.g., SIFMA Letter, at 24-25; FIA PTG Letter, at 3; Virtu Letter, at 6. 
382  See infra Part VII.C. 
383  See, e.g., SIFMA Letter, at 24-25; Virtu Letter, at 5. 
384  SIFMA Letter, at 24-25. 



130 

to CAT but believes that the benefits of such data, as discussed further below, will justify such 

costs. Brokers or dealers generally include fields in order-entry systems, and related downstream 

systems, to indicate whether the broker or dealer obtained a locate as well as the source of such 

locate under Rule 203(b). As stated by the commenter, brokers or dealers may wish to update 

their order entry systems and related downstream systems as a convenient method to track their 

use of the BFMM locate exception to ensure accurate reporting of the use of the BFMM locate 

exception to CAT. As a result, brokers or dealers may wish to make one-time updates to such 

systems to add a field or notation to indicate whether the broker or dealer is claiming the BFMM 

locate exception for the short sale transaction. However, brokers or dealers may also use other 

means to ensure compliance with the final rule. 

This commenter agreed with the Commission that a broker-dealer is required to 

determine whether the firm is eligible for the BFMM locate exception at the time a short sale is 

effected but expressed concerns that market makers that quote and trade on multiple trading 

venues, for example, might encounter certain systematic or operational difficulties in making, 

and reporting, such determination using existing systems design. Specifically, this commenter 

stated that “it may be systematically and/or operationally difficult for the broker to define when 

it is globally acting in a bona fide market maker capacity given the granular details of a market 

maker’s many activities, and the existing systems design.”385 However, the final rule does not 

alter the requirements for the use of the BFMM locate exception. The final rule requires that 

brokers or dealers report their use of the BFMM locate exception as provided under Regulation 

SHO. 

 
385  SIFMA Letter, at 25 n.64. 



131 

Rule 203(b)(2)(iii) provides an exception to the locate requirement for “[s]hort sales 

effected by a market maker in connection with bona-fide market making activities in the security 

for which this exception is claimed.”386 Thus, for purposes of qualifying for the BFMM locate 

exception, “a market maker must also be a market maker in the security being sold, and must be 

engaged in bona-fide market making in that security at the time of the short sale.”387 

Some commenters stated that the Commission and other regulators can currently request 

a particular market maker to provide information regarding its use of the BFMM locate 

exception, and questioned why the Commission would need to require such costly reporting to 

CAT.388 Another commenter stated that there is no data or evidence in the Proposing Release to 

suggest that the Commission’s access to such data has been limited in any way under the current 

request process.389 However, the Commission has stated that Regulation SHO does not require 

market makers to specifically record whether they are relying on the BFMM locate exception,390 

although brokers or dealers should be able to identify what trading activity qualifies for the 

 
386  17 CFR 242.203(b)(2)(iii). Further, the locate is required prior to each short sale order unless the broker or 

dealer has determined that an exception applies. See Rule 203(b)(1). A broker or dealer may not accept a 
short sale order in an equity security from another person, or effect a short sale in an equity security for its 
own account, unless the broker or dealer has: (i) borrowed the security, or entered into a bona-fide 
arrangement to borrow the security; or (ii) reasonable grounds to believe that the security can be borrowed 
so that it can be delivered on the date delivery is due; and (iii) documented compliance with Rule 
203(b)(1). 

387  See 2008 Regulation SHO Amendments, at 61699; Shortening the Securities Transaction Settlement Cycle, 
Exchange Act Release No. 96930 (Feb. 15, 2023), 88 FR 13872, 13911-12 at n.411 (May 5, 2023) 
(“Settlement Cycle Adopting Release”). 

388  See e.g., SIFMA Letter, at 24-25 (“Given that the information that would result from this proposed 
reporting requirement is already available to the SEC and other regulators on demand, SIFMA believes that 
the cost and burden of implementing the requirement would materially outweigh the benefit of such 
information.”); Virtu Letter, at 6 (“The Proposal offers no data or evidence that its access to data about the 
use of the exception has been limited in any way under the current process it uses to collect such 
information from broker-dealers, nor that there are widespread violations or other abuses of the exception 
that warrant imposing substantial costs and burdens on market makers also to report this information to 
CAT.”). 

389  Virtu Letter, at 6. 
390  Proposing Release, at 14971. 



132 

BFMM locate exception so a firm can demonstrate its eligibility for the asserted exception.391 To 

the extent a broker or dealer has documented such eligibility, the Commission and its staff have 

access to such documents.392 The final rule will capture information regarding the use of the 

BFMM locate exception to Regulation SHO393 which will provide the Commission and SROs 

with comprehensive information about market practices with respect to the use of the BFMM 

locate exception.394 Because brokers or dealers asserting the BFMM locate exception are already 

required to demonstrate eligibility for the exception, the costs of reporting should be confined 

primarily to the one-time implementation costs related to updating CAT and any methods elected 

by the broker or dealer, such as updating order entry systems and related systems, to ensure 

compliance. 

Another commenter stated that regulators should utilize other existing short sale data 

available through CAT that could identify activity that is “disproportionate to the usual market 

making patterns of practices of the broker-dealer” in order to determine if the BFMM locate 

exception is being misused.395 The commenter, however, did not provide detail describing how 

disproportionate the activity would be before the Commission could determine whether the 

exception is being misused. Data showing the existence of short sales would not be sufficient to 

assess whether the exception is being misused. Another commenter suggested that CAT already 

has ample existing data fields, including a market maker account holder designation field, and 

 
391  See Regulation SHO Adopting Release, 48011 n.27 (“As with any rule, broker-dealers relying on [an] 

exception should be prepared to monitor for compliance with its conditions, and maintain records 
documenting such compliance.”). 

392  See, e.g., section 17(b) of the Exchange Act.  
393  Proposing Release, at 14971. 
394  FIA PTG Letter, at 3 (“Requiring the reporting of orders on an order-by-order basis with either a ‘buy to 

cover’ or bona fide market making attestation appears unnecessary from an added transparency perspective 
and therefore unnecessarily costly.”). 

395  STA Letter, at 3.  



133 

questioned the need for a BFMM locate exception data field.396 Further, a broker or dealer’s 

status as a market maker under an exchange’s rules, or by self-assertion, is not sufficient by itself 

to establish eligibility to use the BFMM locate exception; the broker or dealer that is a market 

maker must be effecting short sales “in connection with bona-fide market making activities in the 

security for which [the] exception is being claimed.”397 Further, as discussed above, the broker 

or dealer, whether it calls itself a market maker, or has an account it describes as a market maker 

account, must still determine eligibility for the BFMM locate exception for each transaction 

rather than globally.398 Therefore, collecting the data regarding the use of the BFMM locate 

exception will be useful for the Commission, including to assess the use of the exception 

throughout the industry. 

Another commenter stated that there was no data or evidence in the Proposing Release to 

suggest that there are widespread violations or abuses of the BFMM locate exception that 

warrant the costs imposed by the CAT reporting requirements for the BFMM locate exception.399 

As the Commission stated in the Proposing Release, there are a number of settled enforcement 

actions against brokers or dealers in connection with their use of the exception.400 In addition, 

one commenter stated that “it may be systematically and/or operationally difficult for the broker 

to define when it is globally acting in a bona fide market maker capacity given the granular 

details of a market maker’s many activities, and the existing systems design.”401 However, this 

 
396  XR Securities Letter, at 2. 
397  See, e.g., Rule 203(b)(2)(iii), which requires that the broker or dealer (1) be a market maker; (2) that is 

effecting short sales in connection with bona-fide market making activities, and (3) in the security for which 
the exception is claimed. Section 3(a)(38) defines the term “market maker.” 

398  See supra n.374. 
399  Virtu Letter, at 6. 
400  See Proposing Release, at 14971. 
401  See SIFMA Letter, at 25 n.64. 



134 

comment concerns compliance with Regulation SHO rather than reporting of the use of the 

BFMM locate exception in CAT; the new requirements do not affect compliance with 

Regulation SHO.  

Another commenter did not believe that the BFMM locate exception information 

reported to CAT would assist the Commission in identifying violations or misuse of the BFMM 

locate exception “because the data can be manipulated by bad actors and is susceptible to human 

errors of inappropriately marking short sales with the BFMM indicator when they are not 

eligible.”402 The fact that bad actors may act contrary to the requirement is not an appropriate 

reason not to adopt a requirement. Similarly, human error is always possible. In addition, the 

human error the commenter describes, if widespread, could be an indication of noncompliant use 

of the BFMM locate exception. 

Another commenter stated that if BFMM locate exception reporting were adopted, “most 

market making firms will simply tag that new [BFMM locate exception] field with the 

affirmative.”403 Again, the fact that a commenter speculated that some brokers or dealers may 

violate the requirement by providing incorrect data is not a reason to not adopt a requirement. 

Understanding whether market makers always claim the BFMM locate exception (as this 

commenter suggests), sometimes claim the exception, or never claim the exception, will provide 

important information and context regarding how market makers use the exception.404 

 
402  STA Letter, at 3. 
403  XR Securities Letter, at 3. 
404  One commenter disagreed with existing Regulation SHO order marking requirements, with a specific focus 

on a statement made by Commission staff that a broker or dealer should generally not continue to mark 
orders “long” if it has submitted orders beyond the number of shares for which it is long. See Virtu Letter, 
at 3-5; see also FAQ 2.5, Responses to Frequently Asked Questions Concerning Regulation SHO, Division 
of Market Reg., available at https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm. This 
commenter generally stated that this results in virtually all sell orders being marked as short sales and thus, 
information that is reported to CAT under the proposal would not be representative of the market maker’s 

 



135 

Some commenters asked that the Commission provide additional clarity regarding what 

constitutes bona fide market making activities eligible for the BFMM locate exception, and 

requested that the Commission confirm that certain market making activity (e.g., through 

wholesale market making and other activities in connection with facilitating customer orders in 

the OTC market) was bona fide market making activity for purposes of claiming the BFMM 

locate exception.405 One of these commenters expressed concerns regarding recent Commission 

statements related to the BFMM locate exception.406 The statements that the commenter 

references in particular releases are restatements of multiple prior Commission statements 

regarding the BFMM locate exception.407 One commenter expressed concerns that the proposal 

to require BFMM locate exception reporting to CAT was an effort by the Commission to further 

limit the availability of the BFMM locate exception in a manner that would be inconsistent with 

 
“actual” short position and would not be useful short sale-related information. Brokers or dealers must 
mark sell orders “long,” “short,” or “short exempt,” and must obtain a locate for all sales marked short 
unless the broker or dealer can determine that the short sale is “effected by a market maker in connection 
with bona-fide market making activities in the security for which this exception [BFMM locate exception] 
is claimed.” See 17 CFR 242.203(b)(2)(iii). 

405  See SIFMA Letter, at 25 (“Moreover, and especially to the extent that there is a requirement to identify 
reliance on the exception through CAT, the SEC should re-confirm that, while bona fide market making is 
based on certain ‘facts and circumstances’ as set forth in prior interpretive guidance, there are different 
ways in which broker-dealers engage in bona fide market making, including not only through making 
markets on exchanges, but equally through wholesale market making and other activities in connection 
with facilitating customer orders in the OTC market.”); see also STA Letter, at 3 (STA recommends that 
the Commission clarify its views on the scope of the BFMM exception, citing as an example an “OTC 
market makers that provide extensive liquidity for retail trades but do not affect the trades pursuant to 
published quotations.”). 

406  See SIFMA Letter, at 25 n.67 (“SIFMA further notes the SEC’s recent statements in its recent proposing 
release on registration of significant market participants that ‘bona fide market-making exceptions under 
Regulation SHO are only available to registered broker-dealers that publish continuous quotations for a 
specific security in a manner that puts the broker-dealer at economic risk’, that ‘[b]roker-dealers that do not 
publish continuous quotations, or publish quotations that do not subject the broker-dealer to such risk (e.g., 
quotations that are not publicly accessible, are not near or at the market, or are skewed directionally 
towards one side of the market), would not be eligible for the bona fide market maker exceptions’ and that 
‘broker-dealers that publish quotations but fill orders at different prices than those quoted would not be 
engaged in bona fide market making for purposes of Regulation SHO.”). SIFMA cited to Further Definition 
of “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer, 
Exchange Act Release No. 94524 (Mar. 28, 2022), 87 FR 23054, 23068-69 at n.157 (Apr. 18, 2022). 

407  See 2008 Regulation SHO Amendments, at 61698-99; Regulation SHO Adopting Release, at 48015. 



136 

Commission’s original Regulation SHO guidance.408 This commenter expressed particular 

concerns with the Commission’s statement in the Proposing Release that the proposed BFMM 

locate exception reporting would be an additional tool to determine whether such activity 

qualifies for the BFMM locate exception or conversely “could be indicative of, for example, 

proprietary trading instead of bona fide market making.” The Commission has consistently stated 

that the BFMM was intended to be a “narrow” exception,409 and the collection of information 

about its usage will be helpful for the Commission to determine whether it is being used 

appropriately as such. The reported information will indeed be used as an “additional tool to 

determine whether such activity qualifies” for the BFMM locate exception as part of the 

Commission’s regulation of short sales, for example, by determining whether brokers or dealers 

are using the exception for proprietary trading, which is not appropriate. Other commenters 

called for the elimination of the BFMM locate exception itself.410 Such requests are outside the 

scope of this rulemaking. However, the BFMM locate exception is useful for brokers and dealers 

that are, for example, trying to meet demand in fast-moving markets where they might otherwise 

be forced to back away from published, marketable quotes being hit by prospective purchasers 

solely because of the locate requirement. 

 
408  SIFMA Letter, at 25. 
409  See 2008 Regulation SHO Amendments, at 61698-99; Regulation SHO Adopting Release, at 48015. 
410  See Better Markets Letter, at 14 (“The SEC has correctly concluded that naked short sales are abusive. The 

SEC established this loophole, which permits the largest proprietary trading firms to engage in naked short 
selling, on the theory that it facilitates trading in hard-to-borrow securities. However, the SEC’s settlement 
regulations with respect to mandatory buy-ins already provide special accommodations to market-makers 
that cannot close out their short positions within the standard failure-to-deliver close-out timeframe. This 
accommodation already in place calls into serious question whether the large loophole in the locate 
requirement serves any legitimate purpose. At the very least, the SEC must closely monitor the information 
it receives regarding reliance on this exception to determine whether elimination of this exception is 
warranted.”); see also WTI Letter. 



137 

One commenter stated that the costs imposed on market makers to implement and 

maintain the proposed regulatory requirements might result in wider spreads, reduced liquidity, 

and might represent a barrier to entry for new market participants.411 To the extent the 

commenter is concerned that the costs of implementing reporting may be passed on in the form 

of wider spreads or reduced liquidity, on balance the benefits of transparency justify such costs. 

Importantly, it is unclear how reporting the data would create negative results on spreads or 

market liquidity because the reported exception data will only be provided to regulators and not 

made public. If the commenter is concerned that once the data is reported, the Commission may 

become more aware of potential misuse of the BFMM locate exception as described by 

commenters, the consequences identified by the commenter would not flow from the 

requirement to report the use of the exception, but may instead result from the misuse of it. 

Collecting the data will help the Commission with its oversight of the use of the exception, 

including with regard to potentially abusive “naked” short selling.412 The BFMM locate 

exception, if properly utilized, benefits investors and the market by preserving market 

liquidity,413 but it should not be used for speculative414 or potentially abusive “naked” short 

selling.415 Instead, the BFMM locate exception data reported to the CAT will provide the 

 
411  See STA Letter, at 4. 
412  See generally Amendments to Regulation SHO, Exchange Act Release No. 60388 (July 27, 2009), 74 FR 

38266, 38267-68 (July 31, 2009) (“2009 Regulation SHO Amendments”). 
413  See Regulation SHO Adopting Release, at 48025 (“[e]xcepting bona-fide market making activity from the 

locate requirement will benefit investors and the market by preserving necessary market liquidity.”). 
414  See, e.g., 2008 Regulation SHO Amendments, at 61699 (“For example, the Commission has stated that 

bona-fide market making does not include activity that is related to speculative selling strategies or 
investment purposes of the broker-dealer and is disproportionate to the usual market making patterns or 
practices of the broker-dealer in that security.”); see also Regulation SHO Adopting Release, at 48015. 

415  See, e.g., 2008 Regulation SHO Amendments, at 61691 (“We have previously noted that abusive ‘naked’ 
short selling, while not defined in the federal securities laws generally refers to selling short without having 
stock available for delivery and intentionally failing to deliver stock within the standard … settlement 
cycle.”). See also Regulation SHO Adopting Release, at 48009, n.10; Exchange Act Release No. 56212 

 



138 

Commission with a better understanding of the use of this limited exception, which should help 

to ensure that the exception is not subject to misuse by brokers or dealers in violation of the 

Commission’s short selling rules. 

In response to commenters that generally requested additional guidance416 regarding the 

scope of bona fide market making activity eligible for the BFMM locate exception, the primary 

requirement is that a broker or dealer that is a market maker provide widely accessible, 

continuous quotations at or near the market for which it is at risk.417 For example, the 

Commission has stated that for purposes of Regulation SHO, a market maker engaged in bona 

fide market making is a “broker-dealer that deals on a regular basis with other broker-dealers, 

actively buying and selling the subject security as well as regularly and continuously placing 

quotations in a quotation medium on both the bid and ask side of the market.”418 Moreover, the 

Commission has stated that “[b]roker-dealers that do not publish continuous quotations, or 

publish quotations that do not subject the broker-dealer to such risk (e.g., quotations that are not 

publicly accessible, are not near or at the market, or are skewed directionally towards one side of 

 
(Aug. 7, 2007), 72 FR 45544, n.3 (Aug. 14, 2007) (“2007 Regulation SHO Final Amendments”); Exchange 
Act Release No. 57511 (Mar. 17, 2008), 73 FR 15376 (Mar. 21, 2008) (“Naked Short Selling Anti-Fraud 
Rule Proposing Release”). 

416  See, e.g., SIFMA Letter, at 25; STA Letter, at 3. 
417  See, e.g., Settlement Cycle Adopting Release, at n.411 (“Under Regulation SHO’s bona fide market 

making exceptions, the broker-dealer generally should be holding itself out as standing ready and willing to 
buy and sell the security by continuously posting widely accessible quotes that are near or at the market. 
The market maker must be at economic risk for such quotes.”); see also 2008 Regulation SHO 
Amendments, at 61699. Thus, a market-maker that continually executed short sales away from its posted 
quotes would generally be unable to rely on the bona-fide market making exceptions of Regulation SHO. 
See Regulation SHO Adopting Release, at 48015 n.68. The market-maker must also be engaged in bona 
fide market making in that security at the time of the short sale for eligibility for the exceptions. See 2008 
Regulation SHO Amendments, at 61699. 

418  See, e.g., 2008 Regulation SHO Amendments, at 61699; see also Self-Regulatory Organizations; National 
Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change Relating to Close-Out 
Requirements for Short Sales and an Interpretation on Prompt Receipt and Delivery of Securities, 
Exchange Act Release No. 32632 (July 14, 1993), 58 FR 39072, 39074 (July 21, 1993); see also Settlement 
Cycle Adopting Release, at 13911-12 n.411. 



139 

the market), would not be eligible for the bona-fide market-maker exceptions under Regulation 

SHO.”419 Notably, “broker-dealers that publish quotations but fill orders at different prices than 

those quoted would not be engaged in bona-fide market making for purposes of Regulation 

SHO.”420 

After considering the comments received regarding the proposal to require CAT 

reporting firms that are reporting short sales to indicate whether such CAT reporting firm is 

asserting use of the BFMM locate exception, the Commission is adopting this proposed 

amendment to CAT with a few technical modifications to improve the readability of the 

amendment.421 The Commission recognizes that there will be costs to broker-dealers to 

implement changes to their respective systems and processes to accommodate the reporting of 

the BFMM locate exception information to CAT. For the reasons described above, as well as 

reasons stated in the Proposing Release, the Commission believes that the benefits to the 

Commission in its administration of short sale regulations will justify the burdens and costs to 

CAT reporting firms. This reporting requirement will not adversely affect short selling activity or 

liquidity in the market as it requires that brokers or dealers that are market makers provide 

information that is, or should be, readily available to the market maker at the time they effect a 

short sale, to the Commission without having to request access. The requirement does not change 

 
419  See Settlement Cycle Adopting Release, at 13911-12 n.411.  
420  Id. See also Regulation SHO Adopting Release, at 48015 n.68 (“Moreover, a market maker that continually 

executed short sales away from its posted quotes would generally be unable to rely on the bona-fide market 
making exception” of Regulation SHO). 

421  The amendment includes the following non-substantive, technical changes to the rule text: adding the word 
“for” preceding “a short sale” to clarify that reporting is required for a short sale in which the bona fide 
market maker exception is claimed, adding “the” preceding “exception” and adding “in” preceding Rule 
203(b)(2)(iii) to clarify that the bona fide market making exception is found in Rule 203(b)(2)(iii). 



140 

how such brokers or dealers that are market makers use the exception itself, and the data will not 

be published. 

V. Other Comments 

Other commenters also discussed issues that were beyond the scope of the rulemaking, 

such as suggestions for the Commission to ban short selling, enhance Regulation SHO’s locate 

or close-out requirements, address potentially abusive “naked” short selling, and reduce the 

reporting timeframes or requirements for Form 13F reporting, among others.422  

VI. Compliance Date 

The Commission received one comment regarding a compliance date for Rule 13f-2 

reporting requirements; that commenter recommended that Managers be given at least 18 months 

to comply with the new requirements.423 Specifically, the commenter stated that “[g]iven the 

complexity and significance of the operational build required by the proposed rule, we think a 

minimum of 18 months would be an appropriate implementation timeframe to give advisers 

adequate time to come into compliance with any new requirements.”424 Due to the modifications 

from the proposal which will reduce the complexity of the operational build, Managers should 

require less time than suggested by the commenter. Although the data that will result from the 

Rule 13f-2 reporting requirements will be useful to market participants and regulators as soon as 

it is available, it is prudent to implement the rule at a measured pace to help ensure that 

Managers have adequate time to update systems to meet the reporting requirements of Rule 

 
422  One commenter understood the rule as a “self-reporting” rule rather than as a mandatory reporting rule. 

Comment from Sarah (Feb. 25, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-
20117824-270590.htm.  

423  MFA Letter 2, at 3 (stating that the Commission should “provide an appropriate amount of time for firms to 
comply with any new requirements [under Rule 13f-2] (18 months at a minimum)” due to the operational 
build required for compliance with Proposed Rule 13f-2 and Proposed Form SHO). 

424  Id.141 

13f-2. Accordingly, a compliance date of 12 months after the effective date of this release for 

Rule 13f-2 strikes the appropriate balance between the Commission’s goal of increasing 

transparency of short sale-related information and providing Managers with adequate time to 

implement systems and processes to comply with the Rule 13f-2 reporting requirements.425 

The Commission will begin publishing the aggregated short sale related data collected, 

pursuant to Rule 13f-2, three months after the above stated compliance date of 12 months after 

the effective date of this release. The three-month window for the Commission to publish 

aggregated Form SHO data is intended to ensure that Commission systems are operating as 

designed in order to publish the aggregated data. 

Consistent with a suggestion by the commenter, the compliance date for the CAT 

amendments will be 18 months after the effective date of this release, as there were not 

modifications to that requirement from proposal. This will allow CAT reporting firms adequate 

time to update systems to facilitate reporting to CAT.426 An 18-month compliance period for the 

amendment to CAT strikes the appropriate balance between improving the Commission’s 

administration of short sale regulations and providing CAT reporting firms adequate time to 

implement changes to their respective systems and processes to accommodate the reporting of 

BFMM locate exception information to CAT, and is reasonable given that the information to be 

 
425  In addition, with respect to the compliance date, several commenters requested the Commission to consider 

interactions between the proposed rule and other recent Commission rules. In determining compliance 
dates, the Commission considers the benefits of the rules as well as the costs of delayed compliance dates 
and potential overlapping compliance dates. For the reasons discussed throughout the release, to the extent 
that there are costs from overlapping compliance dates, the benefits of the rule justify such costs. See infra 
Parts VIII.B, VIII.C.6.f, and VIII.D.2 for a discussion of the interactions of the final rule with certain other 
Commission rules. 

426  For discussion of the compliance date for the adopted amendment to the CAT NMS Plan to require the 
reporting to the CAT of reliance on the bona fide market making exception in Regulation SHO, see Notice 
of the Text of the Amendment to the National Market System Plan Governing the Consolidated Audit Trail 
for Purposes of Short Sale-Related Data Collection, Exchange Act Release No. 34-98739 (Oct. 13, 2023), 
published elsewhere in this issue of the Federal Register, which will have an effective date of 60 days 
after date of publication in the Federal Register and a compliance date of 18 months after the effective date. 



142 

reported is, or should be, readily available to the market maker at the time they effect a short 

sale.427 

VII. Paperwork Reduction Act Analysis 

A. Background 

Certain provisions of Rule 13f-2, Form SHO, and the Amendment to CAT impose 

“collection of information” requirements within the meaning of the Paperwork Reduction Act of 

1995 (“PRA”).428 The title for the collection of information is: “Amendments to Enhance Short 

Sale Data” (OMB Control No. 3235-0804). An agency may not conduct or sponsor, and a person 

is not required to respond to, a collection of information unless it displays a current valid control 

number. The requirements of this collection of information are mandatory for Managers under 

Rule 13f-2 and Form SHO, and Plan Participants and CAT reporting firms under the 

Amendment to CAT. 

In accordance with the PRA, the Commission is submitting the final amendments to the 

rules to the Office of Management and Budget (OMB) for review. The Commission published a 

request for comments on these collection of information requirements in the Proposing 

Release,429 and submitted the proposed requirements to the Office of Management and Budget 

(OMB) for review in accordance with the PRA.430 The Commission received some comments 

regarding the Commission’s estimates of paperwork burdens and costs associated with 

anticipated compliance of Rule 13f-2, Form SHO, and the Amendment to CAT, which are 

addressed in this section. 

 
427  See supra Part IV.B. See also infra Part VII.C for discussion of costs and burden estimates related to 

compliance with the amendment to CAT.  
428  44 U.S.C. 3501 et seq. 
429  See Proposing Release, at 14980-81. 
430  44 U.S.C. 3507(d); 5 CFR 1320.11. 



143 

As discussed above, Rule 13f-2 and related Form SHO are designed to provide greater 

transparency of short sale-related data to regulators, investors, and other market participants by 

requiring certain Managers to file monthly on Form SHO, through EDGAR in Form SHO-

specific XML, certain short position and activity data. Under Rule 13f-2 and Form SHO, only 

those Managers that meet a specified Reporting Threshold for an equity security will be required 

to file Form SHO. Such information will provide additional context to the Commission and other 

regulators regarding the lifecycle of short sales, assist in reconstructing market events, and 

improve Commission oversight of short selling. 

The Amendment to CAT is intended to supplement the short sale-related data that will be 

reported by certain broker-dealers to the Commission pursuant to Rule 13f-2 and Form SHO. 

The Commission’s amendment to CAT requires, for original receipt or origination of an order 

for equities, the Participants’ Compliance Rules require their broker-dealer members record and 

report whether the order is a short sale for which the BFMM locate exception in Rule 203 under 

Regulation SHO for the reported short sale is being claimed. This information will provide 

valuable data to both the Commission and other regulators regarding the use of the BFMM locate 

exception. Given the differences in the information collections applicable to these parties, the 

burdens applicable to Managers and broker-dealers are separated in the analysis below. 

B. Burdens for Managers under Rule 13f-2 and Form SHO 

1. Applicable Respondents 

As discussed above, Rule 13f-2 and Form SHO require Managers that trigger a Reporting 

Threshold to file monthly via EDGAR, on Form SHO, certain short position and activity data. 

Under section 13(f)(6)(A) of the Exchange Act and for purposes of Rule 13f-2, Managers 

include any person, other than a natural person, investing in or buying and selling securities for 



144 

its own account, and any person (including a natural person) exercising investment discretion 

with respect to the account of any other person.431 Thus, the requirements of Rule 13f-2 could 

apply, for example, to investment advisers that exercise investment discretion over client assets, 

including investment company assets; broker-dealers; insurance companies; banks and bank trust 

departments; and pension fund managers or corporations that manage corporate investments or 

employee retirement assets. 

In the Proposing Release, the Commission stated that it believed that the burden 

associated with Proposed Rule 13f-2 and the related Proposed Form SHO reporting in EDGAR 

would be similar to a Manager’s reporting requirements under former Form SH. In October 

2008, the Commission adopted interim final temporary Rule 10a-3T, which required institutional 

investment managers that exercise investment discretion with respect to accounts holding section 

13(f) securities having an aggregate fair market value of at least $100 million to file Form SH 

with the Commission following a calendar week in which it effected a short sale in a section 

13(f) security, with some exceptions. Form SH included information on short sales and positions 

of section 13(f) securities, other than options.432 The Commission estimated in the Proposing 

Release, that based on Form SH data, each month, approximately 1,000 Managers would trigger 

a Reporting Threshold for at least one security, and therefore be required to file a Proposed Form 

SHO.433 The Commission did not receive any comments regarding the estimated number of 

 
431  See also Instructions to Form 13F. 
432  Disclosure of Short Sales and Short Positions by Institutional Investment Managers, 73 FR 61678. The rule 

extended the reporting requirements established by the Commission’s Emergency Orders dated September 
18, 2008, September 21, 2008, and October 2, 2008, with some modifications. See supra n.103.  

433  This estimate is similar to the estimate provided in the Disclosure of Short Sales and Short Positions by 
Institutional Investment Managers, Exchange Act Release No. 58785 (Oct. 15, 2008), 73 FR 61678 (Oct. 
17, 2008). However, the number of estimated Form SHO filers represents a monthly, as opposed to weekly, 
filing, and therefore the Commission estimates fewer overall filings per month. Additionally, the estimate 
accounts for the estimate by the Commission staff that 252 Form SH filers would have been required to file 

 



145 

Managers that would be required to file a Form SHO, or an alternative estimated number of 

Managers that commenters believed would be more appropriate. 

As discussed above, the Commission is adopting aspects of the Proposal with certain 

modifications to Form SHO reporting requirements. For example, the modified reporting 

threshold for the U.S. dollar value-based prong of Threshold A for reporting company issuer 

securities is being adopted as a monthly average rather than a daily end-of-day calculation, 

which could result in fewer Managers being subject to Form SHO reporting requirements under 

Threshold A than under the Proposed Reporting Thresholds. However, the Commission 

continues to believe that 1,000 Managers is an accurate estimate when considering (1) Managers 

with discretion over less than $100 million, which were not required to file Form SH; (2) the fact 

that Form SH was only required to be filed for 13(f) securities that are included on the 13F List 

as opposed to all equity securities of both reporting and non-reporting company issuers; and (3) 

the fact that Form SH did not include a second, lower threshold (Threshold B) for short positions 

in securities of non-reporting company issuers. As such, the Commission continues to estimate 

that, each month, approximately 1,000 Managers will trigger a Reporting Threshold for at least 

one security, and therefore be required to file a Form SHO. 

2. Burdens and Costs 

The Commission explained in the Proposing Release that it believed that the burden 

associated with Proposed Rule 13f-2 and the related Proposed Form SHO reporting in EDGAR 

 
had a threshold of 2.5% of shares outstanding or $10 million monthly average gross short position in an 
equity security been imposed during the analyzed time period. The estimate of 1,000 is higher than the 252 
estimated Form SH filers to account for: (1) Managers with discretion over less than $100 million, which 
were not required to file Form SH; (2) the fact that Form SH was only required to be filed for 13(f) 
securities as opposed to all equity securities of both reporting and non-reporting company issuers; and (3) 
the fact that Form SH did not include a second, lower threshold (Threshold B) for short positions in 
securities of non-reporting company issuers. 



146 

would be similar to a Manager’s reporting requirements for former Form SH.434 The 

Commission continues to believe that the burden associated with Rule 13f-2 and related Form 

SHO reporting in EDGAR is similar to a Manager’s reporting requirements for former Form SH. 

With respect to each applicable section 13(f) security, the Form SH filing identified the issuer 

and CUSIP number of the relevant security and required the Manager’s start of day short 

position, the number and value of securities sold short during the day, the end of day short 

position, the largest intraday short position, and the time of the largest intraday short position.435 

In adopting interim temporary Rule 10a-3T, which required certain Managers to file weekly non-

public reports via Form SH, the Commission estimated that Managers would spend 

approximately 20 hours to prepare and file each Form SH.436 The Commission estimated in the 

Proposing Release for Form SHO that the burden associated with preparing and filing Form SHO 

in EDGAR would be approximately 20 hours per filing, consistent with that of former Form 

SH.437 

Some commenters were concerned about the Commission’s reliance on prior Form SH 

data in estimating Form SHO reporting burdens, as well as the estimated time burden of 20 hours 

for preparing and filing each required Form SHO.438 One commenter stated that the estimated 20 

hours to file Form SHO was “not realistic” and felt that reliance on Form SH for Form SHO 

 
434  See Proposing Release, at 14972-73. 
435  Form SH was adopted in the wake of the 2008 financial crisis and remained in effect until July 2009. 
436  See Disclosure of Short Sales and Short Positions by Institutional Investment Managers, 73 FR 61686 

(stating that, “[t]he 20 hour per filing estimate is based on data received from a small sample of actual filers 
and a random sample of filings conducted by our Office of Economic Analysis.”). 

437  See Proposing Release, at 14973-74. 
438  See, e.g., MFA Letter, at 15; Two Sigma Letter, at 5-7. 



147 

burden estimates was not adequately justified in the Proposing Release.439 Specifically, some 

commenters stated that the Proposing Release underestimated the costs of preparing proposed 

Information Table 2 in relying on the Form SH and Rule 10a-3T estimates, emphasizing the 

complexity of Form SHO as compared to Form SH.440 One commenter stated that the Proposing 

Release’s estimate of 20 hours needed to process and file Form SHO per month may be too low, 

and even if accurate, will impose a “substantial ongoing burden.”441 However, these commenters 

did not provide the Commission with alternative burden estimates for reporting Form SHO, or 

alternative sources of data for which to base Form SHO burden estimates. 

In contrast, one commenter believed that Managers were not being genuine about their 

concerns regarding costs and burdens of complying with Form SHO reporting requirements, 

stating that they were able to comply with Form SH requirements.442 The commenter also stated 

that the requirements of Form SHO should be less burdensome than the requirements of Form 

SH due to the decreased frequency of reporting. 

Regarding comments of Form SHO’s complexity as compared to Form SH, the adopted 

Form SHO, as described above, does not include the proposed requirement to report hedging 

status, which several commenters thought would be particularly burdensome or operationally 

difficult to implement.443 As adopted, Form SHO also includes a streamlined Information Table 

2, which reduces the granularity of the information reported, decreasing the costs and burdens 

 
439  Two Sigma Letter, at 5-7 (citing letters received by the Commission that it had underestimated the burden 

of Form SH and describing the complexity of Form SHO as compared to Form SH). 
440  See, e.g., MFA Letter, at 15; Two Sigma Letter, at 5-7. 
441  Anonymous Fund Manager Letter, at 8. 
442  See WTI Letter, at 2 (“The protests of the industry in terms of the effort required to comply with the 

Proposal ring hollow given the Commission’s experience with interim temporary Rule 10a-3T – firms had 
no problem complying and the data provided was useful to the Commission. Indeed, the Proposal is easier 
to comply with, given the monthly rather than weekly reporting of interim temporary Rule 10a-3T.”). 

443  See, e.g., T. Rowe Price Letter, at 3-4; Virtu Letter, at 3; MFA Letter, at 4. 



148 

that more detailed reporting of daily activity data as proposed would have imposed, further 

reducing complexity from the proposed rule and form. 

As the Commission acknowledged in the Proposing Release, and continues to 

acknowledge, the information required under former Form SH differs from that required under 

Form SHO. However, the Commission continues to believe that Form SH is an appropriate basis 

for Form SHO burden estimates. Form SH involved the same type of entities (Managers) and the 

same activity (short positions) as Form SHO. While recognizing that the information required 

under former Form SH differs from that required under Form SHO, the Commission continues to 

believe that both forms require the reporting of short sale-related data of similar depth and 

complexity.444 Notably, Rule 13f-2 requires monthly reporting if certain conditions are met, as 

opposed to the weekly reporting required by Form SH for Managers that effected short sales 

within the preceding week,445 which is anticipated to decrease the overall volume of reports 

required to be filed by Managers under Form SHO in comparison to Form SH. 

As such, and since the Commission did not receive comments citing alternative sources 

of data that commenters believed would result in more accurate Form SHO burden estimates, the 

Commission continues to believe that Form SH is an appropriate basis for which to estimate 

Form SHO burdens. The Commission continues to estimate that the burden associated with 

preparing and filing Form SHO in EDGAR will be approximately 20 hours per filing, consistent 

with the corresponding burdens for former Form SH, and consistent with estimates in the 

 
444  Under Form SH, Managers who met the applicable threshold and effected a short sale in a section 13(f) 

security in the preceding week were required to file a report identifying the open short position, closing 
short position, largest intraday short position, and the time of the largest intraday short position, for that 
security during each calendar day of the prior week. See Emergency Order Pursuant to Section 12(k)(2) of 
the Securities Exchange Act of 1934 Taking Temporary Action To Respond to Market Developments, 
Exchange Act Release No. 58591 (Sept. 18, 2008), 73 FR 55175, 55176 (Sept. 24, 2008). 

445  See id. 



149 

Proposing Release.446 Accordingly, the Commission estimates that the burden associated with 

preparing and filing Form SHO across all managers collectively is approximately 240,000 hours 

per year.447 

The Commission received one comment regarding the approximate overall cost of 

$217.55 per Form SHO filing from the Proposing Release. This commenter stated that this cost 

was “not realistic,” but, again, did not provide a more accurate cost estimate, or alternative data 

source for which to base a cost estimate.448 The Commission believes that the hourly cost of 

internal expertise required for each filing will be $251.36, which includes a blended calculation 

of the estimated hourly rate for a compliance attorney, senior programmer, and in-house 

compliance clerk, an increase from the Proposing Release’s estimated $217.55 to account for 

inflation.449 Taken together, the estimated burden hours and hourly rate for the filing of Form 

 
446  Proposing Release, at 14973. 
447  20 hours per filing x 1,000 filings by Managers each month x 12 months = 240,000 hours. In the Proposing 

Release PRA, the Commission estimated that 346 Form SH filers would have been required to file Form 
SHO had a threshold of 2.5% of shares outstanding or $10 million position dollar value been imposed 
during the analyzed time period. Due to the change in the Threshold A calculation of the dollar value prong 
of the Reporting Threshold for equity securities of reporting company issuers to be based on a monthly 
average gross short position rather than the proposed daily calculation, the estimated number of Form SH 
filers that would have been required to file a Form SHO decreased from 346 to 252. However, the 
Commission continues to estimate that 1,000 Managers will be subject to Form SHO reporting per month. 

448  See Two Sigma Letter, at 5-7. 
449  The $251.36 wage rate reflects current estimates of the blended hourly rate for an in-house compliance 

attorney ($425), a senior programmer ($386) and in-house compliance clerk ($82). $251.36 is based on the 
following calculation: (($425) + ((($386 + $82) ÷ 2) x 10)) ÷ 11) = $251.36. The estimated proportion of 
compliance attorney (1/11th) to senior programmer and in-house compliance clerk (10/11th) time burden is 
based on commenter input and computation of the estimated burden for the filing of Form 13F-HR. See 
Electronic Submission of Applications for Orders, Exchange Act Release No. 93518 (Nov. 4, 2021), 86 FR 
64839 (Nov. 19, 2021) at 64860-61 (“Electronic Submission of Applications for Orders”). The $425 per 
hour and $386 per hour figures for a compliance attorney and a senior programmer, respectively, are based 
on salary information for the securities industry compiled by the Securities Industry and Financial Markets 
Association’s Office Salaries in the Securities Industry 2013 (“SIFMA Report”), modified by Commission 
staff to account for an 1800-hour work year and inflation, and multiplied by 5.35 to account for bonuses, 
firm size, employee benefits, and overhead. The $82 per hour figure for a compliance clerk is based on 
salary information from the SIFMA Report, modified by Commission staff to account for an 1800-hour 
work-year and inflation, and multiplied by 2.93 to account for bonuses, firm size, employee benefits, and 
overhead. See also Form PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund 

 



150 

SHO result in an estimated annual cost to the industry of $60,326,400.450 The Commission, 

however, recognizes that advances in technology over time could result in Managers spending 

less time preparing and filing Form SHO than is estimated above.451 

Consistent with its estimates in the Proposing Release, the Commission also anticipates 

that most Managers will file Form SHO directly in the structured XML-based data language for 

Form SHO,452 rather than using the fillable web form provided by EDGAR, resulting in some 

limited additional costs for each filing. While the Commission received comments about the use 

of Form SHO-specific XML generally,453 it did not receive comments regarding the PRA burden 

estimates of using Form SHO-specific XML. The Commission estimates that Managers that file 

Form SHO using a structured XML-based data language could incur an additional burden of 2 

hours of work by a programmer,454 at an estimated cost of $772.455 The Commission further 

 
Advisers; Requirements for Large Private Equity Fund Adviser Reporting, Release No. IA-6297, 88 FR 
38146, 38195-98 (June 12, 2023). 

450  20 hours per filing x 1,000 filings by Managers each month x 12 months x $251.36 per hour = $60,326,400. 
451  See Electronic Submission of Applications for Orders, 86 FR 64859 (stating that “[c]ommenters stated that 

the advances in technology have made the process of completing and filing Form 13F highly automated, 
reducing the time and external costs to managers in complying with this requirement.”). 

452  Most Managers will be familiar with other EDGAR Form-specific XML data languages, the use of which is 
required for the filing (by Managers that exercise investment discretion with respect to accounts holding 
13(f) securities having an aggregate fair market value on the last trading day of any month of any calendar 
year of at least $100 million) of Form 13F. See Frequently Asked Questions About 13F, available at 
https://www.sec.gov/divisions/investment/13ffaq.htm. The Commission estimates that all of the 1,000 
Managers estimated to file Form SHO each month will do so directly using the structured XML-based data 
language rather than the fillable web form provided by EDGAR. 

453  See XBRL Letter; Comment from An Investor (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm. Comments regarding the use of 
XML are addressed in Part II.A.4. 

454  The 2-hour estimated burden is consistent with similar estimates for the use of structured XML data 
formats for the filing of Form N-CR and Form 24F-2. See Money Market Fund Reforms; Form PF 
Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and 
Form N-1A, Exchange Act Release No. 34-97876 (July 12, 2023), 88 FR 51404, 51514 (Aug. 3, 2023); see 
also Securities Offering Reform for Closed-End Investment Companies, Exchange Act Release No. 88606 
(Apr. 8, 2020), 85 FR 33290, 33329 n.439 (June 1, 2020) (stating that “[w]e assume that the burden of 
tagging Form 24F-2 in a structured XML format would be 2 hours for each filing.”). 

455  The $386 per hour figure for a senior programmer is based on salary information from the SIFMA Report.2 
hours x $386 = $772. 



151 

estimates that Managers will collectively spend up to approximately 24,000 hours and 

$9,264,000 per year to file Form SHO directly in a structured XML-based data language.456 The 

Commission also estimates that a similar, additional burden of 2 hours of work by a programmer 

per filing will apply to Managers filing an amended Form SHO directly in a structured XML-

based data language. 

Also consistent with the estimates in the Proposing Release, the Commission estimates 

that approximately 3.5 percent of the Managers that file Form SHO each month will also file an 

amended Form SHO, resulting in an additional burden and cost for an estimated 35 Managers 

each month.457 The additional burden could take up to the original 20 hours to process and file, 

as it will require the filing of an entirely new Form SHO.458 The associated wage rate for filing 

the amended Form SHO is consistent with the cost of expertise required to file the original Form 

SHO, estimated to be $251.36 per hour.459 The Commission also estimates that each amended 

Form SHO will be filed directly using a structured XML-based data language, resulting in a 

corresponding additional burden of 2 hours of work by a programmer per amended Form SHO 

filing. The Commission did not receive any comments regarding the estimated percentage of 

Managers that will file an amended Form SHO each month, or the costs and burden estimates of 

filing an amended Form SHO. 

 
456  2 hours per filing x $386 per hour x 1,000 filings each month x 12 months = $9,264,000. 
457  The estimate of 3.5% of Regulation SHO filers that are anticipated to file an amended Form SHO is based 

on the frequency of recent filings of amended Form 13F. For the reporting period of Dec. 31, 2022, there 
were 6,924 holdings reports for Form 13F-HR submitted, 244 of which were amended. (244 ÷ 6,924 = 
3.5%). 

458  See Form SHO, Special Instructions, at 4. 
459  See Proposing Release, at 14974. 



152 

PRA Table 1: 
Estimated Manager Burden and Costs Associated with Form SHO Reporting  

 Managers 
(Monthly) 

Form 
SHO 

Reports 
Processed 
and Filed 
(Annual) 

Hours 
Needed to 

Process 
and File 

Form 
SHO 

(Avg.) 

Total 
Industry 
Burden 

Hours to 
Process and 
File Form 

SHO 
(Annual) 

 Wage 
Rate 

(Avg.) 

Total 
Industry 

Cost Burden  
(Annual) 

Form 
SHO 

Filings  
1,000 12,000 20 240,000 $251.36 $60,326,400 

Use of 
Structured 

XML-
Based 
Data 

Language 
in Form 

SHO 
Filings 

1,000 12,000 2 24,000 $386 $9,264,000 

Amended 
Form 
SHO 

Filings 

35 420 20 8,400 $251.36 $2,111,424 

Use of 
Structured 

XML-
Based 
Data 

Language 
in 

Amended 
Form 
SHO 

Filings 

35 420 2 840 $386 $324,240 

Total    273,240  $72,026,064 

 

Consistent with estimates in the Proposing Release, in addition to the costs associated 

with the reporting burden, Managers could incur an initial technology-related burden of 325 



153 

hours, at an hourly estimated wage rate of $366,460 for an estimated total cost of $118,950 per 

Manager,461 to update their current systems to capture the required information and automate and 

facilitate the completion and filing of Form SHO. The Commission generally believes that the 

type of Managers that will trigger a Reporting Threshold will likely have sophisticated 

technologies and be able to implement systems to help automate the reporting requirements of 

Rule 13f-2. As discussed in the Proposing Release, the estimate of 325 initial technology-related 

burden hours for Managers filing Form SHO was based on the estimated initial filing burden 

(325 hours) for large hedge fund advisers to fulfill amendments to the reporting requirements for 

Form PF,462 and is similar to the initial technological infrastructure-related burden (355 hours) 

for the proposed security-based swap position reporting requirements of proposed Rule 10B-

1(a).463 While Managers most likely have other existing reporting obligations, the Commission 

recognizes that Managers may need to update their systems to ensure timely and accurate filing 

of the specific information required under Form SHO. 

 
460  The Commission estimates that, of a total estimated burden of 325 hours, approximately 195 hours will 

most likely be performed by compliance professionals and 130 hours will most likely be performed by 
programmers working on system configuration and reporting automation. Of the work performed by 
compliance professionals, we anticipate that it will be performed equally by a compliance manager at a cost 
of $360 per hour and a senior risk management specialist at a cost of $416 per hour. Of the work performed 
by programmers, we anticipate that it will be performed equally by a senior programmer at a cost of $386 
per hour and a programmer analyst at a cost of $280 per hour. ((($360 per hour x 0.5) + ($416 per hour x 
0.5)) x 195 hours) + ((($386 per hour x 0.5) + ($280 per hour x 0.5)) x 130 hours) ÷ 325 = $366. See Form 
PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers; Requirements for 
Large Private Equity Fund Adviser Reporting, Release No. IA-6297 (May 3, 2023), 88 FR 38146, 38195 
(June 12, 2023). See also SIFMA Report. 

461  325 initial technology-related burden hours x $366 per hour = $118,950. 
462  See Form PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers; 

Requirements for Large Private Equity Fund Adviser Reporting, Release No. IA-6297 (May 3, 2023), 88 
FR 38146, 38195 (June 12, 2023). (The Commission recognizes that adopted Rule 13f-2 will cover persons 
other than large hedge fund advisers, and that large hedge fund advisers may generally be more accustomed 
to existing Commission reporting requirements than some other persons that will be covered by adopted 
Rule 13f-2.). 

463  See Rule 10B-1 Proposal. 



154 

One commenter stated that the estimated 325 hours initial technology-related burden was 

“not realistic” but did not provide an alternative estimate.464 One commenter stated that the 

initial estimated costs for initial technology projects per Manager represented a “significant 

portion” of a smaller Manager’s information technology budget but did not state that the estimate 

was inaccurate.465 As a result of not adopting the proposed hedging requirement, which a number 

of commenters thought would be operationally difficult to implement,466 the technology-related 

burden will likely be reduced from that which was estimated in the Proposing Release. 

The Commission did not receive any comments that provided an alternative hourly 

estimate for the initial technology related burden for Managers filing Form SHO, or an 

alternative, more accurate source for which to base the initial technology related burden for 

Managers filing Form SHO. Additionally, in response to the comment that the Commission 

generally underestimated the initial technology-related burden, and that the technology-related 

burden is likely reduced from the Proposing Release given the Commission’s decision not to 

adopt the proposed hedging requirement, the Commission continues to believe that an estimate 

of 325-hours for the initial technology-related burden is appropriate. 

 
464  See Two Sigma Letter, at 5.  
465  See Anonymous Fund Manager Letter, at 6-7. 
466  See Virtu Letter, at 3. 



155 

PRA Table 2: 
Estimated Manager Burden and Costs Associated with Form SHO Initial Technology Projects 

 

Managers 
with 

Proposed 
Form SHO 
Reportable 

Short 
Interest 
Positions 

Number of 
Hours Needed 

for Initial 
Technology 

Projects 
(Avg.) 

Industry 
Burden 

Hours for 
Initial 

Technology 
Projects 

 Wage 
Rate 

(Avg.) 

Total 
Industry Cost 

Burden  

Form SHO 
Initial 

Technology 
Projects  

1,000 325 325,000  $366 $118,950,000 

 

C. Burdens and Costs Associated with the Amendment to CAT 

1. Summary of Collections of Information 

The amendment to the CAT NMS Plan requires Participants to update their Compliance 

Rules to require reporting by Industry Members of whether an original receipt or origination of 

an order to sell an equity security is a short sale for which a market maker is claiming the bona 

fide market making exception to the locate requirement in Rule 203(b)(2)(iii) of Regulation 

SHO.467 

2. Use of Information 

As discussed above, reporting of certain short sale information to the CAT provides 

valuable information for the Commission and other regulators in investigations and 

reconstruction of market events. Requiring Industry Members to identify short sales for which 

they are claiming the BFMM locate exception will provide the Commission staff and other 

regulators an additional tool to determine whether such activity qualifies for the exception, or 

instead is indicative of, for example, proprietary trading instead of bona fide market making. 

 
467  See supra Part IV. 



156 

3. Respondents 

a. National Securities Exchanges and National Securities 

Associations 

The respondents for the amendment to CAT include the 25 Plan Participants (the 24 

national securities exchanges and one national securities association (FINRA)).468 

b. Members of National Securities Exchanges and National 

Securities Associations 

The respondents for the Amendment to CAT also include the Participants’ broker-dealer 

members, that is, Industry Members. The Commission understands that there are currently 3,501 

registered broker-dealers;469 however, not all broker-dealers are expected to have new CAT 

reporting obligations under the Amendment to CAT.470 Based on an analysis of CAT data from 

May 2023, conducted by Commission staff, the Commission estimates that approximately 100 

broker-dealers will be required to report for the original receipt or origination of an order to sell 

an equity security whether the order is a short sale effected by a market maker in connection with 

bona fide market making activities in the security for which the BFMM locate exception in Rule 

203(b)(2)(iii) of Regulation SHO is claimed. This is a decrease from the Commission’s estimate 

in the Proposing Release of 104 broker-dealers that would be required to report for the original 

receipt or origination of an order to sell an equity security whether the order is a short sale 

 
468  The Participants are: BOX Options Exchange LLC; Cboe BZX Exchange, Inc.; Cboe BYX Exchange, Inc.; 

Cboe C2 Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX, Inc.; Cboe Exchange, Inc.; Financial 
Industry Regulatory Authority, Inc.; Investors Exchange Inc.; Long-Term Stock Exchange, Inc.; MEMX, 
LLC; Miami International Securities Exchange LLC; MIAX PEARL, LLC; MIAX Emerald, LLC; 
NASDAQ BX, Inc.; NASDAQ GEMX, LLC; NASDAQ ISE, LLC; NASDAQ MRX, LLC; NASDAQ 
PHLX LLC; The NASDAQ Stock Market LLC; New York Stock Exchange LLC; NYSE MKT LLC; and 
NYSE Arca, Inc., NYSE Chicago Stock Exchange, Inc., NYSE National, Inc. 

469  This is based on FOCUS quarterly filings for 2023 Q1. 
470  See supra Part IV.B. 



157 

effected by a market maker in connection with bona-fide market making activities in the security 

for which the exception in Rule 203(b)(2)(iii) of Regulation SHO is claimed, because there were 

104 CAT reporters listed as equity market makers in CAT in November 2021, and 100 CAT 

reporters listed as equity market makers in CAT in May 2023.471 The Commission also included 

an estimate of 1,218 broker-dealers that would have been required to report “buy to cover” 

information on buy orders for equity securities to CAT in the Proposing Release,472 but since the 

Commission is not adopting the proposed “buy to cover” reporting requirement, such estimate is 

not included here. The Commission did not receive any comments on the estimated number of 

respondents under the proposed amendments to CAT. 

4. Total Initial and Annual Reporting and Recordkeeping Burdens 

The Commission received comments regarding the costs and burdens of the proposed 

amendments to CAT generally473 but did not receive specific comments regarding the Proposing 

Release’s PRA estimates related to the proposed CAT amendments. General comments 

regarding costs and burdens of the proposed CAT amendments are addressed in Part IV. The 

Commission’s total burden estimates in this Paperwork Reduction Act section reflect the total 

burden on all Participants and Industry Members. The burden estimates per Participant or 

Industry Member are intended to reflect the average paperwork burden for each Participant or 

Industry Member, but some Participants or Industry Members may experience more burden than 

the Commission’s estimates, while others may experience less. The burden figures set forth in 

this section are based on a variety of sources, including Commission staff’s experience with the 

development of the CAT and estimated burdens for other rulemakings. Because the CAT NMS 

 
471  See Proposing Release, at 14977. 
472  Id. 
473  See, e.g., SIFMA Letter, at 25; FIA PTG Letter, at 3; Virtu Letter, at 6. 



158 

Plan applies to and obligates the Participants and not the Plan Processor, the Commission 

believes it is appropriate to estimate the Participants’ external cost burden based on the estimated 

Plan Processor staff hours required to comply with the proposed obligations.474 Put another way, 

pursuant to the Amendment to the CAT NMS Plan, the Participants will be obligated to make 

changes to the CAT, but the CAT is managed by the Plan Processor pursuant to contractual 

agreement, and so the Participants will be required to engage the Plan Processor to make any 

required changes. 

a. Participant Burdens 

The Amendment to CAT will require the Participants to engage the Plan Processor to 

modify the Central Repository to accept and process the new BFMM locate exception 

information on order receipt and origination reports. The Commission estimates that the 

Participants will incur an initial, one-time burden of 130 hours, or 5.2 hours per Participant, of 

staff time required to supervise and implement the changes necessary for the Plan Processor to 

accept and process the new data elements, and an initial, one-time, external cost of $113,800, or 

a per Participant expense of approximately $4,552 to compensate the Plan Processor for staff 

time required to make the initial necessary programming and systems changes to accept and 

process the new data elements, based on an estimate that it will take 300 hours of Plan Processor 

staff time to implement these changes.475 The Commission did not receive comment on these 

estimates. 

 
474  The Commission derives estimated costs associated with Plan Processor and Industry Member staff time 

based on per hour figures from the SIFMA Report, modified by Commission staff to account for an 1800-
hour work-year and inflation, and multiplied by 5.35 to account for bonuses, firm size, employee benefits 
and overhead. 

475  The estimated 300 hours of Plan Processor staff time include 200 hours by a Senior Programmer, 40 hours 
by a Senior Database Administrator, 40 hours for a Senior Business Analyst, and 20 hours for an Attorney. 
The Commission estimates that the initial, one-time external expense for Participants will be $113,800 = 

 



159 

The Commission continues to believe that other Paperwork Reduction Act burdens that 

will apply to the Participants, including ongoing burdens and external expenses for the Plan 

Processor’s acceptance and processing of the new data elements, are already accounted for in the 

existing Paperwork Reduction Act estimate that applies for Rule 613 and the CAT NMS Plan 

Approval Order, submitted under OMB number 3235-0671.476 The prior Paperwork Reduction 

Act analysis incorporates any other potential Paperwork Reduction Act burdens for the 

Participants, because the existing Paperwork Reduction Act analysis accounts for initial and 

ongoing costs for, among other things, operating and maintaining the Central Repository, 

including the cost of systems and connectivity upgrades or changes necessary to receive and 

consolidate the reported order and execution information from Participants and their members, 

the cost to store data and make it available to regulators, the cost of monitoring the required 

validation parameters, and management of the Central Repository.477 In addition, the 

Commission anticipates that each exchange and national securities association will file one Form 

19b–4 filing to implement updated Compliance Rules. While such filings may impose certain 

costs on the exchanges, those burdens are already accounted for in the comprehensive Paperwork 

Reduction Act Information Collection submission for Form 19b-4.478 The Commission does not 

expect the baseline number of 19b-4 filings to increase as a result of the Amendment to CAT, 

 
(Senior Programmer for 200 hours at $386 an hour = $77,200) + (Senior Database Administrator for 40 
hours at $379 an hour = $15,160) + (Senior Business Analyst for 40 hours at $305 an hour = $12,200) + 
(Attorney for 20 hours at $462 an hour = $9,240). 

476  See CAT NMS Plan Approval Order, 81 FR 84911-43; see also OMB Control No. 3235-0671, 85 FR 
37721 (June 23, 2020) (notice of submission of request for approval of extension). 

477  See CAT NMS Plan Approval Order, 81 FR 84918. 
478  See OMB Control No. 3235–0045 (Aug. 19, 2016), 81 FR 57946 (Aug. 24, 2016) (Request to OMB for 

Extension of Rule 19b-4 and Form 19b-4 PRA). 



160 

nor does it believe that the incremental costs exceed those costs used to arrive at the average 

costs and/or burdens reflected in the Form 19b–4 PRA submission. 

b. Broker-Dealer Burdens 

The Commission anticipates that certain Industry Members will have initial, one-time 

burdens and costs relating to the Amendment to CAT, to update systems and processes as 

necessary to capture and report use of the BFMM locate exception to CAT. The Commission has 

estimated these initial burdens and costs below. 

The Amendment to CAT will impose an ongoing annual burden relating to, among other 

things, personnel time to monitor each broker-dealer’s reporting of the required data and the 

maintenance of the systems to report the required data and implementing changes to trading 

systems that might result in additional reports to the Central Repository. However, the 

Commission estimates that the ongoing burden imposed by the Amendment to CAT related to 

reporting to the CAT is already accounted for in the existing information collections burdens 

associated with Rule 613 and the CAT NMS Plan Approval Order submitted under OMB 

number 3235-0671.479 Specifically, the CAT NMS Plan Approval Order takes into account 

requirements on broker-dealer members to comply with the CAT NMS Plan, including the 

requirement to maintain the systems necessary to collect and transmit information to the Central 

Repository,480 provides aggregate burden hour and external cost estimates for the broker-dealer 

data collection and reporting requirement of Rule 613, and did not quantify the burden hours or 

 
479  See CAT NMS Plan Approval Order, 81 FR 84911-43. While there is no recordkeeping requirement related 

to reporting use of the BFMM locate exception, brokers or dealers should be prepared to monitor for 
compliance with conditions and maintain records documenting such compliance. See Regulation SHO 
Adopting Release, 48011 n.27 (“As with any rule, broker-dealers relying on [an] exception should be 
prepared to monitor for compliance with its conditions, and maintain records documenting such 
compliance.”). There would be a minimal additional ongoing burden for such brokers or dealers to record 
that they have determined such eligibility for each transaction reported to CAT. 

480  See, e.g., CAT NMS Plan Approval Order, 81 FR 84930.161 

external cost estimates for each individual component of the broker-dealer’s data collection and 

reporting responsibility.481 The Amendment to CAT will not require any Industry Member to 

submit new reports to the CAT, but to add limited additional information to existing reports in 

certain circumstances for certain Industry Members. The Commission does not believe that this 

will alter the estimates of ongoing burden and external costs in the existing Paperwork Reduction 

Act Analysis and the ongoing burden associated with these new collection requirements are 

accounted for in the existing Paperwork Reduction Act Analysis. 

The Amendment to CAT will impose additional burdens on Industry Members that trade 

equity securities and rely upon or plan to rely upon the BFMM locate exception. Based on an 

analysis of data reported to the CAT in May 2023, and specifically the identification of all 

unique CAT Reporters that were identified as equity market makers (including different classes 

of market makers such as “designated” or “lead” market makers, and secondary liquidity 

providers), approximately 100 CAT Reporters will be subject to the new reporting obligation. 

Some broker-dealers that rely upon this exception may retain records regarding their eligibility 

for this exception for specific orders or for orders originated by specific desks or units of their 

business. 

Regarding the obligation to report the BFMM locate exception information to the CAT, 

the Commission believes that it is appropriate to divide the 100 Industry Members, i.e., the CAT 

reporters listed as equity market makers in CAT as of May 2023, that will be required to report 

this information into two categories: (i) Industry Members that report directly to the CAT; and 

(ii) Industry Members that use third-party reporting agents for CAT reporting. For purposes of 

this Paperwork Reduction Act analysis, the Commission estimates that of the 100 Industry 

 
481  See CAT NMS Plan Approval Order, 81 FR 84930. 



162 

Members that will be required to report this information, 58 Industry Members will be reporting 

this information directly to the CAT, and 42 Industry Members will be reporting this information 

through third-party reporting agents. The Commission believes this is a reasonable estimation 

because the majority of Industry Members that are identified as market makers in the CAT have 

developed their own systems and technology to report directly to the CAT. The Commission 

believes that the majority of market makers handle reporting themselves because they likely 

submit a sufficient number of reportable events. The Commission did not receive any comments 

regarding the estimated number of broker-dealers that would be required to report for the original 

receipt or origination of an order to sell an equity security whether the order is a short sale 

effected by a market maker in connection with bona-fide market making activities in the security 

for which the exception in Rule 203(b)(2)(iii) of Regulation SHO is claimed, or about the 

estimated proportion of insourcing vs. outsourcing Industry Members. As such, the Commission 

is keeping the proportion of insourcing vs. outsourcing Industry Members the same as in the 

Proposing Release, but reflective of the estimated 100 broker-dealers rather than 104 broker-

dealers from the Proposing Release. 

The Commission estimates that the 58 insourcing Industry Members that report directly 

to the CAT will incur an initial, aggregate, one-time burden of 15,080 hours, or that each of these 

CAT Reporters will incur an initial, average one-time burden of 260 hours, and that each of these 

58 insourcing Industry Members will incur an initial, aggregate, one-time external expense of 

approximately $870,000 for software and hardware to facilitate reporting of the new data 

elements to CAT, or that each insourcing Industry Member will incur an initial, average one-time 



163 

external expense of approximately $15,000.482 The Commission did not receive any comments 

about the cost and burden estimates for insourcing Industry members. 

The Commission estimates that the 42 outsourcing Industry Members that use third-party 

reporting agents to report to the CAT will incur an initial, aggregate, one-time burden of 420 

hours, or that each of these outsourcing Industry Members will incur an initial, one-time burden 

of 10 hours on average, and that these 42 outsourcing Industry Members will incur an initial, 

aggregate, one-time external expense of approximately $42,000 for software and hardware to 

facilitate reporting use of the BFMM locate exception to CAT, or that each outsourcing Industry 

Member will incur an initial, average one-time external expense of approximately $1,000.483 The 

Commission did not receive any comments about the cost and burden estimates for outsourcing 

Industry Members. 

As discussed above, the Commission continues to believe that the ongoing burden 

associated with reporting to the CAT is already accounted for in the existing information 

collections burdens associated with Rule 613 and the CAT NMS Plan Approval Order submitted 

under OMB number 3235-0671.484 Because this information is already collected and maintained 

 
482  The Commission is basing this figure on the estimated burden and external costs for a broker-dealer that 

handles orders subject to customer specific disclosures required by Rule 606(b)(3) to update their systems 
to capture the data and produce a report to comply with Rule 606. See Disclosure of Order Handling 
Information, Exchange Act Release No. 84528 (Nov. 2, 2018), 83 FR 58338, 58383 (Nov. 19, 2018). This 
is a reasonable proxy for estimating the burdens and costs associated with updating data capture systems 
for reporting purposes here because in both rulemakings broker-dealers were required to update in-house 
data reported for pre-existing reporting obligations. 

483  The Commission believes that the estimated burden and external costs for outsourcing Industry Members is 
reasonable because the burden on individual Industry Members should be significantly lower than 
insourcing Industry Members because of the difference in how these firms report to the CAT. Outsourcing 
Industry Members will not be required to change internal CAT reporting systems, but instead will be 
responsible for making any updates necessary for CAT reporting agents to report this information to the 
CAT. The outsourcing Industry Members will have external costs associated with paying CAT reporting 
agents for any additional fees relating to the change, but because CAT reporting agents can report on behalf 
of numerous outsourcing Industry Members at the same time, the costs of any updates to their systems can 
be distributed amongst outsourcing Industry Members.  

484  See supra n.476. 



164 

by market makers that engage in equity trading and claim the exception pursuant to 17 CFR 

240.17a-3 (“Rule 17a-3 of the Exchange Act”), there is no new ongoing burden associated with 

collecting or recording the information necessary to effectuate CAT reporting of this new 

element. 

PRA Table 3:  
Summary of Estimated Initial One-Time Burdens Related to CAT BFMM Amendment 

Name of 
Information 
Collection 

Type of Burden 
Number of 

Entities 
Impacted 

Initial 
One-
Time 

Hourly 
Burden  

Aggregate 
One-Time 

Hourly 
Burden 

Initial 
One-
Time 
Cost  

Aggregate 
One-Time 

Cost 

CAT: Central 
Repository - 
Short Sale 
Data 

Recordkeeping 25 5.2 130 $4,552 $113,800 

CAT: 
Reporting of 
Bona Fide 
Market 
Making 
Exception – 
Insourcers 

Direct Report 58 260 15,080 $15,000 $870,000 

CAT: 
Reporting of 
Bona Fide 
Market 
Making 
Exception – 
Outsourcers 

Third Party 
Disclosure 42 10 420 $1,000 $42,000 

 

D. Collection of Information is Mandatory 

The information collections are required under Rule 13f-2 and Form SHO for Managers 

that meet the Reporting Threshold and the Amendment to CAT for Plan Participants to collect 

and process new CAT reportable information and for CAT Industry Members that engage in 

certain short sale activity. 

E. Retention Period of Recordkeeping Requirement 

Pursuant to 17 CFR 240.17a-4(b)(7) (“Exchange Act Rule 17a-4(b)(7)”), a broker-dealer 

must preserve for a period of not less than three years, the first two years in an easily accessible 



165 

place, all written agreements (or copies thereof) entered into by such member, broker or dealer 

relating to its business as such, including agreements with respect to any account. 

Pursuant to 17 CFR 240.17a-4(e)(7), a broker-dealer must maintain and preserve in an 

easily accessible place each compliance, supervisory, and procedures manual, including any 

updates, modifications, and revisions to the manual, describing the policies and practices of the 

member, broker or dealer with respect to compliance with applicable laws and rules, and 

supervision of the activities of each natural person associated with the member, broker or dealer 

until three years after the termination of the use of the manual. 

Pursuant to 17 CFR 240.17a-1, every national securities exchange and national securities 

association shall keep and preserve at least one copy of all documents, including all 

correspondence, memoranda, papers, books, notices, accounts, and other such records as shall be 

made or received by it in the course of its business as such and in the conduct of its self-

regulatory activity for a period of not less than five years, the first two years in an easily 

accessible place, subject to the destruction and disposition provisions of 17 CFR 240.17a-6 

(“Rule 17a–6”). 

F.  Confidentiality 

As discussed above, Rule 13f-2 requires certain Managers to file monthly in EDGAR, on 

Form SHO, certain short sale volume data and short interest position data. However, the 

Commission will aggregate the information reported by Managers on Form SHO prior to 

publication to protect the identity of reporting Managers. 

To the extent that the Commission receives—through its examination and oversight 

program, through an investigation, or by some other means—records or disclosures from a 

broker-dealer that relate to or arise from the Rule that are not publicly available, such 



166 

information will be kept confidential, subject to the provisions of applicable law. 

With respect to the Amendment to CAT, Rule 613, and the CAT NMS Plan, information 

collected and electronically provided to the Central Repository will only be available to the 

national securities exchanges, national securities association, and the Commission. Further, the 

CAT NMS Plan includes policies and procedures designed to ensure the security and 

confidentiality of all information submitted to the Central Repository, and to ensure that all 

SROs and their employees, as well as all employees of the Central Repository, shall use 

appropriate safeguards to ensure the confidentiality of such data. The Commission will receive 

confidential information pursuant to this collection of information, and such information will be 

kept confidential, subject to the provisions of applicable law. 

VIII. Economic Analysis 

A. Introduction 

The Commission is adopting a new rule and related form as well as an amendment that 

introduce new reporting requirements in connection with short sales. Rule 13f-2, Form SHO, and 

the amendment to CAT (collectively, the “adoptions”) will improve the transparency of short 

selling activity to regulators, market participants and the investing public. The data provided by 

these adoptions will close informational gaps in the currently available data, which in turn will 

benefit market participants and help foster fair and orderly markets. The adoptions will also 

improve regulatory oversight and enhance regulators’ examination of market behavior and 

recreation of significant market events. These improvements may, in turn, discourage market 

manipulation to the extent that it occurs.485 

 
485 See infra Part VIII.C.1 for additional discussion on potential market manipulation. 



167 

The Commission is mindful of the economic effects that may result from the adoptions of 

Rule 13f-2, Form SHO, and the amendment to CAT, including the benefits, costs, and the effects 

on efficiency, competition, and capital formation.486 The Commission recognizes that the 

adoptions might impose significant compliance costs on market participants. Requiring 

Managers487 to report large positions and short sale activity will likely impose significant initial 

and ongoing costs on Managers. The amendment to CAT will also impose compliance costs on 

broker-dealers. The Commission is cognizant of these costs and has modified the Proposals in a 

way that is intended to reduce the burdens incurred by market participants without sacrificing the 

transparency that is expected to result from the adoption of the Proposals. Modifications from the 

proposed rule and form that are likely to reduce reporting costs to Managers relative to the 

Proposals include: revising a key reporting threshold based on a monthly average calculation 

instead of a daily calculation, which is expected to reduce the number of reporting entities; 

streamlining the reporting requirements of Forms SHO; not adopting the “buy to cover” CAT 

reporting requirement; and not adopting Rule 205. Overall, the Commission has sought to 

balance the costs of the adoptions against the benefit to transparency that will be provided to 

regulators and the public.  

The Commission recognizes that the adoptions may lead to tradeoffs in market quality, 

with a risk of negative effects on price efficiency. A potential reduction in market manipulation 

 
486 Exchange Act section 3(f) requires the Commission, when it is engaged in rulemaking pursuant to the 

Exchange Act and is required to consider or determine whether an action is necessary or appropriate in the 
public interest, to consider, in addition to the protection of investors, whether the action would promote 
efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). In addition, Exchange Act section 
23(a)(2) requires the Commission, when making rules pursuant to the Exchange Act, to consider among 
other matters the impact that any such rule would have on competition and not to adopt any rule that would 
impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the 
Exchange Act. See 15 U.S.C. 78w(a)(2). 

487  See infra note 506 and the accompanying discussion in the text on the definition of “Manager”. 



168 

through improved regulatory oversight stemming from the adoptions may have a positive impact 

on market quality. Furthermore, the adoptions will provide market participants with improved 

transparency into short selling activity, which might also lead to improved price efficiency. On 

the other hand, Rule 13f-2 and the disclosures Form SHO requires will increase the costs and 

risks of implementing large short positions, which might reduce price efficiency by reducing 

short selling and the positive effects of such short selling. Furthermore, public disclosure of 

information resulting from Rule 13f-2 and Form SHO might facilitate short squeezes, which in 

turn might also reduce market quality.488  

The Commission has considered the economic effects of the adoptions and wherever 

possible, has quantified their likely economic effects. The Commission is providing both a 

qualitative assessment and quantified estimates of the adopted rule and CAT amendment’s 

economic effects where feasible. The Commission has received comments on the Proposals and 

has addressed commenters’ concerns with the economic analysis. The Commission has 

incorporated data and other information to assist it in the analysis of the economic effects of the 

adoptions. However, as explained in more detail below, because the Commission does not have, 

and in certain cases does not believe it can reasonably obtain data that may inform the 

Commission on certain economic effects, the Commission is unable to quantify certain economic 

effects. Further, even in cases where the Commission has some data, quantification is not 

practicable due to the number and type of assumptions necessary to quantify certain economic 

effects, which render any such quantification unreliable. Our inability to quantify certain costs, 

 
488 See infra Part VII.C.1. The Commission expects that for many securities, a limited number of Manager 

positions may surpass the reporting requirement thresholds. Given the eventual public release of the 
aggregate position sizes, there is a risk that other market participants will be able to potentially identify the 
Managers with large short positions and orchestrate short squeeze efforts against them (should they seem 
vulnerable against a short squeeze). Nevertheless, the Commission maintains the ability of identifying such 
behavior using CAT data, which could mitigate initiation of such behavior.  



169 

benefits, and effects does not imply that the Commission believes such costs, benefits, or effects 

are not significant.  

The Commission is adopting the Manager reporting and disclosures to implement the 

statutory mandate of section 929X of the Dodd-Frank Act. Accordingly, many of the costs and 

benefits of Rule 13f-2 and Form SHO stem from the Commission’s implementation of the 

statutory mandate. In addition, the Commission is exercising discretion in its design and 

implementation of Rule 13f-2 and Form SHO and recognizes that this discretion has economic 

effects. Specifically, the Commission is using this discretion to ensure that the disclosures are 

additive to currently available data and will be useful to both market participants and regulators, 

with a focus on addressing data limitations exposed by market events, especially the market 

volatility in January 2021. Additionally, the Commission is adopting a Proposed CAT 

amendment in order to address such data limitations outside of the context of the statutory 

mandate of section 929X. 

The Commission has access to several sources of data that provide some short selling 

information, one of which is CAT. CAT data can be used by regulators for regulatory purposes, 

including analysis and reconstruction of broad-based market events; in market analysis in 

support of regulatory decisions; in market surveillance, investigations, and other enforcement 

activities. At times, these regulatory functions can benefit from information on short sale 

positions of market participants and how these positions change over time. CAT does not include 

data that can be used to track such positions, and as discussed further above, Commission staff 

experience in reconstructing the events of January 2021 provided insights into the challenges of 

using existing CAT data for this purpose. Other existing data sources, including public data 

sources, are also limited for these purposes as well as for informing members of the public and 



170 

market participants. Specifically, current data fail to distinguish the type of trader engaged in 

short selling or identify individual short positions, as well as the fluctuation in those positions, 

even for regulatory use. Furthermore, current data do not track the use of the bona fide market 

maker exemption when short selling without the “locate”.489 The adopted rule will serve to 

increase the Commission’s awareness and understanding of short sale activity by Managers with 

large short sale positions by requiring reporting of their reliance on the bona fide marker maker 

locate exception. The adopted amendment will serve the Commission in its regulatory capacity. 

Existing data sources fail to accurately represent economic short positions of Managers 

due to several limitations.490 While FINRA publishes aggregate short interest on a bimonthly 

basis, these data do not reflect the timing with which short positions expand or shrink in the two-

week period between reporting dates.491 Some other data sources report daily short sale 

volume492 without distinguishing between short sale transactions that affect economic short 

 
489  See supra note 10 for description of the locate requirement of Rule 203 of Regulation SHO. 
490  One commenter stated that the data reported from Form SHO would only provide very limited additional 

relevant insight relative to FINRA short interest data. See SBAI Letter at 2. The Commission reiterates that 
Form SHO data are additive to existing data, including FINRA short interest data. More specifically, 
publicly released Form SHO data will indicate which equities have large short positions held by 
institutional investment managers. This is different from seeing large short interest, which may indicate 
many smaller positions, including those held by retail investors. Large short positions accumulated by 
Managers are often based on fundamental research, in contrast to smaller positions which more likely stem 
from hedging or arbitrage strategies. Therefore, information on the magnitude of aggregate large short 
positions, especially in relation to overall short interest, may highlight the degree to which short sales of a 
particular security are concentrated among Managers guided by fundamental research relative to hedging or 
arbitrage strategies. Thus, Form SHO will provide novel information on short sale behavior relative to other 
short sale data sources. 

491 FINRA requires all members to report settled short positions in equities of all customer and proprietary 
accounts twice per month. According to the schedule it has adopted, FINRA publishes the short sale data 
about a week after each reporting due date. See, e.g., Short Interest Reporting, available at 
https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest.  

492 FINRA reports daily off-exchange short sale volume data that aggregate, for each exchange-listed security, 
short sale transactions reported to a FINRA TRF or ADF. See Short Sale Volume Data, FINRA, available 
at https://www.finra.org/finra-data/browse-catalog/short-sale-volume-data. Registered exchanges also 
report daily short sale volume aggregated at the security level, often charging a fee. See, e.g., TAQ Group 
Short Sales & Short Volume, New York Stock Exchange, available at https://www.nyse.com/market-
data/historical/taq-nyse-group-short-sales. 



171 

positions and short sale transactions meant for purposes such as liquidity provision or hedging of 

long positions. As such, these existing short volume data may not be combined with the 

bimonthly short interest data to construct aggregate daily short positions of any particular 

Manager. Securities lending data, bolstered by the recently adopted 17 CFR 240.10c-1a 

(“Exchange Act Rule 10c-1a”), will offer a clearer picture of the relationship between short 

interest and securities being lent;493 however, this does not allow the Commission or the public 

to observe and monitor large short positions of Managers.494 No existing data identify short 

positions of individual traders. Even though some regulatory data, e.g., CAT data, identify short 

transactions of individual traders, they may not be utilized to reconstruct short positions because 

economic short positions may change in the absence of any short sale transactions. Thus, the 

Commission is adding to the existing data sources to further illuminate the short selling 

market.495 

These data limitations inhibit regulators from performing functions such as market 

surveillance and market reconstruction. For example, the Commission does not have regular 

access to information about Managers who hold large short positions, even if those positions are 

held for a long period of time. If the positions are sufficiently large and prices move against the 

 
493  Specifically, one will be able to look at a particular securities lending data to see if changes in short interest 

correspond to many smaller lending transactions or a smaller quantity of large securities loans, which may 
indicate market sentiment towards the particular company. However, it is impossible to discern whether 
these securities loans are being borrowed by numerous short sellers or instead concentrated among a small 
number of large short sellers. This information will be covered by Rule 13f-2 if the short seller(s) crosses 
the Report Thresholds. In addition, unlike FINRA short interest data, Rule 13f-2 data will incorporate 
Managers that are not FINRA members. Furthermore, while fees are required to access exchanges’ short 
volume and short transaction data, market participants will not have to pay a fee to view publicly released 
Form SHO data.  

494  Unlike the Commission, however, the public will observe anonymized, aggregated data covering gross 
short sale positions of Managers that exceed at least one of the Reporting Thresholds.  

495 One commenter stated that Form SHO data collected by the Commission would not fully capture the short 
selling market. See SBAI Letter at 3. The Commission has not stated that Form SHO data provides a 
complete perspective of the short selling market. However, Form SHO data will reveal large short positions 
of Managers, which is not readily available from any other data source. 



172 

positions, the Commission currently cannot efficiently assess the risk that these positions impose 

on the market more broadly.496 Further, with existing data, the Commission may have difficulty 

reconstructing significant market events, thereby inhibiting the Commission from quickly 

understanding market events and providing efficient market oversight.  

B. Baseline  

The baseline against which the costs, benefits, and the effects on efficiency, competition, 

and capital formation of the final rule are measured consists of the current state of the equity 

market, current practices of Managers and broker-dealers, and the current regulatory framework. 

The economic analysis considers existing regulatory requirements, including recently adopted 

rules, as part of its economic baseline against which the costs and benefits of the final rule are 

measured.497 

Several commenters requested the Commission consider interactions between the 

economic effects of the proposed rule and other recent Commission proposals.498 Commenters 

 
496  See infra Part VIII.C.1 for discussion of how the Commission might use Form SHO data for understanding 

market events. 
497  See, e.g., Nasdaq v. SEC, 34 F.4th 1105, 1111-15 (D.C. Cir. 2022). This approach also follows SEC staff 

guidance on economic analysis for rulemaking. See Staff’s “Current Guidance on Economic Analysis in 
SEC Rulemaking” (March 16, 2012), available at 
https://www.sec.gov/divisions/riskfin/rsfi_guidance_econ_analy_secrulemaking.pdf (“The economic 
consequences of proposed rules (potential costs and benefits including effects on efficiency, competition, 
and capital formation) should be measured against a baseline, which is the best assessment of how the 
world would look in the absence of the proposed action.”); Id. at 7 (“The baseline includes both the 
economic attributes of the relevant market and the existing regulatory structure.”). The best assessment of 
how the world would look in the absence of the proposed or final action typically does not include recently 
proposed actions, because doing so would improperly assume the adoption of those proposed actions. 

498  See, e.g., MFA Letter 2, at 3-4 (“We believe the Commission should take into account the sheer scope of 
all its recently proposed rules when determining whether to adopt any final rules or in setting compliance 
dates for any of the new requirements”); Eric J. Pan, President and CEO, and Susan Olson, General 
Counsel, Investment Company Institute (Aug. 17, 2023), at 3, available at 
https://www.sec.gov/comments/s7-04-22/s70422-246959-547222.pdf (“ICI Letter 2”) (“we request that the 
Commission . . . publish a thorough analysis of the cumulative effects of the Interconnected Rules that 
accounts for interconnections and dependencies among them”).  



173 

indicated there could be interactions between this rulemaking and five proposals499 that have 

since been adopted: Rule 10c-1a,500 Beneficial Ownership Reporting,501 Private Fund 

 
499  Reporting of Securities Loans, Release No. 34-93613 (Nov. 18, 2021), 86 FR 69802 (Dec. 8, 2021) (see Jiří 

Król, Deputy CEO, Global Head of Government Affairs, Alternative Investment Management Association 
Ltd (Aug. 11, 2023), at 4, available at https://www.sec.gov/comments/s7-08-22/s70822-243880-
514482.pdf) (“AIMA Letter 2”); Modernization of Beneficial Ownership Reporting, Release No. 33-11030 
(Feb. 10, 2022), 87 FR 13846 (Mar. 10, 2022) (see MFA Letter 2, at 3; Jennifer Han, Executive Vice 
President, Chief Counsel and Head of Regulatory Affairs, Managed Funds Association, and National 
Association of Private Fund Managers (July 21, 2023), at 14-15, available at 
https://www.sec.gov/comments/s7-08-22/s70822-233179-486723.pdf) (“NAPFM Letter”); ICI Letter 2, at 
7 n. 13); Amendments to Form PF to Require Current Reporting and Amend Reporting Requirements for 
Large Private Equity Advisers and Large Liquidity Fund Advisers, Release No. IA-5950 (Jan. 26, 2022), 87 
FR 9106 (Feb. 17, 2022) (see MFA Letter 2, at 3; NAPFM Letter 10-12); Private Fund Advisers; 
Documentation of Registered Investment Adviser Compliance Reviews, Release No. IA-5955 (Feb. 9, 
2022), 87 FR 16886 (Mar. 24, 2022) (see MFA Letter 2, at 3; NAPFM Letter 10-12); Shortening the 
Securities Transaction Settlement Cycle, Release No. 34-94196 (Feb. 9, 2022), 87 FR 10436 (Feb. 24, 
2022) (see ICI Letter 2 at 7 n. 13).  

500  See Reporting of Securities Loans, Release No. 34-98737 (Oct. 13, 2023) (“Rule 10c-1a”). The securities 
loan reporting rule requires any person who loans a security on behalf of itself or another person to report 
information about securities loans to a registered national securities association (namely, FINRA) and 
requires FINRA to make certain information it receives available to the public. The covered persons will 
include market intermediaries, securities lenders, broker-dealers, and reporting agents. The final rule’s 
compliance dates require that FINRA propose its rules within four months of the effective date of final 
Rule 10c-1a, or approximately May 2024, and finalize them no later than 12 months after the effective date 
of final Rule 10c-1a, or approximately January 2025; that FINRA implement data retention and availability 
requirements for reporting 24 months after the effective date of final Rule 10c-1a, or approximately 
January 2026; that covered persons report Rule 10c-1a information to FINRA starting on the first business 
day thereafter; and that FINRA publicly report Rule 10c-1a information within 90 calendar days thereafter, 
or approximately May 2026. See Rule 10c-1a, Part VIII. 

501  See Modernization of Beneficial Ownership Reporting, Release No. 33-11253 (Oct. 10, 2023) (“Beneficial 
Ownership Reporting”). Among other things, the amendments generally shorten the filing deadlines for 
initial and amended beneficial ownership reports filed on Schedules 13D and 13G, and require that 
Schedule 13D and 13G filings be made using a structured, machine-readable data language. The new 
disclosure requirements and filing deadlines for Schedule 13D are effective 90 days after publication in the 
Federal Register. The new filing deadline for Schedule 13G takes effect on September 30, 2024, and the 
rule’s structured data requirements have a one-year implementation period ending December 18, 2024. See 
Beneficial Ownership Reporting, Part II.G. 



174 

Advisers,502 Settlement Cycle,503 and the May 2023 SEC Form PF Amending Release.504 These 

rules were not included as part of the baseline in the Proposing Release because they were not 

adopted at that time. In response to commenters, this economic analysis considers potential 

economic effects arising from any overlap between the compliance period for the final 

amendments and each of these recently adopted rules.505 

 
502  See Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews, Release 

No. IA-6383 (Aug. 23, 2023), 88 FR 63206 (Sept. 14, 2023) (“Private Fund Advisers Adopting Release”). 
The Private Fund Advisers Adopting Release includes new rules designed to protect investors who directly 
or indirectly invest in private funds by increasing visibility into certain practices and restricting other 
practices, along with amendments to the Advisers Act books and records rule and compliance rule. The 
amended Advisers Act compliance provision for registered investment advisers has a November 13, 2023 
compliance date. The compliance date is March 14, 2025 for the rule’s quarterly statement and audit 
requirements for registered investment advisers with private fund clients. For the rule’s adviser-led 
secondaries, restricted activity, and preferential treatment requirements, the compliance date is September 
14, 2024 for larger advisers and March 14, 2025 for smaller advisers. See Private Fund Advisers Adopting 
Release, Parts IV, VI.C.1. 

503  See Settlement Cycle Adopting Release. Settlement Cycle Adopting Release shortens the standard 
settlement cycle for most broker-dealer transactions from two business days after the trade date to one 
business day after the trade date (“T+1”). With certain exceptions, the rule has a compliance date of May 
28, 2024. See Settlement Cycle Adopting Release, Parts VII, VII.B.3. 

504  See Form PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers; 
Requirements for Large Private Equity Fund Adviser Reporting, Release No. IA-6297 (May 3, 2023), 88 
FR 38146 (June 12, 2023) (“May 2023 SEC Form PF Amending Release”). The Form PF amendments 
require large hedge fund advisers and all private equity fund advisers to file reports upon the occurrence of 
certain reporting events. For new sections 5 and 6 of Form PF, the compliance date is December 11, 2023; 
for the amended, existing sections, it is June 11, 2024. See May 2023 SEC Form PF Amending Release, 
Part II.E. 

505  In addition, commenters indicated there could also be overlapping compliance costs between the final 
amendments and proposals (or in the case of Release No. 34-93784, a portion of the proposal) that have not 
been adopted. Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, 
and Business Development Companies, Release No. 33-11028 (Feb. 9, 2022), 87 FR 13524 (Mar. 9, 2022) 
(see MFA Letter 2, at 3; NAPFM Letter 18-19); Outsourcing by Investment Advisers, Release No. IA-6176 
(Oct. 26, 2022), 87 FR 68816 (Nov. 16, 2022) (see MFA Letter 2, at 3; NAPFM Letter 17-18); Enhanced 
Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and 
Governance Investment Practices, Release No. 33-11068 (May 25, 2022), 87 FR 36654 (June 17, 2022) 
(see MFA Letter 2, at 3; NAPFM Letter 19-20); Safeguarding Advisory Client Assets, Release No. IA-6240 
(Feb. 15, 2023), 88 FR 14672 (Mar. 9, 2023) (see MFA Letter 2, at 3; NAPFM Letter 9-10); Prohibition 
Against Fraud, Manipulation, or Deception in Connection With Security-Based Swaps; Prohibition Against 
Undue Influence Over Chief Compliance Officers; Position Reporting of Large Security-Based Swap 
Positions, Release No. 34-93784 (Dec. 15, 2021), 87 FR 6652 (Feb. 4, 2022) (see MFA Letter 2, at 3; 
NAPFM Letter 13-14; AIMA Letter 2, at 3; ICI Letter 2, at 7 n. 13); Prohibition Against Conflicts of 
Interest in Certain Securitizations, Release No. 33-11151 (Jan. 25, 2023), 88 FR 9678 (Feb. 14, 2023) (see 
MFA Letter 2, at 3; NAPFM Letter at 21-22); Further Definition of “As a Part of a Regular Business” in 
the Definition of Dealer and Government Securities Dealer, Release No. 34-94524 (Mar. 28, 2022), 87 FR 
23054 (Apr. 18, 2022) (see NAPFM Letter 12-13); Standards for Covered Clearing Agencies for U.S. 

 



175 

1. Institutional Investment Managers 

The potential universe of persons who meet the definition of Manager is broad and 

diverse. Exchange Act section 13(f)(6)(A) defines the term “institutional investment manager” as 

“includ[ing] any person, other than a natural person, investing in or buying and selling securities 

for its own account, and any person exercising investment discretion with respect to the account 

of any other person.”506 Exchange Act section 3(a)(9) states that “[t]he term ‘person’ means a 

natural person, company, government, or political subdivision, agency, or instrumentality of a 

government.” “‘Company’ means a corporation, a partnership, an association, a joint-stock 

company, a trust, a fund, or any organized group of persons whether incorporated or not; or any 

receiver, trustee in a case under title 11 of the United States Code or similar official or any 

liquidating agent for any of the foregoing, in his capacity as such.” 507 As a result, Managers 

exercising discretion over the accounts of others include but are not limited to investment 

advisers exercising investment discretion over client assets, including investment company assets 

such as mutual funds, ETFs, and closed-end funds; banks and bank trust corporations offering 

investment management services; pension fund managers; firms, including broker-dealers and 

insurance companies, managing corporate or employee investment assets; and individuals 

exercising investment discretion over the accounts of others. Also, as a result of the definition of 

 
Treasury Securities and Application of the Broker-Dealer Customer Protection Rule With Respect to U.S. 
Treasury Securities, Release No. 34-95763 (Sept. 14, 2022), 87 FR 64610 (Oct. 25, 2022) (see NAPFM 
Letter 16-17); Amendments Regarding the Definition of “Exchange” and Alternative Trading Systems 
(ATSs) That Trade U.S. Treasury and Agency Securities, National Market System (NMS) Stocks, and Other 
Securities, Release No. 34-94062 (Jan. 26, 2022), 87 FR 15496 (Mar. 18, 2022) (see NAPFM Letter 22-
23). To the extent those proposals are adopted, the baseline in those subsequent rulemakings will reflect the 
existing regulatory requirements at that time. 

 
506  See also Exchange Act section 3(a)(35) defining when a person exercises “investment discretion” with 

respect to an account.  
507  See section 2(a)(8) of the Investment Company Act. The term “company” in the Exchange Act “ha[s] the 

same meaning[] as in the Investment Company Act of 1940.” Exchange Act section 3(a)(19). 



176 

Manager, the set of Managers excludes natural persons buying and selling securities only for 

their own account but does include natural persons exercising discretion over the account of 

another person.508 

Notwithstanding the broad statutory definition of Manager, it is the Commission’s 

understanding that only a fraction of Managers is believed to engage in short selling and fewer 

still engage in any substantial short selling. Registered broker-dealers’ market making 

operations, for example, engage in short selling but, with the exception of option market makers, 

generally do not hold large positions overnight. The Commission is also aware, for example, that 

advisers to both hedge funds and registered investment companies engage in short selling to 

varying degrees. However, with the exception of hedge funds, institutional investors are viewed 

as “largely absent” from the short selling portion of the financial markets.509 Using actual 

investment strategies employed by registered investment companies510 as a proxy for the number 

of Managers in the public fund markets engaged in short selling, the number of such Managers is 

 
508  To the extent that a natural person exercising discretion over the account of another person has a short 

position exceeding the thresholds, that natural person would be subject to the costs associated with Rule 
13f-2 and the Form SHO. We expect such a natural person would likely use the fillable web form provided 
by EDGAR to input Form SHO disclosures. Few Managers that are natural persons would be likely to have 
short positions large enough to exceed the threshold. See infra Part VIII.C.6 for more information on 
Managers’ costs. 

509 Peter Molk Frank Partnoy, Institutional Investors as Short Sellers?, 99 B.U. L. REV. 837, 839 (2019). Molk 
and Partnoy’s paper “identif[ies] the regulatory and other barriers that keep key categories of 
institutions, specifically, mutual funds, insurance companies, pension funds, banks, sovereign wealth funds, 
endowments, and foundations, from acquiring significant short positions.” Id. at 844. 

510 As of Dec. 20212, there were 9,050 mutual funds (excluding money market funds) with approximately 
$22,652 billion in total net assets, 2,819 ETFs organized as an open-end fund or as a share-class of an 
open-end fund with approximately $5,910 billion in total net assets, 680 registered closed-end funds with 
approximately $363 billion in total net assets, 701 unit investment trusts with approximately $2,184 billion 
in total net assets, and 15 variable annuity separate accounts registered as management investment 
companies on Form N-3 with $237 billion in total net assets. Estimates of the number of registered 
investment companies and their total net assets are based on an analysis of Form N-CEN filings as of July 
31, 2023. For open-end management funds, closed-end funds, and management company separate 
accounts, total net assets equals the sum of monthly average net assets across all funds in the sample during 
the reporting period. See Item C.19.a (Form N-CEN). For UITs, we use the total assets as of the end of the 
reporting period, and for UITs with missing total assets information, we use the aggregated contract value 
for the reporting period instead. See Item F.11 and F.14.c in Form N-CEN. 



177 

likely to be relatively small. A Division of Economic and Risk Analysis White Paper survey of 

all mutual fund Form N-SAR filings in 2014 found that “[w]hile 64 percent of all funds were 

allowed to engage in short selling, only 5 percent of all funds actually did so.”511 As of 

December 2022, there were 7,164 registered investment companies with total equity positions 

valued at approximately $14.7 trillion. Of those, 138 funds had short positions with a total short 

position value of approximately $15 billion. Of the funds with short positions, only 15 funds held 

positions equal to or greater than $10 million.512 Additionally, according to an analysis of 

publicly available Form PF data, approximately sixteen percent of single-strategy hedge funds 

employ strategies involving short selling.513 

While information about Managers’ investments other than from funds managed by 

investment advisers is limited, the Commission understands that such other Managers, other than 

options market makers due to their routine use of hedging transactions, do not frequently 

establish short positions that would be large enough to be subject to the rule’s reporting 

requirement.514 One possible proxy for the number of Managers that might potentially have a 

 
511 Daniel Deli et. al., Use of Derivatives By Registered Investment Companies at 8, DERA White Paper 

(2015), available at https://www.sec.gov/files/derivatives12-2015.pdf. 
512 This is based on an analysis of data provided by registered investment companies to the Commission on 

Form N-PORT filings received through July 31, 2023. 
513 As of 2022 Q4, there are 1,107 hedge funds out of 6,553 Equity Single-Strategy hedge funds (excluding 

fund-of-funds hedge funds) that employ short selling in an Long/Short and Short Bias strategy. Assets 
under management (AUM) in these types of hedge funds total approximately $1.165 trillion. 2022 Q2 
Private Fund Statistics, Division of Investment Management Analytics Office, available at 
https://www.sec.gov/divisions/investment/private-funds-statistics.shtml. Data includes both U.S. and non-
U.S. domicile hedge funds managed by SEC-registered investment advisers with at least $150 million in 
private fund assets under management. The data do not include hedge funds that were classified as multi-
strategy on Form PF. These hedge funds could employ short selling as part of their multi-strategy. Data for 
non-U.S. domicile hedge funds with an equity short-bias strategy is not publicly available for 2022 Q2. In 
this case the last publicly available values were used (7 funds with a total AUM of $1 billion) from 2019 
Q3. As of the end of 2021, hedge fund assets totaled approximately $4 trillion. Global Hedge Fund Industry 
Assets Top $4 Trillion for the First Time, Reuters (Jan. 20, 2022) (retrieved from Factiva database). 

514  For example, according to Molk and Partnoy “insurance companies generally are not active short sellers. 
Short selling by insurance companies is used almost exclusively to hedge positions, and generally is not 

 



178 

reporting obligation is a fraction of the number of Managers reporting positions on Form 13F 

because such persons by definition manage accounts holding section 13(f) securities having an 

aggregate fair market value of at least $100 million, making such Managers more likely to have 

the resources to engage in short selling that exceeds Rule 13f-2’s thresholds. As of March 31, 

2023, 8,551 Managers515 with investment discretion over approximately $38.79 trillion reported 

holdings on Form 13F in Section 13(f) securities.516 The Commission also believes that 

registered investment advisers, particularly those managing hedge funds, are the primary 

Managers likely to be affected by Rule 13f-2. Though the Commission lacks data to quantify the 

exact number affected parties, the Commission estimates that the total number of Managers with 

reporting obligations will be between 252 and 1,000.517 

2. Short selling 

Short selling is a widely used market practice, which allows investors to profit if an asset 

declines in value or to hedge risks. Market participants can build an economic short position 

using traditional means (i.e., borrowing shares and selling them into the market to buy back later) 

 
used with respect to equity positions at all.” Supra note 509, at 850. See also Molk and Partnoy discussion 
about banks and trusts. “Trust administrators … have a history of adopting conservative investment 
strategies. Although shorting can be used to reduce risk when matched with similar long positions, using 
short selling as an income generation tool is not consistent with the overall conservative investment 
tradition.” Id. at 854. 

515  A portion of these filings are Form 13Fs filed to declare that the filer’s holdings are reported on another 
filer’s Form 13F. Thus, not all 8,551 Managers’ Form 13Fs represent unique holdings. 

516  The statistic is computed by the Commission from data filed on Form 13F.  
517  See supra Part VII.B.1 for more information on the estimates of how many Managers would have reporting 

obligations. The Commission estimated the number of reporting Managers using the short sale activity of 
Managers that submitted Form SH. Only Managers that exercised investment discretion over accounts with 
aggregate fair market values of at least $100,000,000 in securities described in Rule 13f-1(c) under the 
Exchange Act, and effected short sales of those securities, were required to file Form SH. Given that 
Managers included in the Form SH data may be a subset of Managers with obligations under Rule 13f-2, 
the estimate of 252 Managers is likely lower than the number who will ultimately report Form SHO. 
However, the Commission lacks data to better estimate the universe of Managers with obligations under 
13f-2. See also infra Part VIII for a discussion of the applicability of Form SH data to estimating the 
number of Managers affected by Rule 13f-2. 



179 

or they can gain short exposure using derivatives. This section provides an overview of the 

current state of obtaining short exposure to equities and the different means of short selling – i.e., 

traditional means and using derivatives.  

a. Short Selling Equities 

A short sale is the sale of a security that the seller does not own or any sale that is 

consummated by the delivery of a security borrowed by, or for the account of, the seller.518 In 

general, short selling is used to profit from an expected downward price movement, to provide 

liquidity in response to unanticipated demand, or to hedge the risk of an economic long position 

in the same security or in a related security.519 To short sell a stock, the short seller borrows 

shares of a stock from a lender – typically a long-term investor such as a mutual fund or pension 

fund – and sells those shares into the market. Later, the short seller purchases the same number 

of shares and returns them to the lender. The profit on the transaction for the short seller is the 

difference between the price at which the shares were initially sold and the price at which the 

investor re-purchased the shares – less any fees such as securities lending fees. If the price of the 

stock goes down then this difference will be positive and the short seller will make money. Short 

selling contributes to price efficiency when short sellers trade to incorporate negative 

information into stock prices. 

In addition to short selling based on negative sentiment, market participants also short 

sell to hedge existing positions. Hedging is a particularly potent motive to short sell a stock for 

options market makers who can hedge the risk of writing a call option by short selling the 

underlying stock in the stock market. Other investors use short selling to hedge out an unwanted 

 
518 See Rule 200(a) of Regulation SHO, 17 CFR 242.200(a). See also Regulation SHO Adopting Release. 
519  One commenter supported this statement, stating that short selling provides liquidity and is an important 

hedging tool. See SBAI Letter at 2. 



180 

component of a stock’s return. For example, an investor who wants to buy a particular stock to 

trade on stock specific information but does not want to expose itself to industry risk can hedge 

industry risk by short selling an industry index ETF while purchasing the underlying security. 

Market makers also use short selling extensively to maintain two sided quotes in the temporary 

absence of inventory. Lastly, traders may use short selling as part of algorithmic trading 

strategies attempting to benefit from temporary pricing anomalies. While short selling to trade on 

information or to hedge generally results in short positions that are held for some time, registered 

broker-dealers engaged in market making operations and algorithmic technical traders generally 

close their positions by the end of the day and thus their short positions generally do not show up 

in existing measures of short interest.520 

Short selling generally entails more risk than holding a long position. At worst, a buyer of 

a long position can lose its entire investment. This is not true for a short seller. If the stock price 

increases from the short sale price, the investor loses money and since prices could potentially 

rise indefinitely, the short seller could lose more than the value of its original investment. 

Additionally, margin requirements for short selling are typically 150 percent – including the 

proceeds of the short sale plus an additional 50 percent of the value of the short position.521 If the 

stock price goes up, the investor may receive a margin call, which would require the investor to 

commit additional assets to meet margin requirements. To protect itself from losses, if an 

investor is unable to meet margin requirements, the broker-dealer may close the short position at 

a significant loss to the short seller. These dynamics can make it difficult for investors to 

maintain short positions in highly volatile stocks. 

 
520 See infra Part VIII.B.4.i for a discussion of existing short interest data. 
521  Regulation T specifies that in most situations margin requirements for equity short sales must be 150 %. 

See 12 CFR 220.12.181 

Short selling is facilitated by the securities lending market. Borrowing shares generally 

occurs two days after the short sale is executed. This is because stock market transactions 

normally settle two business days after the transaction occurs, while securities lending 

transactions settle on the same day.522 Consequently, a short seller (or its broker-dealer) will 

gauge the ability to borrow shares prior to executing the short sale, referred to as obtaining a 

“locate,” but would actually borrow the share on the day that it is required to deliver the share to 

settle the stock market transaction.  

Short selling is prevalent in equity markets in general. A common ratio used to capture 

the amount of short selling is the short interest ratio, which measures the fraction of shares sold 

short at a given point in time divided by the total shares outstanding for that security. Figure 1 

below presents the time series average for short interest outstanding for equities with different 

characteristics. This Figure shows that short interest tends to be higher for small-cap stocks than 

for mid- or large-cap stocks.523 

Another way to measure the prevalence of short selling in financial markets is by 

analyzing the fraction of transactions that involve a short seller. Short sellers are involved in 

nearly 50 percent of trading volume, while only about 2 percent of shares outstanding are held 

short in the U.S. equity markets.524 This average volume of short selling tends to be much higher 

than the typical changes in short interest,525 suggesting that a significant fraction of short selling 

 
522  On Feb. 15, 2023, the Commission adopted a rule to shorten the settlement cycle to one business day; 

compliance by broker-dealers will be required as of May 28, 2024. See Settlement Cycle Adopting Release. 
523  One commenter stated that biotechnology companies, 90% of which have market capitalizations that would 

qualify as small-cap or micro-cap stocks, face an outsized proportion of short positions. See infra note 593. 
524 See DERA 417(a)(2) Study. Figure F.1 in the DERA 417(a)(2) Study (showing that the level of short 

selling as a percentage of trading volume grew from 2007 to 2013 to about 50 %). See also D. Rapach, M. 
C. Ringgenberg, and G. Zhou, Short Interest and Aggregate Stock Returns, J. OF FIN. ECON. 46-65 (2016). 

525 The Commission analyzed trading volume for common shares during the year 2019. This analysis revealed 
that the average common share during this period traded approximately 5% of shares outstanding each 

 



182 

volume is reversed very quickly. Such short selling is indicative of the fact that short selling is a 

key component of modern market making strategies and technical algorithmic trading.526 

Figure 1: Short Interest Ratio for Non-Financial Common Stocks, Jan. 2005 – Feb. 2023 

 

This figure plots the weighted average short interest ratio for three groups of stocks based on market capitalization 
on a bi-weekly basis from for January 2005 to April 2023. Large cap stocks are defined as having a market 
capitalization of greater than $10 billion, mid cap as $2 billion to less than $10 billion, and small cap as less than $2 
billion. We estimate the short interest ratio for each stock as the number of shares in short interest reported by the 
exchanges on a bi-weekly basis and obtained from the Compustat North America Supplemental Short Interest File 
(for NYSE- and Nasdaq-listed stocks), divided by shares outstanding obtained from the Center for Research in 
Security Prices, LLC (CRSP) daily stock files. Since short interest is reported as of the settlement date, we match 
short interest to the trading date two days prior to the short interest report date. The sample includes non-financial 
(i.e., excluding stocks with SIC code between 6000 and 6999) and common stocks (i.e., CRSP share code of 10 or 

 
week, with approximately half of all trades involving short sellers. Consequently, total short selling volume 
amounts to approximately 5% of shares outstanding every two weeks for a typical stock. In contrast, from 
2015 through 2019, absolute changes in short interest approximately every two weeks have equaled about a 
half of a percent of shares outstanding. Thus, the total amount of short selling volume occurring is an order 
of magnitude larger than the changes in short interest over the same time period. These statistics suggest 
that the majority of short selling transactions likely do not involve long term traders building short 
positions. Additionally, the correlation coefficient for bimonthly changes in short interest and short selling 
volume in 2019 is only about 0.018. This low correlation suggests that the economic forces driving total 
short selling volume and changes in short interest are likely different.  

526 See infra Part VIII.C.3 for a more detailed discussion of short selling and liquidity provision. 



183 

11). Following Blocher & Ringgenberg (2019), we discard stocks whose short interest ratio and adjusted short 
interest ratio (where the adjusted short ratio is adjusted for stock splits, buybacks, etc.) differ by more than 10%, in 
order to exclude potential asynchronous adjustments for stock splits in the shares outstanding and short interest 
datasets. Furthermore, stock-date observations for which a stock has multiple gvkey’s (Compustat identifier) or 
permno’s (CRSP identifier) per date are removed. We then take the value-weighted average short interest ratio 
within a group, using market capitalization as weights. Market capitalization is calculated as shares outstanding 
multiplied by the closing price (obtained from the CRSP daily stock files) two days prior to the short interest record 
date. S&P 500 values are obtained from the CRSP Index file. See Jesse Blocher, Matthew C. Ringgenberg, et al., 
When Do Short Sellers Exit Their Positions?, SSRN (Aug. 27, 2018), available at 
https://ssrn.com/abstract=2634579. 

 

b. Taking Short Positions via Derivatives 

Trading in derivatives affects short selling in two key ways. First, derivatives offer 

investors an alternative means to express negative sentiment rather than short selling the stock. 

For instance, an investor wishing to profit from the decline of a security’s value can also trade in 

various derivative contracts, including options and security-based swaps. Providing evidence of 

this alternative means of short selling, academic research shows that investors do indeed use 

options as an alternative means to obtain short-like economic exposure when standard short 

selling is restricted.527 

Among the most popular derivative contracts are options, specifically put and call 

options. Call options give the owner of the option the right but not the obligation to purchase a 

stock at a specific price on a future date. Put options are similar but give the owner of the option 

the right but not the obligation to sell a stock at a specific price at a future date. In a put option 

the seller of the option is taking a long position in the underlying security while the purchaser of 

the put is taking a short position. The opposite is true for a call option. 

 
527 See Robert Battalio and Paul Schultz, Regulatory Uncertainty and Market Liquidity: The 2008 Short Sale 

Ban's Impact on Equity Option Markets, 66 J. OF FIN. 2013-2053 (2011); B.D. Grundy, B. Lim, and P. 
Verwijmeren, Do Option Markets Undo Restrictions on Short Sales? Evidence from the 2008 Short-Sale 
Ban, 106 J. OF FIN. ECON. 331-348 (2012). See also G.J. Jiang, Y. Shimizu, and C. Strong, Back to the 
Futures: When Short Selling is Banned (2019), available at 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3420275.  



184 

In addition to options, convertible securities (in which the security can be converted into 

an equity security) and security-based swaps can be used to create the same economic exposure 

as a short position.528 Convertible debt securities offer the owner a stream of payments and the 

ability to convert the security into equity should the owner’s strategy deem this beneficial.529 

Security-based swaps include total-return swaps in which two counterparties agree to exchange 

or “swap” payment with each other as a result of changes in a security characteristic, such as its 

price.530 As with options, in each of these derivative contracts one party is inherently long and 

the other party is inherently short. These derivatives, and other more exotic derivatives, tend not 

to be as standardized as options, and are traded over-the-counter. Security-based swap 

transactions are reported to and publicly disseminated by security-based swap data 

repositories.531 

In addition to providing an alternative means of expressing a bearish sentiment, trading in 

derivatives frequently leads to related trading in the stock market as derivatives’ counterparties 

 
528 On Sept. 19, 2019, the Commission approved the “Recordkeeping and Reporting Requirements for 

Security-Based Swap Dealers, Major Security-based Swap Participants, and Broker-Dealers” which 
established a regulatory regime for security-based swaps under Title VII of the Dodd-Frank Act. See 
Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap 
Participants, and Broker-Dealers, Exchange Act Release No. 87005 (Sept. 19, 2019), 84 FR 68550 (Dec. 
16, 2019), available at https://www.sec.gov/rules/final/2019/34-87005.pdf. 

529  Convertible debt securities are also employed in hedging strategies whereby the equity is sold short while 
the convertible security of that equity is held long. 

530 On July 9, 2012, the Commission approved rules and definitions of Security based swaps. See 17 CFR parts 
230, 240, and 241; Further Definition of “Swap,” “Security-Based Swap,” and “Security-Based Swap 
Agreement”; Mixed Swaps; Security-Based Swap Agreement Recordkeeping, Commodity Futures Trading 
Commission and Securities and Exchange Commission, 77 FR 48208 (Aug. 13, 2012), available at 
https://www.sec.gov/rules/final/2012/33-9338.pdf.  

531  See, e.g., 2015 Regulation SBSR Adopting Release, supra note 97; Security-Based Swap Data Repository 
Registration, Duties, and Core Principles, Exchange Act Release No. 74246 (Feb. 11, 2015), 80 FR 14437 
(Mar. 19, 2015); Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, 
Exchange Act Release No. 78321 (July 14, 2016), 81 FR 53545 (Aug. 12, 2016) (“2016 Regulation SBSR 
Adopting Release”). See also Order Approving Application for Registration as a Security-Based Swap 
Data Repository, 86 FR 8977 (Feb. 10, 2021), available at https://www.sec.gov/rules/other/2021/34-
91798.pdf.  



185 

seek to hedge their risk. For example, an options market maker who sells a put has taken on long 

exposure to the underlying security and may hedge this position by opening a short position in 

the underlying security. Thus, option market makers who sell large quantities of put options may 

amass large short positions in the underlying equities to hedge their options exposure.  

3. Current Short Selling Regulations 

The Commission adopted Regulation SHO532 to update short sale regulation in light of 

numerous market developments since short sale regulation was first adopted in 1938 and to 

address concerns regarding persistent failures to deliver and potentially abusive “naked” short 

selling.533 

In adopting Regulation SHO, the Commission recognized that short sales can provide 

important pricing information534 and liquidity to the market.535 However, the Commission was 

also concerned with the negative effect that failures to deliver may have on shareholders and the 

markets. For example, large and persistent failures to deliver may deprive shareholders of the 

benefits of ownership, such as voting and lending, and sellers that fail to deliver securities on 

 
532 See Regulation SHO Adopting Release. 
533 In a “naked” short sale, the seller does not borrow or arrange to borrow the securities in time to make 

delivery to the buyer within the standard two-day settlement cycle. As a result, the seller fails to deliver 
securities to the buyer when delivery is due (also known as a “failure to deliver”). 

534 Efficient markets require that prices fully reflect all buy and sell interest. Market participants who believe a 
stock is overvalued may engage in short sales in an attempt to profit from a perceived divergence of prices 
from true economic values. Such short sellers add to stock pricing efficiency because their transactions 
inform the market of their evaluation of future stock price performance. This evaluation is reflected in the 
resulting market price of the security. See Exchange Act Release No. 48709 (Oct. 28, 2003), 68 FR 62972 
(Nov. 6, 2003), available at https://www.sec.gov/rules/proposed/34-48709.htm#P179_15857.  

535 Market liquidity is generally provided through short selling by market professionals, such as market 
makers, who offset temporary imbalances in the buying and selling interest for securities. Short sales 
effected in the market add to the selling interest of stock available to purchasers, and reduce the risk that 
the price paid by investors is artificially high due to a temporary contraction of selling interest. Short sellers 
covering their sales also may add to the buying interest of stock available to sellers. See Exchange Act 
Release No. 48709 (Oct. 28, 2003), 68 FR 62972 (Nov. 6, 2003), available at 
https://www.sec.gov/rules/proposed/34-48709.htm#P179_15857.  



186 

settlement date may attempt to use their failures to engage in trading activities to improperly 

depress the price of a security. 

Due to continued concerns regarding failures to deliver, and to promote market stability 

and preserve investor confidence, the Commission has amended Regulation SHO on several 

occasions. For example, the Commission eliminated certain original exceptions to Regulation 

SHO’s close-out requirements,536 strengthened those same close-out requirements by adopting 

Rule 204,537 and reintroduced a short sale price test restriction by adopting Rule 201.538 In 

addition, the Commission adopted a targeted antifraud rule, Rule 10b-21, to further address 

failures to deliver in securities that have been associated with “naked” short selling.539 

 
536 As initially adopted, Regulation SHO included two major exceptions to its then existing close out 

requirements: the “grandfather” provision and the “options market maker” exception. Due to continued 
concerns regarding failures to deliver, and the fact that the Commission continued to observe certain 
securities with failures to deliver that were not being closed out consistent with its then existing close out 
requirements, the Commission eliminated the “grandfather” provision in 2007 and the “options market 
maker” exception in 2008. See Exchange Act Release No. 56212 (Aug. 7, 2007), 72 FR 45544 (Aug. 14, 
2007) (eliminating the “grandfather” provision to Regulation SHO’s close out requirement), available at 
https://www.sec.gov/rules/final/2007/34-56212fr.pdf; Exchange Act Release No. 58775 (Oct. 14, 2008), 73 
FR 61690 (Oct. 17, 2008) (eliminating the “options market maker” exception to Regulation SHO’s close 
out requirement), available at https://www.sec.gov/rules/final/2008/34-58775fr.pdf. 

537 In 2008, the Commission adopted 17 CFR 242.204T (“temporary Rule 204T”), and in 2009 adopted Rule 
204. Rule 204 further strengthens Regulation SHO’s close out requirements by making those requirements 
applicable to failing to deliver results from sales of all equity securities, while reducing the time-frame 
within which failures to deliver must be closed out. See Exchange Act Release No. 60388 (July 27, 2009), 
74 FR 38266 (July 31, 2009), available at https://www.sec.gov/rules/final/2009/34-60388fr.pdf. 

538 In 2004, the Commission initiated a year-long pilot to study the removal of short sale price tests for 
approximately one-third of the largest stocks. After review of the pilot’s data, the Commission proposed the 
elimination of all short sale price tests. In June 2007, the Commission adopted a rule that eliminated all 
short sale price tests, including Rule 10a-1, a predecessor to Regulation SHO. The rule became effective in 
July 2007. In 2010, the Commission reinstituted a short sale price test restriction by adopting Rule 201. See 
Exchange Act Release No. 61595 (Feb. 26, 2010), 75 FR 11232 (Mar. 10, 2010), available at 
https://www.sec.gov/rules/final/2010/34-61595fr.pdf. 

539 Rule 10b-21 is an antifraud provision that supplements existing antifraud rules, including 17 CFR 240.10b-
5 (“Rule 10b-5”), and was adopted to further evidence the liability of short sellers. Specifically, Rule 10b-
21 applies to short sellers, including broker-dealers acting for their own accounts, who deceive specified 
persons about their intention or ability to deliver securities in time for settlement, while failing to deliver 
securities by settlement date. Among other things, the rule highlights the specific liability of short sellers 
who deceive their broker-dealers about their source of borrowable shares for purposes of complying with 
Regulation SHO’s locate requirement, or who misrepresent to their broker-dealers that they own the shares 
being sold and subsequently fail to deliver shares. See supra note 14, available at 
https://www.sec.gov/rules/final/2008/34-58774.pdf. 



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Regulation SHO requires broker-dealers to properly mark sale orders as “long,” “short,” 

or “short exempt,” to locate a source of shares prior to effecting a short sale (also known as the 

locate requirement), and to close out failures to deliver that result from long or short sales. In 

addition, if the price of an equity security has experienced significant downward price pressure, 

Regulation SHO temporarily restricts the price at which short sales may be effected.  

Regulation SHO imposes certain recordkeeping obligations on broker-dealers. However, 

the Commission does not have market-wide information on how often the bona fide market 

making exception is used. Furthermore, bona fide market making information is not reported on 

a regular basis, instead the Commission must request bona fide market making records on a 

broker-dealer by broker-dealer basis.540 

In addition, regulations currently do not require market participants to record, report, or 

track when short sellers “buy to cover” their short sales. This makes it difficult for regulators to 

assess compliance with Rule 105 and with close out requirements in Rule 204. 

4. Existing short selling data 

There are several sources of short selling data that are available both publicly and for 

regulatory purposes. In general, these data sources lack information about levels of and the 

timing of changes in economic short positions for specific Managers in specific securities. Some 

sources report aggregate short positions at the security level, but their content is not granular 

enough to further the understanding of short selling strategies. Other sources provide granular 

short volume information, but they are unable to distinguish short transactions that impact short 

positions from those that do not and do not contain all activity that can change short positions. 

 
540 See supra Part IV.B for a discussion on the use of the bona fide market making locate exception. 



188 

Some regulatory data sources report short transactions at the individual investor level, but using 

these data to estimate short positions would be significantly inaccurate and inefficient.  

a. Bimonthly Short Interest Data 

One of the primary data sources for aggregate short selling data is the bimonthly short 

interest data collected by FINRA.541 FINRA collects aggregate short interest information in 

individual securities on a bimonthly basis as the total number of shares sold short in a given 

stock as of the middle and end of each month. Then the exchange that lists the given stock, or 

FINRA itself in the case of OTC stocks, distributes the collected data.542 FINRA computes short 

interest using information it receives from its broker-dealer members pursuant to FINRA Rule 

4560 reflecting all trades cleared through clearing broker-dealers.543 FINRA Rule 4560 requires 

generally that broker-dealers that are FINRA members report “short positions” in customer and 

proprietary firm accounts in all equity securities twice a month through FINRA’s web-based 

Regulation Filing Applications (RFA) system.544 FINRA defines “short positions” for this 

purpose simply as those resulting from “short sales” as defined in Rule 200(a) of Regulation 

SHO under the Exchange Act.545 Member firms must report their short positions to FINRA 

 
541 See DERA 417(a)(2) Study at 17-18, supra note 6. 
542 See Short Interest – What It Is, What It Is Not, FINRA INV’R INSIGHTS (Apr. 12, 2021), available at 

https://www.finra.org/investors/insights/short-interest.  
543 Id. (Short interest for a listed security at any date reported by FINRA is “a snapshot of the total open short 

positions in a security existing on the books and records of brokerage firms on a given date.”). 
544 FINRA Rule 4560 excludes short sales in “restricted equity securities,” as defined in Securities Act Rule 

144, from the reporting requirement. 
545 See FINRA Rule 4560(b)(1). 



189 

regardless of position size.546 The process of gathering and validating short interest data takes 

approximately two weeks.547 Thus the data are available with approximately a two week lag. 

FINRA short interest data are widely available and are used by academics and other 

market participants.548 Furthermore, these short interest data are found to predict future stock and 

market returns over the monthly and annual horizons, suggesting that the bimonthly short interest 

data capture the economic short selling based on fundamental research.549 However, these data 

face two major limitations. First, the information does not provide insight into the timing with 

which short positions are established or covered over the two-week reporting period. This 

precludes the possibility of understanding the behavior of aggregate economic short selling in the 

two weeks leading up to the reporting date.550 Second, given that short interest is aggregated at 

the security-level, the aggregation does not provide an understanding of certain aspects of the 

underlying short selling activity. For example, the data cannot inform on whether short sentiment 

is broadly or narrowly held or held by persons with larger positions. The data also does not 

inform on the extent to which short interest has been hedged.     

 
546 See FINRA Market Regulation Department, General for Short Interest Reporting Instructions (Dec. 18, 

2008) (reporting instructions to FINRA member firms), available at 
https://www.finra.org/Industry/Compliance/RegulatoryFilings/ShortInterestReporting/P037072.  

547 See DERA 417(a)(2) Study at 17-18, supra note 6. 
548 See supra note 491. FINRA and the listing exchanges make these data publicly available with biweekly 

updates. 
549 See, e.g., Peter N. Dixon and Eric K. Kelley, Business Cycle Variation in Short Selling Strategies: Picking 

During Expansions and Timing During Recessions, 57(8) J. OF FIN. AND QUANTITATIVE ANALYSIS 3018-
3047 (2022); see also Ekkehart Boehmer, Zsuzsa R. Huszar, and Bradford D. Jordan, The Good News in 
Short Interest, 96 (1) Journal of Financial Economics 80-97 (2010); Stephen Figlewski, The Informational 
Effects of Restrictions on Short Sales: Some Empirical Evidence, 16 (4) J. OF FIN. AND QUANTITATIVE 
ANALYSIS 463-476 (1981). 

550  For example, the public will not have information on stock-specific volatility in real-time that may relate to 
short selling of the particular stock. Such volatility may be explained, though only through assumption, 
once the bimonthly short interest data becomes available. Assumption is necessary because the data are still 
not at the daily level. 



190 

b. Short Selling Volume and Transactions from SROs 

Since 2009, many SROs have been publishing two short selling data sets, including same 

day publication of daily aggregated short sale volume in individual securities551 and publication 

of short sale transaction information on no more than a two-month delay.552 Some SROs make 

the historical daily short volume data available to market participants for a fee.553 The fact that 

market participants and academic users pay these subscription fees indicate that these data are 

utilized. In addition to these daily short volume data, several SROs provide intraday short sale 

transaction information for the orders that execute on their respective venues. As an example, 

FINRA provides information from FINRA’s Trade Reporting Facility (“TRF”) and Alternative 

Display Facility (“ADF”)554 (the TRF and ADF are together referred to herein as “FINRA’s 

 
551 See Short Sale Volume and Transaction Data, available at 

https://www.sec.gov/answers/shortsalevolume.htm (showing hyperlinks to the websites where SROs 
publish this data). See also supra note 492. See, e.g., FINRA’s Daily Short Sale Volume Files (which 
provide aggregated volume by security on all short sale trades executed and reported to a FINRA reporting 
facility during normal market hours). See FINRA Information Notice, Publication of Daily and Monthly 
Short Sale Reports (Sept. 29, 2009), available at 
https://www.finra.org/sites/default/files/NoticeDocument/p120044.pdf. 

552 See FINRA’s Monthly Short Sale Transaction Files (which provide detailed trade activity of all short sale 
trades reported to a consolidated tape. See supra note 492. See also Short Sale Volume and Transaction 
Data, available at https://www.sec.gov/answers/shortsalevolume.htm. Additional transaction data has been 
available at various times, including transaction data from the Regulation SHO Pilot, which has been 
discontinued by most exchanges in July 2007 when the uptick rule was removed. See Exchange Act 
Release No. 55970 (June 28, 2007), 72 FR 36348 (July 3, 2007), available at 
https://www.sec.gov/rules/final/2007/34-55970.pdf. The Pilot data comprised short selling records 
available from each of nine markets: American Stock Exchange, Archipelago Exchange, Boston Stock 
Exchange, Chicago Stock Exchange, NASD, Nasdaq Stock Market, New York Stock Exchange, National 
Stock Exchange, and the Philadelphia Stock Exchange. See SEC Division of Trading and Markets, 
Regulation SHO Pilot Data FAQ, available at https://www.sec.gov/spotlight/shopilot.htm#pilotfaq. 

553 See, e.g., TAQ Group Short Sale & Short Volume, New York Stock Exchange, available at 
https://www.nyse.com/market-data/historical/taq-nyse-group-short-sales (for short sale data relating to all 
NYSE owned exchanges). See Short Sale Volume and Transaction Reports from Nasdaq Trader, available 
at https://nasdaqtrader.com/Trader.aspx?id=shortsale (for short sale data for Nasdaq exchanges); see also 
Short Sale Daily Reports, Chicago Board Options Exchange (for Cboe exchanges), available at 
https://datashop.cboe.com/us-equity-short-volume-and-trades.  

554 Each TRF provides FINRA members with a mechanism for the public reporting of transactions effected 
otherwise than on an exchange. See FINRA, Market Transparency Trade Reporting Facility, available at 
https://www.finra.org/Industry/Compliance/MarketTransparency/TRF/.  



191 

Reporting Facilities”). Overall, these different sources of daily and intraday short volume data 

provide greater, though different, levels of granularity relative to the bimonthly short interest 

observations discussed earlier. 

Despite offering higher granularity than bimonthly short interest data, these existing short 

volume data provided by the SROs, including FINRA, have a number of limitations. First, the 

data do not provide insight into the activities of either individual traders, or different trader types. 

Consequently, it is not possible with existing short selling data provided by the SROs to separate 

trading volume associated with market makers, algorithmic traders, investment managers, or 

other trader types. Form SHO will address this limitation by providing data on the gross short 

sale positions and activity of investment managers with large short sale positions. 

Additionally, the data do not provide insight into activities that may reduce exposure, 

making the use of these data to estimate investor sentiment fraught with potential bias. 

Moreover, these data provide information only on short sales, whereas short positions could also 

change because investors can increase or decrease their positions in ways other than short selling 

the stock. For example, investors can increase their short positions by exercising put options and 

delivering borrowed shares or by delivering borrowed shares when they are assigned call 

options. Investors can reduce their short positions in an equity when they, for example, “buy to 

cover” their positions, purchase shares in a secondary offering,555 convert bonds to stock, or 

redeem ETF shares containing the equity. As a result, the short selling volume and transactions 

data cannot easily explain changes in short interest, exposing a gap between these two types of 

existing data. 

 
555  See supra note 285. 



192 

Aggregate short selling statistics and short selling transactions data have different lags 

with which they are available. Aggregate short selling volume statistics are usually made 

available by the SROs by the end of the following business day. For the transactions data, the lag 

can be much longer, and in some cases the data are released with a one-month lag – implying 

that some short selling transactions data are not available for two months.556 

There is also a concern that these data may over-represent the total volume of short sales 

occurring in the market. This is because Regulation SHO provides specific criteria regarding 

what is a long sale.557 If a market participant is unclear whether its trade will meet all the 

requirements at settlement to be marked a long sale, then it may choose to mark the trade as short 

to not run afoul of Regulation SHO requirements, even if the trade is likely an economic long 

sale.558  

c. Securities Lending 

Securities lending data provide information on stock loan volume, lending costs, and the 

percentage of available stock out on loan. In the equity market, a primary reason for end 

borrowers to engage in a securities loan is to facilitate a short sale,559 leading to a close 

 
556  For example, a short sale transaction that takes place in late June could be released in a dataset in the month 

of August.  
557 See Rule 200(g) of Regulation SHO specifies when an order can be marked as long. See also Part IV.B; 

Regulation SHO Adopting Release. An economic long sale is a sale of an owned, not borrowed, security. 
558 See 2009 letter from Securities Industry and Financial Markets Association (“SIFMA”) commenting on an 

alternative short sale price test, expressing concern that compliance with Regulation SHO short selling 
marking requirements “will result in a substantial over-marking of orders as “short” in situations where 
firms are, in fact, “long” the securities being sold.” Letter from Securities Industry and Financial Markets 
Association (“SIFMA Letter”), available at https://www.sec.gov/comments/s7-08-09/s70809-4654.pdf. 

559  One reason for this is that the “permitted purpose requirement” of the Board of Governors of the Federal 
Reserve System’s Regulation T, which broadly governs the lending activities of broker-dealers, specifies 
that a broker dealer may generally borrow or lend U.S. securities from or to a (non-broker-dealer) customer 
solely “for the purpose of making delivery of the securities in the case of short sales, failure to receive 
securities required to be delivered, or other similar situations,” unless an exemption applies. See 12 CFR 
220.10(a).  



193 

correlation between information about certain loan volumes and short interest. Therefore, some 

market participants use securities lending data as a measure of short sale positions.560 Since the 

proposing release, the Commission has adopted Rule 10c-1a. Below, we describe the baseline 

securities lending data – commercial securities lending data as well as forthcoming Rule 10c-1a 

data.561  

i.  Commercial Securities Lending Data 

The securities lending industry appears to use commercial securities lending data 

widely,562 though these data are generally available only by subscription.563 The use of 

commercial security lending data as proxy for economic short interest has several limitations. 

These include the fact that commercial vendors of the securities lending data often impose access 

restrictions via give-to-get models. In addition, the data are not comprehensive and are based on 

voluntary contributions, which leads to self-selection bias. In this setting, the entities 

contributing data are mindful of whether other entities can access the data. As such, participation 

 
560 Some research has used stock lending data as a proxy for actual short sales. See, e.g., Oliver Wyman, The 

Effects of Short Selling Public Disclosure of Individual Positions on Equity Markets, Alternative 
Investment Management Association (Feb. 2011), available at https://www.managedfunds.org/industry-
resources/industry-research/the-effects-of-short-selling-public-disclosure-of-individual-positions-on-
equity-markets/. 

561  While the adoption of Rule 10c-1a occurred before the adoption of Rule 13f-2, and Rule 10c-1a has certain 
intermediate compliance dates related to FINRA rulemaking that precede Rule 13f-2 compliance dates, we 
expect that the reporting and publication of Rule 13f-2 information will occur before the reporting and 
publication of Rule 10c-1a information. See supra Part VI and infra note 585. Rule 10c-1a is thus part of 
the baseline for Rule 13f-2, but significant aspects of Rule 10c-1a will be implemented later. 

562 Several commercial entities sell data on securities lending to clients. See, e.g., 2011 Letter from Data 
Explorers (hereafter “Data Explorers Letter”) in response to the request for comment relating to the 
proposed study of the cost and benefits of short selling required by Dodd Frank Act section 417(a)(2) 
available at https://www.sec.gov/comments/4-627/4627-152.pdf. As some commenters have stated, stock 
lending facilitates short selling. See, e.g., Speech by Chester Spatt, former Chief Economist of the SEC 
(Apr. 20, 2007), available at https://www.sec.gov/news/speech/2007/spch042007css.htm. The information 
sold by vendors may include volume of loans, lending costs, and the percentage of available stock out on 
loan. 

563 See DERA 417(a)(2) Study at 22-23. See also Rule 10c-1a, Part IX.B.5.  



194 

rates in data sharing reflects strategic considerations that may lower the extent of data shared by 

each entity, reducing the information content of the pool of data collected by each vendor.  

The data for securities lending is potentially biased564 – either containing information 

about the wholesale market or the customer market, but not both, making it difficult for a given 

market participants to obtain comprehensive security lending information from one source. 

Furthermore, even the cumulative data provided by vendors is still not be comprehensive, 

primarily because it is based on voluntary data contributions.565 The reliance on voluntary data 

contributions increases the likelihood that data are missing in a non-random manner which can 

introduce biases into the data. To this end, the existing data accessible by an individual market 

participant may not accurately proxy short selling activity. 

Existing commercial securities lending data only provide a noisy proxy of short 

sentiment. This is because current commercial securities lending data originates from either 

surveys of a subset of asset managers about their securities lending experience, or it comes from 

give-to-get arrangements where those involved in securities lending must give data to the data 

providers in order to be able access data from the data providers. Because the survey data are not 

comprehensive it can only provide a noisy proxy of actual short sentiment. The give-to-get data 

also provides only a noisy proxy because it too relies on voluntary data submissions. It is also 

 
564  For example, while the Commission believes that certain currently available securities lending data 

products may be biased due to missing observations, the extent of the biases cannot be quantified as the 
data that would be needed to assess the extent of the bias are missing. 

565  Voluntary data contributions are provided either through customer market surveys or using a give-to-get 
model. The Commission believes that both give-to-get and customer market survey data lack 
comprehensiveness, as it is unlikely that the full universe of lending programs and borrowers contribute all 
data to any given data vendor. The voluntary nature of submissions to both give-to-get and customer 
market survey data may mean that some data may be withheld. Market participants that choose not to 
disclose their data to the commercial data vendors likely make that choice because it is in their strategic 
interest not to disclose, resulting in nonrandom omissions. These omissions likely insert bias into the 
commercial databases. 



195 

generally limited to information about loans from lending programs to broker dealers 

(“Wholesale Loans”), which are made largely to facilitate clearing and settlement on a net basis 

at a clearing broker, rather than by transaction or position.566 Thus, Wholesale Loans are not 

traceable to individual short sellers. Further, the Commission understands that broker-dealers 

will usually source shares to meet their net clearing and settlement requirements from other 

sources, such as their own inventory or customer margin accounts, before engaging in Wholesale 

Loans. Thus, current commercial securities lending data serve only as an imperfect measure of 

short sentiment. 

ii. Rule 10c-1a Data 

On October 13, 2023, the Commission adopted Rule 10c-1a.567 Rule 10c-1a requires that 

the data elements in paragraph (c) of Rule 10c-1a, except for the size of the loan, are required to 

be made publicly available by an RNSA not later than the morning of the business day 

immediately after the covered securities loan is effected. Rule 10c-1a requires that the size of the 

loan be made publicly available by an RNSA on the twentieth day immediately after the covered 

securities loan is effected. In addition, Rule 10c-1a requires covered persons to report to an 

RNSA the legal name of each party to the loan (lender, borrower, and intermediary) and that an 

RNSA keep such information confidential. Next-day summary volume information will indicate 

the magnitude but not the direction of the activity, such that loan decreases are added to, not 

subtracted from, loan increases. Therefore, these data will not allow a viewer to discern between 

increases in aggregate short positions and decreases of aggregate short positions. 

 
566  See Rule 10c-1a, Part IX.B.2 for a more detailed discussion. 
567  Rule 10c-1a will provide the Commission and market participants with access to comprehensive securities 

lending data market data. See Rule 10c-1a; see also supra note 561. 



196 

Because loans to end-borrowers are usually made to facilitate short sales,568 these loans 

relate very closely to those customers’ short positions. By aggregating the total amount of shares 

on loan in the “customer” category, market participants could likely estimate outstanding short 

interest with considerable accuracy, though with an approximately one-month delay.569 

Additionally, since each loan likely relates to a unique market participant, the Rule 10c-1a data 

will provide an indication of the distribution of short sentiment – that is, whether short interest is 

concentrated on a few short sellers with large positions, or whether it is spread out over many 

short sellers.570 Examining the change in the size of a loan from the reported data can also 

indicate when individual market participants increased or decreased their short positions, albeit 

with an approximate one-month delay.  

Pursuant to Rule 10c-1a, persons will be required to identify the legal name of all the 

parties to a securities loan without any delay to the RNSA. Consequently, regulators can use the 

data to track the size of shares on loan, and thus approximate an individual entity’s short position 

with little delay, potentially even if that entity uses multiple broker-dealers to source shares. 

Because loan modifications, such as increases, decreases, or terminations of loans, must be 

 
568  See infra Part VIII.C.2. 
569  While most loans that facilitate short sales likely come from this category of ‘customer’ loans, not all will. 

Some large market participants do not use broker dealers as an intermediary when sourcing loans, rather 
they maintain relationships directly with lending programs to source shares when they wish to short sale. 
These transactions would show up in the data as loans to “Other” entities. Lastly, to the extent that a broker 
dealer borrows shares to facilitate their own short selling, the loan would show up in the data as a loan to a 
broker dealer. However, by summing up all ‘customer’ and ‘other’ loans, market participants could likely 
estimate aggregate short interest with considerable accuracy. However, only publicly released Form SHO 
data will isolate large gross short sale positions of Managers. The delay of 21 days is due to the settlement 
of the loan occurring in T+1 manner plus the publication of the data 20 days after settlement. 

570 The ability to identify changes in customer short positions is reduced to the extent that some short sellers, 
such as large institutions, have relationships with and are able to spread their borrowing across multiple 
prime brokers, which would make short interest appear less concentrated. 



197 

reported, regulators can produce running estimates of changes in individual entity’s estimated 

short positions. 

d. CAT Data 

Regulators can also extract short sale information from CAT data, which provide order 

lifecycle information for stocks and options.571 The data contain an order mark that is a part of 

the “material terms of the trade” that indicates whether an order is a short sale. This order mark 

allows regulators to identify traders who are short selling and to see the order entry and 

execution times of these short sales. However, CAT was not designed to track traders’ positions 

or changes in those positions, but rather collects information to analyze trading and order 

lifecycles. As such, using CAT data to estimate positions and changes in those positions can be 

challenging.  

Theoretically, one could use the order execution information in CAT data to estimate 

trader positions and track how those positions change over time. However, such estimates could 

be inaccurate due to several circumstances. First, CAT data do not include information on the 

long or short positions held in each account at the time that an Industry Member initially begins 

reporting to CAT. Thus, CAT does not provide an appropriate starting point for building short 

positions using investor-specific transaction information. Second, some investors may establish 

or cover short positions via other means that are not CAT-reportable events, for example: 

secondary offering transactions; option assignments; option exercises; conversions; or ETF 

creations and redemptions. Thus, there are activities that affect positions that are not contained in 

CAT in any capacity. 

 
571 It is important to note that only regulators have access to CAT data. 



198 

While CAT is not designed to track positions, CAT data can be used in very limited and 

specific circumstances to offer rough position estimates. When focused on one or few accounts, 

estimating positions, though potentially inaccurate, can be manageable. However, using 

transaction information to track positions across a broad set of positions is inefficient. Even in 

situations in which the above limitations do not apply, the use of CAT data to estimate short 

positions and changes in those positions for all or a large set of accounts is inefficient and would 

require a considerable amount of processing power, which would take time and reduce the 

processing power available for other CAT queries. This hinders the Commission’s estimation of 

short positions in a timely fashion. 

Other than the inefficient means of estimating positions described above, CAT does not 

distinguish buy orders that establish a long position from those that cover, and therefore reduce, 

a short position. While Commission staff were able to identify some short covering activity 

during the volatile period in January 2021, due to the difficulties described above, the staff 

analyzing the volatility associated with meme stocks could not easily identify short covering 

activity using CAT data alone and was thus hindered in their reconstruction of key events.572 

Finally, even though CAT data identify short selling by market makers, the data do not 

provide information as to whether a broker-dealer is claiming use of the exception for bona fide 

market making from Regulation SHO’s locate requirement. Rather, the Commission has to make 

individual document requests to obtain such information currently. The adopted amendment will 

make this information readily available to regulators in a uniform electronic format and 

consolidate it with the other material terms of orders required to be reported to CAT. 

 
572  See Staff Report on Equity and Options Market Structure Conditions in Early 2021, SEC (Oct. 14, 2021), 

available at https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-
2021.pdf. 



199 

There are 24 national securities exchanges and one national securities association 

(FINRA) that are CAT Plan Participants. There are also 3,501 broker-dealers who have reporting 

obligations to CAT as Industry Members.573 These Industry Members often use third-party 

reporting agents such as service bureaus for CAT reporting. 

e. Exchange Act Form SH 

For a ten-month period in 2008 and 2009,574 the Commission required certain Managers 

to file confidential weekly reports of their short positions in section 13(f) securities, other than 

options, on Exchange Act Form SH, through temporary Rule 10a-3T.575 De minimis short 

positions of less than 0.25 percent of the class of shares with a fair market value of less than $10 

million were not required to be reported.576 Additionally, only Managers that exercise investment 

discretion with respect to accounts holding section 13(f) securities having an aggregate fair 

market value of at least $100 million were required to report. The investment manager was 

required to report short positions to the Commission on Form SH on a nonpublic basis on the last 

business day of each calendar week immediately following any calendar week in which it 

 
573  See supra Part VII.C.4.b for discussion of PRA costs for broker-dealers due to the CAT amendment. Not 

all 3,501 broker-dealers will bear the same costs due to the CAT amendment. 
574 See DERA 417(a)(2) Study at 18, supra Part II.A.3 at 6. 
575 With respect to each applicable section 13(f) security, the Form SH filing was required to identify the 

issuer and CUSIP number of the relevant security and reflect the manager’s start of day short position, the 
number and value of securities sold short during the day, the end of day short position, the largest intraday 
short position, and the time of the largest intraday short position. The reporting requirement was 
implemented via a series of emergency orders followed by an interim final temporary rule, Rule 10a-3T. 
Exchange Act Release No. 58591 (Sept.18, 2008), 73 FR 55175 (Sept. 24, 2008); Exchange Act Release 
No. 58591A (Sept. 21, 2008), 73 FR 58987 (Sept. 25, 2008); Exchange Act Release No. 58724 (Oct. 2, 
2008), 73 FR 58987 (Oct. 8, 2008); Exchange Act Release No. 58785 (Oct. 15, 2008), 73 FR 61678 (Oct. 
17, 2008). 

576 See Exchange Act Release No. 58591 (Sept.18, 2008), 73 FR 55175 (Sept. 24, 2008). 



200 

effected short sales,577 a more frequent disclosure interval than the quarterly public reporting of 

long positions required on Exchange Act Form 13F.578 

In addition to the limited and temporary time period during which disclosure of short 

positions was required to be reported on Exchange Act Form SH, even at the regulatory level, the 

reporting requirements and data had several drawbacks and limitations. One drawback was that 

only Managers who exercised investment discretion with respect to accounts holding section 

13(f) securities having an aggregate fair market value of at least $100 million were required to 

file Form SH, which excluded short-only funds and other large short sellers who did not file 

Form 13F. Additionally, the report was costly as Managers filing Form SH had a weekly 

reporting requirement. Additionally, data fields in Form SH including start of day short position, 

gross number of securities sold short during the day, and end of day short position were each 

subject to the de minimis reporting threshold, which resulted in unreported data points when only 

a subset of the fields exceeded the de minimis threshold. Furthermore, Form SH data were 

difficult to work with because they were not validated for errors such as duplicate entries, 

missing fields, or positions that were below the de minimis threshold and therefore did not need 

to be reported.579 

5. Competition 

Many Managers operate in the investment management industry.580 In broad terms, 

investment management is a highly competitive industry. Investment managers compete for 

investors and investor funds. Among the bases on which Managers compete are returns, fees and 

 
577 See Exchange Act Release No. 58785, 73 FR 61678. 
578 Id. 
579  See Proposing Release, at 14963 for information on the methodology and caveats of using Form SH data. 
580  See supra Part VIII.B.1 for discussion of Institutional Investment Managers.201 

costs, trading strategies, risk management, and the ability to gather information. It is costly for 

investment managers to do market research to gain an informational advantage. Investment 

managers who own a security have an advantage over those who do not in that a security owner 

can trade more cheaply on negative information by simply selling whereas investment managers 

not owning the same security must establish some form of short exposure, such as selling a 

security short, to capitalize on any negative information that they have uncovered. Academic 

research suggests that when the cost of short selling increases, a security owner’s advantage in 

terms of being able to profitably trade on gathered information increases, leading investors not 

owning a security to engage in less fundamental research.581 The Commission is cognizant of 

such research and has taken steps to help ensure that the impact of published data will be 

minimized by delaying publication by approximately one month and anonymizing and 

aggregating reporting Managers’ short position data.  

Investment managers, like other investors that could be subject to Rule 13f-2, also 

compete by using proprietary trading strategies. They typically seek to trade in ways that would 

not expose their strategies because, if their strategies became known to others, the strategies 

could lose value and such Managers could also suffer higher trading costs. More specifically, 

other traders could use copycat trading strategies to try to mimic the Managers’ strategy, 

potentially competing away the profitability of the strategy or other traders could anticipate when 

the Manager might trade, which could result in higher trading costs for the Manager. Some 

 
581 This occurs because if an investor not owning the asset engages in fundamental research and discovers 

evidence that a stock may be overpriced, then it is costly for that investor to act on that information. This is 
not true for investors who own the asset as they can simply sell the shares that they own. See, e.g., Peter N. 
Dixon, Why Do Short Selling Bans Increase Adverse Selection and Decrease Price Efficiency?, 11 (1) THE 
REV. OF ASSET PRICING STUDIES 122-168 (2021).  



202 

Managers also compete for returns by engaging in securities lending whereby assets are lent to 

other investors, often short sellers, for a fee. These fees in aggregate can be substantial.582  

The Commission estimates there are 3,501 broker-dealers. These broker-dealers also 

compete with each other for order flow. The broker-dealer industry is a competitive industry 

with reasonably low barriers to entry to many segments of the industry. Most trading activity is 

concentrated among a small number of large broker-dealers, with thousands of small broker-

dealers competing for niche or regional segments of the market. To limit costs and make 

business more viable, the small broker-dealers often contract with bigger broker-dealers to 

handle certain functions, such as clearing and execution, or to update technology. Larger broker-

dealers often enjoy economies of scale over smaller broker-dealers and compete with each other 

to service the smaller broker-dealers who are both their competitors and customers.583 Broker-

dealers compete in multiple ways: reputation, convenience, and fees. Broker-dealers typically 

pass operating costs down to their customers in the form of fees. 

C. Economic Effects584 

1. Investor Protection and Market Manipulation 

The adopted Rule 13f-2 and CAT amendment will enhance the Commission’s ability to 

protect investors and investigate market manipulation by providing a clearer view into the short 

selling market and improving the Commission’s reconstruction of significant market events. This 

 
582 The securities lending market is large and complex. See Parts IX.B.1-IX.B.4 of Rule 10c-1a for a more 

detailed description of this market and players.  
583  See Rule 613 Adopting Release. 
584  In preparing this economic analysis, the Commission accounted for the various types of Managers that 

could be subject to the reporting requirements. In general, the Commission believes that the economic 
effects of the rule are more influenced by the Managers’ investment strategy and motivation for short 
selling rather than by the type of Manager that is reporting. Any exceptions are noted in the analysis. See 
supra Part VIII.C.1. 



203 

in turn may lead to improved identification of manipulative short selling strategies which may 

also serve as a deterrent to would-be manipulators and thus may help prevent manipulation. It 

will also improve the Commission’s observation of short sale activity that potentially poses a 

systemic risk. The Commission believes that the adoption of Rule 13f-2 and the CAT 

amendment will benefit investors by facilitating the Commission’s observation of short selling 

and will thus help protect investors and help ensure the sufficiency of information related to 

short selling in the market. 

The Commission believes that the Rule 13f-2, Form SHO, and the CAT Amendment will 

improve regulators’ oversight of markets and enhance the Commission’s and SROs’ 

reconstruction of significant market events by providing a clearer view into the role that short 

selling plays in market events of interest. Specifically, the Commission could have used Form 

SHO data combined with other data to reconstruct market events and better understand the link 

between trading activity of large short seller and contemporaneous price volatility during the 

recent volatility associated with meme stocks. For example, while short sellers as a whole were 

exiting their positions during the period of heightened volatility, large short sellers may have 

been engaging in trading behavior that was distinct from other short sellers. 

The recent adoption of Rule 10c-1a will further enhance the usefulness of adopted Form 

SHO.585 As another source of data covering the short selling market, the Commission may use 

Rule 10c-1a data combined with Form SHO data in an attempt to match securities lending with 

actual short positions taken. While the timing of the data being received may be asynchronous, 

 
585  Rule 10c-1a, which was adopted prior to Rule 13f-2, includes multiple compliance dates, and certain 

disclosures required by Rule 13f-2 may be implemented before certain of Rule 10c-1a’s compliance dates. 
Due to this uncertainty, the Commission describes the effects of Rule 13f-2 and the CAT amendment as 
coming into existence prior to those associated with Rule 10c-1a but acknowledges that there may be a 
period in which this is not true. The beneficial combined effects will not materialize until the disclosure 
requirements of both rules are implemented. See infra note 615. 



204 

Form SHO and Rule 10c-1a data sources will have a natural relationship with each other. This 

combination of data can be useful for market reconstructions, but also useful in detecting 

activities such as naked short selling or other potential violations. 

Hypothetically, if Form SHO data had been available to the Commission at the time of 

the market events of January 2021, the Commission could have used these data to examine the 

short selling behavior of individual large short sellers. Additionally, because short positions often 

take some time to create, the Commission could have attempted to identify individual short 

sellers with large short positions in the various meme stocks in January 2021 based on the most 

recent reports; the Commission could then have used CAT data to better understand how these 

short sellers traded during the heightened volatility.586 One commenter stated that the lack of 

transparency into short positions did not just hamper the SEC’s understanding of these events as 

they unfolded but, “…may also be interfering with the SEC’s and market observers’ ability to 

say with confidence what happened in retrospect.”587 The Commission agrees that more data, as 

is being generated by the adoption of this rule, would have aided the Commission in analysis of 

the events of January 2021. 

As noted above in Part VIII.B, Form SHO data will provide the Commission with data 

that are additive rather than duplicative.588 After implementation of Rule 13f-2, the activity data 

provided in Form SHO will allow the Commission to observe how large short sellers respond to 

 
586 Some academics have critiqued the Commission Staff’s GameStop report, the Report on Equity and 

Options Market Structure Conditions in Early 2021, available at https://www.sec.gov/files/staff-report-
equity-options-market-struction-conditions-early-2021.pdf, and some of its methods, which were driven by 
data availability. See Joshua Mitts, Robert Battalio, Jonathan Brogaard, Matthew Cain, Lawrence Glosten, 
and Brent Kochuba, A Report by the Ad Hoc Academic Committee on Equity and Options Market Structure 
Conditions in Early 2021 (working paper) (2022), available at 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4030179. 

587  See Better Markets Letter at 7. 
588  See supra Part VIII.B for discussion. 



205 

the heightened volatility, albeit with a time lag, due to the filing deadline. Specifically, the 

Commission will be able to observe more precisely which days reporting short sellers most 

actively increase or decrease their short positions and correlate this activity to market conditions 

on those days.  

Analysis of Form SHO data during periods of high volatility might help the Commission 

maintain fair and orderly markets by highlighting key economic channels and mechanisms 

through which short selling could both impact and be impacted by periods of volatility. This 

information can, in turn, allow the Commission to more specifically tailor responses to similar or 

related events in the future. While the data provided by the CAT amendment will be visible to 

the Commission relatively quickly, the Form SHO data will only be available following a lag of 

at least two weeks.589 Thus, while Form SHO data will be useful in market reconstruction, it will 

have limitations in its timeliness. 

The bona fide market making information from the CAT Amendment will facilitate 

regulatory analysis of the use of the bona fide market making exceptions to Regulation SHO.590 

In particular, this information will provide regulators investigating potential Regulation SHO 

violations with clearer evidence regarding whether a market maker was relying on a bona fide 

market making exception. This might save a significant amount of time during an investigation. 

 
589  Form SHO is required to be reported 14 days after the end of the month. Thus, trades happening in the first 

two weeks of the month will not be reported for more than a month. 
590 Two Regulation SHO rules include exceptions for bona fide market making. Rule 203(b)(2)(iii) exempts 

market makers selling short in connection with bona fide market making activities from the requirement 
that a short seller must either borrow or have reasonable grounds to believe he can borrow a security in 
time for delivery prior to effecting a short sale. See 17 CFR 242.203(b)(2)(iii). Rule 204(a)(3) provides that 
a failure to deliver positions attributable to bona fide market making activities by registered market makers, 
options market makers, or other market makers obligated to quote in the over-the-counter markets, must be 
closed out by no later than the beginning of regular trading hours on the third consecutive settlement day 
following the settlement date (T+4), rather than the settlement day following the settlement date (T+1). See 
17 CFR 242.204(a)(3).  



206 

Having regular access to these data will provide the Commission with further insight into 

whether the exceptions for bona fide market making in Regulation SHO Rules 203 and 204 are 

being used appropriately, which may assist in assessing compliance with Regulation SHO. 

The bona fide market making information might improve regulators’ ability to interpret 

certain information in market reconstructions. Market reconstructions can sometimes benefit 

from regulators knowing when certain activity is either directional or market neutral because the 

motives and profitability of such trading types are different. The bona fide market making 

information will help regulators separate short selling that represents market makers’ liquidity 

provision to facilitate investor demand from other short selling, including other market maker 

short selling. Since such short selling is more likely to be in response to customer demand, it is 

less likely to signify that the short seller anticipates a price decline, relative to cases in which the 

short seller is trading directionally.  

Additionally, the data provided by adopted Rule 13f-2 and the CAT amendment may 

improve the Commission’s ability and effectiveness in detecting certain types of fraud. Form 

SHO data will provide the Commission flags that may signal potential fraud during an 

examination. Additionally, the enhanced CAT data will provide the Commission with regular 

access to improved information with which to examine potential instances of fraud without 

needing to ask broker-dealers for information. 

Enhanced fraud detection by the Commission may also help deter fraud, resulting in 

improved price efficiency and market quality. Some market participants and academics have 

raised concerns that short selling may in some instances offer the potential for stock price 



207 

manipulation, including “short and distort” campaigns.591 In “short and distort” strategies, which 

are illegal, the goal of manipulators is to first short a stock and then engage in a campaign to 

spread unverified bad news about the stock with the objective of panicking other investors into 

selling their stock in order to drive the price down.592 If a “short and distort” campaign is 

suspected, then detecting this behavior using the position and activity data in Form SHO will be 

easier than using current data.  

Short and distort campaigns are more likely to occur in stocks with lower market 

capitalizations with less public information.593 Consequently, among these stocks, it may not 

take a very large short position in dollar terms to reach the daily average 2.5 percent of shares 

outstanding over the preceding calendar month threshold for smaller reporting issuers or the 

 
591 See, e.g., comment letters submitted with regards to Short Sale Reporting Study Required by Dodd-Frank 

Act section 417(a)(2): Naphtali M. Hamlet (May 6, 2011); Jan Sargent (May 6, 2011); Lee R. Donais, 
President and CEO, L.R. Donais Company (May 8, 2011); Joseph A. Scilla (May 9, 2011); Jane M. 
Reichold (May 17, 2011); John Gensen (May 18, 2011); Victor Y. Wong (May 20, 2011); Kevin Rentzsch 
(May 24, 2011); Lynn C. Jasper (May 27, 2011); Donald L. Eddy (May 28, 2011); Al S. (June 10, 2011); 
Jeffrey D. Morgan, President and CEO, National Investor Relations Institute, at 3 (June 21, 2011) 
(“NIRI”); Professor James J. Angel, at 2 (June 24, 2011); and Dennis Nixon, CEO and Chairman, 
International Bancshares Corporation, at 1 (July 18, 2011). All letters are available at 
https://www.sec.gov/comments/4-627/4-627.shtml. 

592 If successful, the scheme can drive down the price, allowing the manipulators to profit when they “buy to 
cover” their short position at the reduced price. Short sellers could also engage in price manipulations by 
systematically taking short positions in one firm while taking long positions in the competitor. See Bodie 
Zvi, Alex Kane, and Alan J. Marcus, Investments and Portfolio Management, McGraw Hill Education 
(2011). See also Rafael Matta, Sergio H. Rocha, and Paulo Vaz, Predatory Stock Price Manipulation, 
available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3551282. 

593 One commenter stated that biotechnology companies, 90% of which have market capitalizations that would 
qualify as small-cap or micro-cap stocks, face a disproportionately high share of short positions. The 
commenter believes that biotechnology firms are disproportionately targeted by short sellers for multiple 
reasons. First, because biotechnology companies cannot disclose interim data until validated, the time gap 
between milestone announcements makes these stocks targets for “short-and-distort” campaigns. Second, 
the commenter stated that short sellers of biotechnology firms will challenge patent claims in order to drive 
their stock prices lower, which makes short positions on these stocks more valuable. The commenter 
supports the Commission’s inclusion of the 2.5% threshold, which would be reached before the $10 million 
daily average threshold for the majority of biotechnology firms. See Bio Letter at 5-8. 



208 

$500,000 or more at the end of a settlement day threshold for non-reporting company issuers.594 

As a result, it is likely that an entity engaging in such a practice will be required to report Form 

SHO data.595 Consequently, if “short and distort” type behavior is suspected, then the 

Commission will be more likely to identify Managers with large short positions and thus quickly 

focus their inquiries on entities that could potentially profit from manipulation. The Commission 

could then match estimated “buy to cover” trading on individual days to statements or other 

actions of the investor which may indicate that the investor was engaging in such behavior.596 In 

addition, the Commission could use CAT data to further investigate the trading activity of the 

alleged manipulator. CAT data would be used to corroborate Form SHO reporting to CAT 

reported transactions. Using the identified manager’s data in CAT, the Commission could see all 

CAT reportable activity, but will not be able to see other activity such as options exercises or 

participation in secondary offerings from an issuer.  

Enhanced oversight due to the adopted rule and amendment could also provide increased 

protection from other sources of harm caused by manipulative short sale activity. First, if firm 

manager decision-making is influenced by shifts in stock prices, as one theoretical study 

 
594 Academic research has found that the average short interest in stocks targeted by activist short sellers is 

about 10%, while it is only 4% for non-targeted firms. Consistent with high information asymmetries, 
targeted firms also appear to have wider bid-ask spreads and higher disagreement among analysts. See W. 
Zhao, Activist Short-Selling and Corporate Opacity (Working Paper) (2020), available at 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2852041.  

595 See, e.g., Y. T. F. Wong and W. Zhao, Post-Apocalyptic: The Real Consequences of Activist Short-Selling. 
(Working Paper) (2017), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2941015. 
Several commenters agreed that the 2.5% threshold for Rule 13f-2 was important because it protects firms 
with lower market capitalizations. See, e.g., BIO Letter at 9. 

596  “Buy to cover” activity would be inferred from position changes reported on Form SHO. This method is 
only a proxy for “buy to cover” information. Specifically, the Commission would be assuming that changes 
in position came from “buy to cover” activity, though there are other mechanisms which could change a 
Manager’s net position that do not occur from “buy to cover” transactions. Further, Form SHO will not 
show intraday short sales and buying to cover if the amounts are equal, as the net position will not change. 



209 

suggests, 597 then short sellers could seek to drive down stock prices when profitable projects are 

announced, which may cause firm managers to reassess these projects. Doing so may lead to 

worse managerial decision making and lower stock prices. Second, another theoretical study 

argues that due to high levels of leverage and interconnectedness in the finance industry, even 

small declines in stock prices due to manipulative short sellers could ripple through the financial 

system with large effects.598 While manipulation is difficult to verify, should it be suspected, 

such activity might be more easily identified with Form SHO positions and activity data. The 

positions data will allow the Commission to more quickly identify individuals with large short 

positions and then use the activity to identify what data to gather, including CAT data to 

investigate their trading behavior to look for signs of manipulation. Improved detection capacity 

may also deter manipulative behavior due to increased fear of detection, potentially leading to an 

overall decline in fraudulent activity.599 

Publicly releasing aggregated information about large short positions may, in some 

instances, increase the risk of trading behavior that is harmful to short sellers, including 

orchestrated short squeezes. More specifically, to the extent that Managers are still holding their 

short positions when the data becomes public, the Commission believes that the information 

 
597 See I. Goldstein and A. Guembel, Manipulation and the Allocational Role of Prices, 75 (1) THE REV. OF 

ECON. STUDIES 133-164 (2008). 
598 See Markus K. Brunnermeier and Martin Oehmke, Predatory Short Selling, 18 (6) REV. OF FIN. 2153-2195 

(2014). Similarly, some have also stated that short sellers may have played a role in the stock market crash 
at the beginning of the Great Depression. See, e.g., Jonathan R. Macey, Mark Mitchell, and Jeffry Netter, 
Restrictions on Short Sales: An Analysis of the Uptick Rule and its Role in View of the October 1987 Stock 
Market Crash, 74 CORNELL L. REV. 799, 801-802 (1989) (collecting reports of such allegations). 

599 See letters from Christine Lambrechts (hereafter “Lambrechts Letter”), available at 
https://www.sec.gov/comments/4-627/4627-14.htm; see also International Association of Small Broker 
Dealers and Advisor, available at https://www.sec.gov/comments/4-627/4627-109.pdf. See NIRI Letter, 
available at https://www.sec.gov/comments/4-627/4627-134.pdf. 



210 

disclosed pursuant to Rule 13f-2 and the disclosures Form SHO requires also might, in some 

cases, potentially facilitate manipulative strategies targeting short sellers, such as short squeezes.  

However, the Commission has sought to reduce this risk by releasing only aggregated 

and anonymized data. Several commenters agreed that only aggregated and anonymized data 

should be published by the Commission in order to reduce the likelihood of short squeezes and 

chilling short sale activity, the latter of which could harm stock price efficiency and market 

liquidity.600 In contrast, however, multiple commenters stated that individual Manager’s 

positions should be publicly disclosed in order to uncover hidden short positions, which one 

commenter stated pose risks to investors and the markets.601 The Commission has sought to 

balance the costs and benefits of Rule 13f-2 and Form SHO by collecting Manager-specific data, 

which should provide the Commission with improved detection of manipulative and potentially 

destabilizing activity, while publicly releasing only aggregated, anonymized data, which should 

reduce the likelihood of short squeezes and copycat behavior but still increase the transparency 

of large short sale activity.602  

The Commission recognizes that the position size thresholds that underlie publicly 

released information may lead to the risk of Managers being identified by the public. The 

Commission estimates that 39 percent of stocks reported on Form SHO would only have one 

 
600 For discussion of data aggregation, see supra Part II.C. See also MFA Letter, at 18; SIFMA Letter, at 22; 

AIMA Letter, at 5 comment letters of supporters. 
601 This commenter stated that reducing or eliminating the reporting thresholds to Form SHO would provide 

benefits. See Better Markets Letter, at 13. Several retail investor commenters also said that the reporting 
thresholds to Form SHO should be reduced or eliminated. See supra note 25. 

602  One commenter stated it was confusing that the Commission believes that the public release of Form SHO 
may give opportunities to orchestrate short squeezes, but at the same time, also help detect short squeezes. 
See Two Sigma Letter, at 10-12. While publicly released Form SHO data may, in some cases, increase the 
opportunity to orchestrate short squeezes, the Commission has reduced this risk by only releasing, 
aggregated, anonymized data. Moreover, this risk is further reduced by the Commission’s ability to utilize 
disaggregated, Manager-identified short sale data in order to increase its detection of short squeezes and 
other manipulative behavior. 



211 

Manager above the reporting Threshold A.603 By focusing on stocks in which market participants 

can ascertain that only one Manager exceeded the threshold,604 combined with a Manager’s posts 

on social media or information discovered by a private investigator, market participants may be 

able to identify the Manager holding the short position.605 As such, the limited number of 

reporters potentially risks shining a spotlight on the few Managers with large short positions.606 

However, due to the delay before publicly releasing the data, public Form SHO information will 

not be as up-to-date and thus may not as accurately reflect current short positions.607 Thus, 

efforts to orchestrate a short squeeze based on the public Form SHO data could result in losses to 

the initiators of the short squeeze if the short positions they target no longer exist.608 Based on 

 
603 Based on analysis of Form SH data. See Proposing Release, at 14963. Commenters questioned the use of 

Form SH data in this and other contexts. See infra Box 1: Use of Form SH Data for responses to comments 
on the use of these data.  

604  In some cases, identifying which equity securities reported to the public via Form SHO data had only one 
Manager reporting may not be difficult. For example, if the aggregated short positions reported in an equity 
security were less than $20 million, it could be estimated that one Manager had a short position of at least 
$10 million average over the month. However, this estimation could be incorrect if Managers’ end of 
month gross short position differs significantly from their average gross short position over the month. This 
estimation could be further honed by looking at daily data to see changes in daily short positions to better 
estimate the size of the position, and thus the number of Managers.  

605 For example, one issuer, upon learning that short sellers had taken a large short position in the issuer, 
reportedly sent a letter to all shareholders urging them to request physical custody of their shares from their 
broker-dealers in an apparent attempt to disrupt securities lending which supports short selling. This 
strategy appeared to work initially as the share price increased by nearly 50% in the subsequent three 
weeks. The issuer also hired private investigators to determine who was behind the short selling and filed 
suit against a well-known short seller. The issuer, however, entered bankruptcy less than a year later. The 
bankruptcy courts ruled that the issuer defrauded investors. See G. Weiss, The Secret World of Short-
Sellers, Business Week, 62a (Aug. 5, 1996). See also Owen A. Lamont, Go Down Fighting: Short Sellers 
vs. Firms, 2 (1) THE REV. OF ASSET PRICING STUDIES 1-30 (2012). 

606  Though the count of Managers filing Form SHO in any particular equity security may sometimes be able to 
be estimated with some accuracy, the identities of Managers will not be disclosed by Form SHO data.  

607 Analysis of Form SH data found that short positions were held at or above the $10 million or 2.5% 
thresholds only for an average of 9.85 days after the end of each month. See Proposing Release, at 14963 
for information on the methodology and caveats of using Form SH data. Commenters questioned the use of 
Form SH data in this and other contexts. See infra Box 1: Use of Form SH Data for responses to comments 
on the use of these data. 

608  That is because the short position has already been closed and the organizers of the short squeeze are 
incorrectly assuming the Manager still has an open short position. Depending on the Manager’s desired 
length of time of the short position, the public version of Form SHO data may still accurately portray the 

 



212 

analysis using Form SH data, the Commission expects that most, but not all, of the short 

positions leading to reporting on Form SHO will be closed by the time that the aggregated Form 

SHO data are released.609 An additional factor that may help mitigate the risk of a short squeeze 

due to the public release of Form SHO data is the fact that non-public Form SHO data, in 

coordination with CAT data, will improve the SEC’s ability to detect short squeeze activity, 

which may deter some market participants from seeking to orchestrate a short squeeze.  

Having detailed confidential information about which Managers currently hold large 

positions might also help the Commission observe potential systemic risk concerns regarding 

short selling. Large and concentrated short positions have the potential to increase systemic risk. 

As discussed previously, unlike long transactions, short selling places an investor at risk of 

losing significantly more than the investor’s initial investment, should the value of the 

underlying asset increase significantly. Even temporary spikes in asset value can lead to 

significant losses – by triggering margin calls or even position liquidations if capital 

requirements cannot be met.610 If the value of an underlying asset increases, a short seller may be 

required to post additional collateral to meet margin requirements. If the investor is unable to do 

so, then the investor’s broker-dealer may liquidate the investor’s position with existing collateral 

 
aggregated short position in a given equity security. However, those basing their decisions on public Form 
SHO data will not know whether the Managers underlying the aggregated short positions in Form SHO 
data have closed out their positions within the two weeks publication delay. Other data sources, combined 
with Form SHO data, can be used in an attempt to discover if the position is closed out, but those are also 
on a delayed basis. 

609 See infra note 622 for a discussion on the Commission’s estimates on how long Managers hold short 
positions. See also infra note 629 for more information on short sellers that do hold their positions for 
longer periods of time. Commenters questioned the use of Form SH data in this and other contexts. See 
infra Box 1: Use of Form SH Data for responses to comments on the use of these data. 

610 Due to imperfect information and market frictions, a short seller who “does not have access to additional 
capital when security prices diverge … may be forced to prematurely unwind the position and incur a 
loss[.]” See, e.g., Mark Mitchell, Todd Pulvino, and Erik Stafford, Limited Arbitrage in Equity Markets, 57 
J. OF FIN. 551-584 (2002). See also, e.g., Andrei Shleifer and Robert W. Vishny, The Limits of Arbitrage, 
52 J. OF FIN. 35 – 55 (1997) and Denis Gromb and Dimitri Vayanos, Limits of Arbitrage, 2 ANNU. REV. 
FIN. ECON. 251-275 (2010) (citations therein). 



213 

leading to steep losses for the short seller. Consequently, it may be more difficult for a short 

seller to ride out periods of turbulence than a long seller. 

One commenter stated they were unaware of cases of short selling causing systemic 

harm.611 However, the potential instability that the Commission wishes to detect includes 

spillovers from events in one asset, such as a particular equity security, to the market for another 

asset.  

Manager level short position data of individuals with large short positions might allow 

the Commission to better observe these positions, study, and more appropriately respond to any 

market events that arise. For example, if the Commission had Form SHO data during the meme 

stock events of January 2021 then it would have had a clearer view as to which Managers held 

large short positions prior to the volatility event and thus which Managers could have been at 

greatest risk of suffering significant harm from a short squeeze. However, the ability of the 

Commission to respond to market events is likely impacted by the timeliness of the short sale 

data that it receives. One commenter stated that due to the delay in reporting of Form SHO, the 

data would not be useful to the Commission to respond to market events.612 While the delay will 

not aid the Commission in responding in real-time to market events, it does aid the Commission 

in developing responses to events over a longer time horizon. Regulatory changes rarely happen 

in real time and involve careful analysis prior to implementation. The Commission has chosen a 

reporting regime which balances the benefits of more frequent and timely data with the costs 

incurred by Managers having to report more quickly, including higher explicit reporting costs as 

well as heightened risks of short squeezes and copycat trading. 

 
611 See SBAI Letter at 4. 
612  See SBAI Letter at 2. 



214 

All the effects, positive and negative, associated with the data collected by Rule 13f-2 

discussed in this section will be limited by data accuracy. Upon filing, Form SHO will be 

checked for technical errors but not for the accuracy of the position and activity data in the Form. 

If Managers make mistakes in their calculations, such mistakes will reduce the utility of the data. 

However, the amendment process will require Managers to amend filings when they discover 

errors, thus promoting the accuracy of the information. 

2. Effects on Stock Price Efficiency 

The Commission believes that Rule 13f-2 and Form SHO may have uncertain effects on 

stock price efficiency.613 The uncertain effects on price efficiency stems from increased 

transparency of short sales generally increasing efficiency, whereas increased transparency might 

also discourage potential short sellers from gathering information – which harms price 

efficiency. This section discusses both the concept of price efficiency and the positive and 

negative impacts that adopted Rule13f-2 and the CAT amendment may have on price efficiency. 

a. Comparisons to other public short selling data 

The publicly released aggregated data from Form SHO will provide information to 

market participants about the aggregate activities of large short sellers – with a planned lag of 

approximately fourteen days from the end of the filing deadline, which is fourteen days after the 

last day of the month.614 Existing short selling data, such as the FINRA short interest data, is 

timelier than the data that will be filed pursuant to Rule 13f-2 and Form SHO. Forthcoming 

information from Rule 10c-1a data, which could be used to estimate short interest, is also 

 
613 See infra Part VIII.D.1 for additional discussion of the effect of adopted Rule 13f-2 and the CAT 

amendment on efficiency. 
614 Thus, it will be a one-month delay after the last day of the month of data being reported. See supra Part 

II.B.3 for more information on the delay of public dissemination of Form SHO data. 



215 

expected to be timelier than Rule 13f-2 and Form SHO data.615 Nevertheless, Rule 13f-2 and 

Form SHO data will provide information on short sale behavior that is not available from other 

short sale data sources. For example, while FINRA short interest data includes short interest for 

all short sales known to clearing broker-dealers, it does not provide the Commission or the public 

with daily information on short sellers’ activities. In contrast, Form SHO data will provide daily 

information on gross short positions of Managers that exceed Reporting Thresholds.616 

Moreover, while Rule 10c-1a data will disseminate to the public anonymized transactions-by-

transaction securities lending data by all market participants, it does not allow for an accounting 

of the timing of aggregate short sales conducted by Managers, nor does it reveal aggregate short 

positions of Managers with large short positions, as will the data from publicly available Form 

SHO.617 Thus with the adoption of Rule 13f-2 and Form SHO, market participants, who will 

only see anonymized data, will have increased awareness into the activity of Managers with 

large short sale positions.618 These benefits are afforded by the adoption of Rule 13f-2 and the 

required reporting of Form SHO.  

There is overlap between the information about stock fundamentals contained in FINRA 

short interest data, forthcoming Rule 10c-1a data, and the data that will be aggregated from Form 

 
615  We expect that the reporting and publication of Rule 13f-2 information will occur before the reporting and 

publication of Rule 10c-1 information. See supra note 531. Reporting and disclosure under Rule 13f-2 will 
provide more information over current short selling data until reporting and disclosure under Rule 10c-1a 
are fully implemented. This could temporarily magnify the benefits and costs of many of the effects 
discussed in this section and elsewhere in the Economic Analysis. 

616  The Commission will anonymize these data before they are publicly disseminated. 
617  For example, a Manager could accumulate a large short position in a particular security using securities 

loans from multiple prime brokers. Each of these loans will be reported as a distinct Rule 10c-1a securities 
loan, and observers may not be able to ascertain whether they are part of a single Manager’s short position. 
As a result, a large securities loan in Rule 10c-1a data may not represent a single large position reportable 
under Rule 13f-2. 

618  The Commission will have enhanced data regarding Managers and trading activity of stocks in which 
thresholds are triggered. See supra Part VIII.C.1 for discussion. 



216 

SHO filings. However, the information in Form SHO filings provides data on Managers, 

including their aggregated daily net changes in positions.619 Thus, Form SHO will increase the 

information available to investors about past bearish sentiment in the market on a specific time 

frame. For example, Form SHO data could be combined with FINRA short interest data to 

calculate the proportion of short interest comprised of Managers with substantial positions. 

Furthermore, the accompanying activity information of Form SHO will provide market 

participants with an enhanced view of short interest and securities lending as well as increased 

insight on how the short sale activity measured by these data series change over time. Further, 

the use of the last day of the month as the reference month for the Form SHO reports will allow 

for a direct comparison of the Form SHO data to the FINRA short interest data. For example, 

market participants might search for correlations between significant increases or decreases in 

short positions found in Form SHO data with corporate events or announcements to gather a 

more precise view of how the market views corporate actions or events and which events 

contributed to the FINRA final short interest tally at the end of the month. While Rule 10c-1a 

data could also be used with FINRA short interest data for such analysis, Form SHO data will 

more clearly reveal how Managers with large gross short positions view these actions or events. 

Thus, market participants and regulators will be able to use Form SHO data along with FINRA 

short interest data to assess the degree to which short interest is concentrated among Managers 

with large positions. It will also allow regulators to better assess which securities face the 

greatest risk of short squeezes and other manipulative strategies. 

 
619  This is in contrast to other data sources, which only provide data on securities such as the short interest in a 

particular security (i.e., FINRA short interest) or the volume of securities lent (i.e., Rule 10c-1a data). 



217 

Form SHO data could also be combined with forthcoming Rule 10c-1a data in order to 

assess the degree to which securities lending is widely dispersed among market participants or 

concentrated among Managers who filed Form SHO.  

b. Potential improvements to price efficiency 

Rule 13f-2 and Form SHO may also improve price efficiency if they mitigate fraud as 

discussed in Part VIII.C.1. Fraud is inherently non-efficient trading and harms price efficiency 

because a fraudster’s motive is to create a deviation of a firm’s value from fundamentals and to 

profit from this deviation. Thus, to the extent that fraudulent trading, such as short and distort 

campaigns, are limited by regulator’s access to the data provided by Form SHO, Rule 13f-2 will 

result in improved price efficiency.  

More generally, the impact of Form SHO on price efficiency will be commensurate with 

the degree to which aggregated Form SHO data are newer or more timely than other publicly 

available short selling information and useful for valuing stocks. Price efficiency (also known as 

market efficiency) refers to how accurately prices reflect available information relevant to the 

value of the asset.620 This information may allow market participants to more effectively make 

trading decisions and manage risk – increasing price efficiency. For example, if aggregate 

Manager short positions provide better info on bearish sentiment, then prices could react to 

updated Form SHO information on bearish sentiment. 621 Although the majority of Managers’ 

short positions may be closed by the time the aggregated data from Form SHO will be made 

public due to the lag in reporting and public dissemination, a portion of the short positions may 

 
620 See, e.g., Eugene Fama, Efficient Capital Markets II, 46(5) J. FIN. 1575-1617 (1991). 
621  See, e.g., A. Senchack and L. Starks, Short-Sale Restrictions and Market Reaction to Short-Interest 

Announcements, 28 J. OF FIN. AND QUANTITATIVE ANALYSIS 177-194 (1993). 



218 

still be open.622 Information on the aggregate size and activity of positions that remain open 

could be combined with FINRA short interest and forthcoming Rule 10c-1a data to estimate the 

proportion of short positions held by large short sellers. If this proportion is not yet reflected in 

prices, prices will adjust upon publication.  

Even if many positions are closed by the time the information is disseminated, Tables 1 

and 2 will still promote price efficiency if the prices do not yet reflect the historical short 

position and activity information. Table 2, for example, will provide information on the 

variability of large short positions in a security and how large short positions changed around 

corporate events. Such information will improve the precision of signals from Table 1 

information and corporate events. 

c. Potential Harms to Price Efficiency 

Rule 13f-2 may harm price efficiency by increasing the cost of short selling.623 Academic 

studies, both theoretical and empirical, have shown that when short selling becomes more costly, 

stock prices are less reflective of fundamental information both because costly short selling 

makes trading on information more difficult, and because costly short selling dissuades investors 

from collecting information in the first place.624 Short sellers fill the role of incorporating 

 
622 The Commission estimates that the median number of days that the short position is held above the 

threshold after the end of the month is 0, while the average number of days that a short position is held 
above the threshold is 9.68. This suggests that the majority of positions will be closed while some are held 
longer than the delay in reporting. 

623  Adopted Rule 13f-2 will have direct impacts on establishing large short positions which may trigger 
reporting obligations. Additionally, there may be lesser effects which dissuade market participants from 
short selling in fear of triggering reporting of Form SHO. 

624 See supra note 597. See Edward Miller, Risk, Uncertainty, and Divergence of Opinion, 32 J. OF FIN. (1977). 
See Robert F. Stambaugh, Jianfeng Yu, and Yu Yuan, The Short of It: Investor Sentiment and Anomalies, 
104 J. OF FIN. ECON. 288- 302 (2012). 



219 

negative information by making short sales that reflect the short sellers’ beliefs about the true 

value of the company.625 

i. Costs that Impact Price Efficiency 

Rule 13f-2 increases the costs of short selling in at least four ways: (1) Compliance costs, 

(2) potentially revealing short sellers’ information that may have been acquired through 

fundamental research, (3) potentially revealing short sellers’ trading strategies, and (4) increasing 

the threat of retaliation against Managers by other market participants. 

(a) Compliance Cost Effects 

The compliance costs associated with reporting large short positions will result in an 

increase in the cost of short selling.626 As many Managers have underlying investors, these costs 

 
625 Several commenters made statements and cited research on how short selling improves price efficiency. 

See, e.g, NASDAQ Letter at 1, AIMA Letter at 5, which state that short selling promotes efficient price 
formation, enhances liquidity, and facilitates risk management. Furthermore, one comment letter, 
“…urge(d) the Commission to consider the widely-cited academic law and finance literature as part of its 
analysis of the Proposed Short Reporting Rules,” and cited multiple studies that provide evidence that short 
selling contributes to price efficiency. See also “Law and Finance Professors letter” at 2. Cited studies 
include Jonathan M. Karpoff and Xiaoxia Lou, Short Sellers and Financial Misconduct, 65 J. OF FIN. 1879-
1913 (2010) and Ekkehart Boehmer, Charles Jones, and Xiaoyan Zhang, Which Shorts Are Informed? 63 J. 
OF FIN. 491-527 (2008), and Lauren Cohen, Karl Diether, and Christopher Malloy, Supply and Demand 
Shifts in the Shorting Market, 62 J. OF FIN. 62, 2061-2096 (2007). Other cited studies find evidence that 
constraints on short selling reduce market efficiency, including Joseph E. Engelberg, Adam V. Reed, and 
Matthew C. Ringgenberg, Short Selling Risk, 73 J. OF FIN. 755-786 (2018), Ekkehart Boehmer, Charles 
Jones, and Xiaoyan Zhang, 2013, Shackling the Short Sellers: The 2008 Shorting Ban, Review of Financial 
Studies 26, 1363-1400, Pedro Saffi and Kari Sigurdsson, Price Efficiency and Short Selling, Review of 
Financial Studies 24, 821-852 (2011). One cited paper favors reduced regulation of short selling in order to 
avoid undermining the market quality improvements provided by short selling. See Peter Molk and Frank 
Partnoy, The Long-Term Effects of Negative Activism, UNIV. OF ILLINOIS L. REV., 1-70 (2022). Another 
cited paper favors less regulation of short selling that enhances price efficiency but increased regulation of 
short selling that is aimed at disabling the fundamental value of targeted firms. See Barbara Bliss, Peter 
Molk, and Frank Partnoy, Negative Activism, 97 WASH. UNIV. L. REV. 1333-1395 (2020)). The comment 
letter’s suggestion to delay public release of Form SHO data for one year and receive additional input on 
which Form SHO thresholds to apply stem from a concern that Rule 13f-2 could undermine the market 
quality benefits of short selling, of which the above cited studies find evidence. However, the Commission 
is also cognizant of the of the benefits provided by short selling, as noted in supra Part VIII.B.2. 
Furthermore, the Commission discusses in detail below the potential costs to price efficiency stemming 
from Rule 13f-2 and Form SHO. See infra Part VIII.C.2.c.ii. 

626 See infra Part VIII.D.2 for a discussion of how these direct costs may affect investors in funds that employ 
short selling.  



220 

will likely be passed on to end consumers in the form of lower returns due to limiting the 

strategies that Managers could profitably employ and reducing the profitability of strategies still 

employed. On net, an increase in the cost of short selling will reduce short selling, harming price 

efficiency.627  

(b) Potentially Revealing Information of Short 

Sellers 

Publicly releasing aggregated Form SHO data has the potential to reveal some of the 

information that short sellers may have acquired through fundamental research.628 Revealing this 

information to the market may cause prices to adjust to the information that the short seller 

uncovered before the short seller is able to acquire their full desired position – decreasing the 

profits to acquiring this information and providing less incentive to produce fundamental 

research. Thus, the publication of Form SHO data represents an additional cost to short selling in 

the form of potentially lower profitability for trading on negative information. Relative to the 

proposed rule, the Commission has modified the final rule’s requirements for publication of 

Form SHO data (from the proposed rule) to decrease the risks of revealing this information by 

requiring much less granular information in Table 2 of Form SHO. In addition, adopted Rule 

13f-2 will mitigate revealing information by delaying publication at least 14 days from the last 

day of a month and only publishing aggregated data. 

To avoid price impacts, a short seller seeking to build a sizeable position in a firm 

generally does so by building up small positions over time until the desired position is 

 
627  See supra note 624 and accompanying text. 
628  Several commenters agreed. See, e.g., SBAI Letter at 2-3, Two Sigma Letter at 1-2, SIFMA Letter at 2.221 

accumulated.629 Because short positions can take a long time to accumulate, even with a lag, the 

information motivating the trades being reported may not be stale. While aggregation limits the 

precision with which markets can estimate an individual short seller’s motivation, it does not 

eliminate it.630 Additionally, the threshold may protect short sellers with smaller short positions 

from having the information in their trades revealed. In contrast, Rule 13f-2 may highlight large 

positions, potentially increasing the likelihood that some of the information contained in the 

trades of large short sellers will be acted on by other market participants before the short seller 

could acquire their optimal position. Thus, the Commission expects that publication of 

aggregated Form SHO data will still represent a cost to short selling.631  

Relatedly, Managers who wish to build large short positions may choose to execute their 

transactions at a pace that is faster than what they would have done otherwise to attempt to profit 

from their research before information is disclosed and copycat investors are able to trade based 

 
629  See Albert S. Kyle, Continuous Auctions and Insider Trading, ECONOMETRICA: J. OF THE ECONOMETRIC 

SOCIETY 1315- 1335 (1985). See Kirilenko, Andrei, Albert S. Kyle, Mehrdad Samadi, and Tugkan Tuzun, 
The Flash Crash: High‐Frequency Trading in an Electronic Market, 72 (3) THE J. OF FIN. 967 -998 (2017) 
(for a discussion of this type of trading); Amir E. Khandani and Andrew W. Lo., What Happened to the 
Quants in August 2007? Evidence from Factors and Transactions Data, 14 (1) J. OF FIN. MARKETS, 1 -
46 (2011) (for a discussion of what happens when investors build large positions without properly 
smoothing their trading). Well-known short seller Gabe Plotkin testified that his firm had built and 
maintained a short position in GameStop for over 5 years prior to the significant volatility experienced in 
January 2021. See Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail 
Investors Collide (Hearing), U.S. House of Representatives Committee Repository (“Game Stopped 
Hearing”), https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=111207; See also Juliet 
Chung and Melvin Capital Says It Was Short GameStop Since 2014, Wall Street Journal (Feb 17, 2021). In 
the Form SH data, 17.9 % of positions were held above the proposed Threshold A for at least a month. 
Commenters questioned the use of Form SH data in this and other contexts. See infra Box 1: Use of Form 
SH Data for responses to comments on the use of these data. 

 
630 See supra Part VIII.C.1 for a discussion of how market participants may attempt to uncover individual 

identities. 
631 Consistent with this expectation, research on similar regulations in Europe has documented a similar effect 

there. See Market Impact of Short Sale Position Disclosures, Copenhagen Economics: Office of Global 
Research and Markets at the MFA, available at 
https://www.copenhageneconomics.com/publications/publication/market-impact-of-short-sale-position-
disclosures. 



222 

on the reported data. Executing transactions at a faster speed than would be optimal imposes 

increased transaction costs on Managers than they would have incurred otherwise.632 

Additionally, trading faster than is optimal may harm price efficiency by leading prices to over-

react to the aggressive trading.633 

(c) Potentially Revealing Trading Strategies of Short 

Sellers 

If Form SHO data provides information about the specific trading strategies or identities 

of certain short sellers, those short sellers could be harmed by actions such as others profiting 

from predicting their trading or copycat trading.634 This harm could result in less short selling, 

reducing the price efficiency benefits of short selling. 

While Rule 13f-2 was designed to minimize the possibility of identifying Managers or 

their proprietary information, there are conditions that may arise that would be conducive to 

revealing proprietary trading strategies. For example, in cases where market participants may be 

able to discern that there is only one Form SHO filer,635 then market participants might attempt 

to use the activity data to extract information about the specific trading strategies that short 

sellers use to implement their trades. Market participants might then try to identify similar 

patterns in the real time market trading and quote data and alter their trading strategies to attempt 

to profit from any predictability in the short seller’s trading strategy. This behavior would further 

 
632 See Kyle (1985) at supra note 630.  
633 See e.g., Albert S. Kyle and Anna A. Obizhaeva, Large Bets and Stock Market Crashes (Mar. 22, 2019), 

available at https://ssrn.com/abstract=2023776 or https://dx.doi.org/10.2139/ssrn.2023776.  
634  If the identity of the short seller is exposed, then this may also incentivize retaliation against them. See 

infra Part VIII.C.2.i.(d). 
635  This could partially be achieved through the use of Rule 10c-1a data, depending on the timing of the 

securities loan, among other factors. However, such risk is mitigated by the fact that securities lending 
transaction sizes in Rule 10c-1a data are not publicly disseminated for 20 business days and counterparties 
identities are not publicly disseminated. 



223 

limit the benefit to short selling as it may allow other market participants to game the short 

seller’s trading behavior – increasing the cost of implementing short selling trading strategies. 

The Commission received several comment letters that addressed the risk of copycat trading due 

to public disclosure of Form SHO data.636 While the Commission acknowledges this risk, it 

believes that the design of the published activity data will significantly limit this risk. In 

particular, the netting of short selling activity across short sellers will mask much of the trading 

behavior of individual short sellers while still providing information about changes in bearish 

sentiment in the market. By netting trading activity in the aggregations across Form SHO filers, 

market participants viewing the publicly reported Form SHO data will still get a view of changes 

in bearish sentiment while keeping Manager specific trading strategies hidden.  

(d) Retaliation Against Short Sellers 

The public disclosure requirements might also increase short selling costs by exposing 

Managers to the risk of retaliation by other market participants, but the risk may be low.637 An 

issuer’s directors or shareholders may have the incentive to retaliate if they believe short sellers 

are inappropriately reducing the value of the stock. 638 

 
636 See, e.g., SBAI letter at 2, Two Sigma letter at 1, David Kwon letter at 3. Furthermore, supporting 

commenters’ views, there is empirical evidence that copycat trading in response to media reports may harm 
price efficiency. See Jiang, George and Strong, Cuyler, Unusual Option Activity: Is it Smart to Follow 
‘Smart Money’? (Aug. 29, 2022). available at https://ssrn.com/abstract=3618427. 

637 See 2011 MFA Letter; Owen A. Lamont, Go Down Fighting: Short Sellers vs. Firms, 2(1) THE REV. OF 
ASSET PRICING STUDIES 1-30 (2012); Lorien Stice-Lawrence, Yu Ting Wong, Yu Ting Forester Wong, and 
Wuyang Zhao, Short Squeezes After Short-Selling Attacks (Nov. 2021), available at 
https://ssrn.com/abstract=3849581 or https://dx.doi.org/10.2139/ssrn.3849581.  

638  The motivation behind such retaliation may be strengthened by the belief that the short seller’s aim is to 
profit from reducing the value of the stock rather than uncovering mismanagement or other negative 
information about the firm to shareholders. See generally Barbara Bliss, B., Peter Molk, and Frank Partnoy 
(2020), Negative Activism, Wash. U. Law Review 97:1333-1395 (2020), which distinguishes between 
“informational negative activism,” which serves to uncover, “…the truth about companies whose shares the 
activists believe are overvalued,” and “operational negative activism,” which, “…involves dismantling or 
disabling sources of value at companies.” 



224 

Although aggregating the data before releasing it to the public on a delay will provide 

some protection to Managers from having their identities uncovered, in certain cases motivated 

market participants may still be able to identify individual investors. For instance, in the case that 

the aggregated short position reported to the public is just above the threshold, market 

participants might reasonably assume that only one Manager has a short position large enough to 

report, which may facilitate identifying who that manager is. The Commission believes that even 

if the probability of identifying individual short sellers is low, the threat of this additional 

exposure to retaliation may disincentivize short selling.  

In the event that Managers can be identified from Form SHO disclosures, issuers might 

take retaliatory action against individual short sellers through lawsuits and by forwarding 

information to regulators in attempts to precipitate regulatory investigations, through claims in 

the media, or by applying pressure on the shorting firm through business relationships that may 

exist outside of trading.639 One commenter provided further examples of retaliatory behavior that 

short sellers may face the threat of, including short squeezes, nuisance lawsuits, intimidation, and 

physical violence.640 There is also evidence that when short sellers’ positions become public, 

market participants strive to orchestrate short squeezes and are successful a significant fraction 

of the time.641 Short sellers often face lawsuits when they take their information public or their 

identities otherwise become known – regardless of whether the information the short sellers 

brought forth was legitimate.642 Some issuers have even been known to hire private investigators 

 
639 See 2011 letter from Security Traders Association of New York on the Short Sale Reporting Study 

Required by Dodd-Frank Act section 417(a)(2), available at https://www.sec.gov/comments/4-627/4627-
155.pdf.  

640  See MFA Letter at 9. 
641 See infra note 645. 
642 See Owen A. Lamont, Go Down Fighting: Short Sellers vs. Firms, 2 (1) THE REV. OF ASSET PRICING 

STUDIES 1-30 (2012). 



225 

in an attempt to uncover the identities of individuals short selling their stock.643 Some short 

sellers have also expressed that they have experienced threats to their personal safety after their 

short positions were revealed.644 

In addition, publicly disclosing that Managers, in aggregate, have amassed large 

aggregate short positions may expose the Managers to increased risk of being the target of 

predatory strategies such as short squeezes. The risk of short squeeze increases if market 

participants are able to identify the individuals with large short positions, as discussed in Part 

VIII.C.1.645 In this case, they may be able to better estimate the capital constraints of the short 

seller to identify the likelihood of a squeeze being successful. 

ii. Impact of the Costs 

Because reporting information on Form SHO increases the costs of short selling, the 

adopted rules could have several negative effects on price efficiency. In particular, negative price 

efficiency effects could derive from a reduction in fundamental research,646 strategic trading to 

avoid exceeding the thresholds, and reduced liquidity in options markets. Reduced short selling 

could also take place from the effect of negative price efficiency. Rule 13f-2 and Form SHO 

have been designed to reduce the likelihood of these risks occurring to the extent possible while 

still providing market participants and regulators with enhanced transparency of short sale 

 
643 Id. 
644 See Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide: 

Hearing Before the H. Comm. on Fin. Serv., 117th Cong. (2021) (statement of Gabriel Plotkin, Founder and 
CEO, Melvin Capital Management), available at 
https://www.congress.gov/117/meeting/house/111207/witnesses/HHRG-117-BA00-Wstate-PlotkinG-
20210218.pdf (stating that after company’s short positions were made known, Reddit users made posts and 
others sent personal text messages that were laced with anti-Semitic slurs and threats of physical harm to 
him and others). 

645  As noted in Part VIII.C.1, the Commission will also be better able to detect short squeezes. 
646  Several commenters also stated there could be a possible reduction in fundamental research. See, e.g., MFA 

Letter at 10.   



226 

behavior. To the extent that fundamental research decreases, price efficiency might be harmed as 

prices will not necessarily reflect all available relevant information, only that portion that had 

been discovered by investors continuing to perform fundamental research. 

It is possible that short sellers may strategically select average short position just below 

the threshold in order to avoid reporting. The size of a short position is often related to the 

expected magnitude of the short seller’s negative information, with revelations of larger negative 

information being associated with larger short positions.647 Consequently, to the extent that 

Managers may choose to select otherwise sub-optimal short positions to avoid reaching the 

reporting threshold, Rule 13f-2 and Form SHO might result in a sub-optimal allocation of capital 

and may harm price efficiency. To this end, some have argued that stock prices can be viewed as 

a weighted average of investor sentiment. If short sellers limit their positions to avoid disclosure 

requirements, then stock prices may skew towards being overvalued.648  

Additionally, Rule 13f-2 might dissuade options market makers from holding large short 

positions and providing liquidity in options markets and, thus, might harm price efficiency in 

equity markets. Research has found that options play an important informational role in stock 

 
647  See, e.g., supra note 629. 
648  See, e.g., supra note 625. In contrast, some argue that short selling itself increases the value of assets as it 

provides demand for securities lending and allows owners to collect securities lending fees. From this 
perspective, restricting short selling may decrease stock prices by restricting the demand for securities 
loans. See Darrell Duffie, Nicolae Garleanu, and Lasse Heje Pedersen, Securities Lending, Shorting, and 
Pricing, 66 (2-3) J. OF FIN. ECON. 307-339 (2002). Consistent with statements in the Proposing Release, the 
Commission continues to believe that this effect is the not predominate effect of short selling on asset 
prices, because the average fee earned from securities lending is usually very small relative to the average 
long term stock returns. Thus, it appears that other economic effects tend to dominate the relationship 
between short selling and stock prices and that on net short selling restrictions lead to stock overvaluation. 
Proposing Release at 14996 n. 281. See also letters from OTC Markets, Provable Markets, SIFMA, and 
Chester Spatt responding to FINRA’s regulatory notice 21-19 (arguing that short selling is vital to price 
efficiency), available at https://www.finra.org/rules-guidance/notices/21-19#. In contrast, others have 
argued markets adjust to short selling constraints as to not overvalue stocks. See Douglas Diamond and 
Robert E. Verrecchia, Constraints on Short-Selling and Asset Price Adjustment to Private Information, 18 
J. OF FIN. ECON. 277-311 (1987). 



227 

price discovery, therefore reductions in liquidity in the options market can reduce the price 

efficiency in the equity market.649 

d. Limitations on Price Efficiency Effects 

As with the discussion in Part VIII.C.1, many of the economic effects articulated in this 

section relating to the reporting of Form SHO might be limited to the extent that the data 

reported in Form SHO contains factual errors. The EDGAR system will check the data for 

technical errors but not the accuracy of the data entry by filers. Thus, the data reported in Form 

SHO might contain errors. To the extent that these errors exist and meaningfully affect the 

usability of the data, the value of the data and the economic benefits and costs associated with 

collecting the data would be limited. Additionally, the benefits and costs are lessened by the 

delay in the publication of the data. Furthermore, the data will only be available for those 

securities with Managers who have short positions over the threshold, which may not be 

representative of all short positions, and the number of reporting Managers may change from 

month to month. 

3. Effect on Market Liquidity 

The effect of the adopted Rule 13f-2 and CAT amendment on liquidity is uncertain. Part 

VIII.C.2.c discusses the possibility that Rule 13f-2 and Form SHO may harm price efficiency by 

dissuading investors from pursuing fundamental research. Alternatively, Rule 13f-2 and Form 

SHO may help price efficiency by increasing transparency with respect to the actions of large 

short sellers. To the extent that the adopted rule and amendment improve price efficiency, this 

might also indirectly improve liquidity because market makers would be subject to less 

mispricing risk. Mispricing risk leads to lower liquidity because market makers must be 

 
649  See infra Part VIII.C.3. See also David Easley, Maureen O’Hara, and Pulle Subrahmanya Srinivas, Option 

Volume and Stock Prices: Evidence on Where Informed Traders Trade, 52 J. OF FIN. 431-465 (1998). 



228 

compensated in the form of wider bid ask spreads for the potential that there is information 

relevant to the firm that has not yet been discovered and may affect prices. Thus, to the extent 

that the Rule 13f-2 enhances price efficiency, it may also enhance liquidity by mitigating 

mispricing risk. Conversely, if the Rule harms price efficiency, it may also harm liquidity. 

Equity market makers generally do not carry large gross short positions overnight. 

However, adopted Rule 13f-2 and Form SHO may make market makers more concerned that a 

particularly volatile trading day may cross the Reporting Thresholds requiring the filing of Form 

SHO. One commenter described the concern for unintentionally crossing the threshold while 

market making.650 While the Commission believes the adopted Reporting Thresholds will 

generally be very difficult for market makers to trigger,651 market makers could still choose to 

reduce market making activities during periods of volatility due to concerns over having to report 

Form SHO. To the extent market makers believe high volatility may necessitate a large short 

position, the adopted rule may reduce market liquidity. 

Additionally, in the event that an options market maker might have short equity position 

close to the Reporting Thresholds, Rule 13f-2 might dissuade these option market makers from 

increasing their short position, which may harm their willingness to provide liquidity in options 

markets. Alternatively, Rule 13f-2 might not cause option market makers that exceed the 

Reporting Thresholds to reduce their positions in order to avoid filing Form SHO, in which case 

the additional associated spending on filing Form SHO (and other compliance costs) might result 

in wider spreads if the compliance costs are large enough. 

 
650 See HSBC Letter at 15. 
651  Market makers typically use short selling to maintain two sided quotes in the absence of inventory and 

other high frequency traders. While market makers trade in large volumes, they tend to end trading sessions 
fairly flat on inventory in larger stocks. Therefore, while it is possible that market makers may end a single 
trading day holding a gross short position of $10 million, it is highly unlikely that this will occur frequently 
enough for them to end the month with an average daily position of $10 million.  



229 

4. Effect on Corporate Decision Making 

The Commission believes that Rule 13f-2 and Form SHO might have mixed effects on 

corporate decision making. On one hand, research suggests that corporate managers learn from 

market reactions to announcements.652 Consequently, Rule 13f-2 and Form SHO may provide 

corporate managers with additional feedback on their decisions, albeit with a delay. Projects 

often take some time to design and implement after announcement, and consequently, even with 

the lag in the reporting time of Form SHO data, a corporate manager might review the data 

around significant announcements to better understand how some Managers viewed a particular 

project or announcement. For example, if large short positions were built shortly after a 

corporate project announcement, then this may help signal to a corporate manager that the 

market viewed that project announcement negatively, and this information could enhance the 

corporate manager’s decision-making on the project. 

In another aspect, short sellers, and particularly large short sellers with the resources to 

perform fundamental research, serve as valuable external monitors of management. If a corporate 

manager knows that short sellers are monitoring their actions and financial statements and are 

willing to expose wrongdoing, then they are less likely to engage in fraud or do other things that 

may hurt the value of the company. Historically, short sellers have, at times, through doing 

research, uncovered fraudulent behavior.653 Academic research has also shown that even the 

 
652 See, e.g., James B Kau, James S. Linck, and Paul H. Rubin, Do Managers Listen to the Market?,14 (4) J. 

OF CORPORATE FIN. 347-362 (2008). 
653 See, e.g., A. Dyck, A. Morse, and L Zingales, Who Blows the Whistle on Corporate Fraud?, 65(6) THE J. 

OF FIN. 2213-2253 (2010) (using a large sample of fraud cases between 1996 and 2004, the authors find 
that short sellers uncovered the fraud in nearly 15% of cases.). See also Cassell Bryan-Low and Suzanne 
McGee, Enron Short Seller Detected Red Flags in Regulatory Filings, THE WALL STREET J. (Nov. 5, 2001) 
(discussing an Enron short seller that detected red flags reviewing, among other things, the company’s SEC 
filings) (retrieved from Factiva database). Cf. Nessim Mezrahi et al., More Securities Class Actions May 
Rely on Short-Seller Data, LAW360 (Jan. 10, 2022, 7:07 PM) available at 
https://www.law360.com/articles/1453499/ more-securities-class-actions-may-rely-on-short-seller-data 

 



230 

threat of short selling serves to discipline managers.654 As discussed in Parts VI.C.1 and VI.C.2, 

Rule 13f-2 may discourage Managers from performing fundamental research. If less fundamental 

research is performed by short sellers,655 then their role as monitors of the firm diminishes. Less 

monitoring might lead to higher incidences of fraud as managers feel that the likelihood of being 

caught declines.656 Thus, to the extent that Rule 13f-2 and Form SHO discourage fundamental 

research it may lead to both an increase in the total amount of corporate fraud in the economy as 

well as decrease the fraction of fraudulent actors that are discovered by investors. 

5. Effect on the Securities Lending Market 

As discussed in Parts VIII.C.1 and VIII.C.2, the adopted rule and related Form SHO will 

increase the cost of short selling, particularly large short positions – potentially leading to less 

overall short selling. As discussed in Part VIII.C.2, short sellers must borrow shares for their 

short position. When short sellers borrow shares, they pay a borrowing fee to the owner of the 

share. These fees can represent a significant source of revenue for pension funds, mutual funds, 

and others who engage in securities lending.657 Consequently, to the extent that the adoptions 

discourage short selling, they may also lower overall portfolio returns, including for institutional 

investors that engage in securities lending.658 

 
(authors’ “analysis of 131 Rule 10b-5 securities class actions indicates that plaintiffs continue to rely on 
short-seller research to substantiate fraud-on-the-market claims”).  

654 See, e.g., Massimo Massa, Bohui Zhang and Hong Zhang, The Invisible Hand of Short Selling: Does Short 
Selling Discipline Earnings Management? 28 (6) THE REV. OF FIN. STUDIES 1701-1736 (2015).  

655  See supra Part VIII.C.2 for a discussion of the potential for the final rule to reduce the incentives for short 
sellers to conduct fundamental research.  

656 See, e.g., Paul Povel, Rajdeep Singh, and Andrew Winton, Booms, Busts, and Fraud, 20 (4) THE REV. OF 
FIN. STUDIES 1219-1254 (2007) (linking variations in monitoring intensity to the incidence rate of financial 
fraud.). 

657 See supra note 563. 
658 Commenters on the Short Sale Reporting Study Required by Dodd-Frank Act section 417(a)(2) argue that 

increased public short selling disclosure may result in reduced short selling, thereby lowering revenues to 
 



231 

6. Compliance Costs 

The Commission believes that there will be direct costs associated with adopted Rule 

13f-2, Form SHO, and the CAT amendment. These costs include Managers reporting position 

and activity data, broker-dealers updating CAT reporting processes, and the Commission 

processing and releasing the Manager reports through EDGAR. Rule 13f-2, related Form SHO, 

and the amendment to CAT in aggregate, will result in an estimated maximum of $119,975,800 

in initial costs and $72,026,064 in annual costs.659 

The Commission received several comments from industry groups concerned about the 

cost of implementing Rule 13f-2, Form SHO, and the CAT amendment. One commenter stated 

that Managers currently do not have systems in place to comply with Rule 13f-2, Form SHO, and 

the CAT amendment. Multiple commenters stated that there would be high costs associated with 

tracking positions for the purpose of seeing if they had crossed the Reporting Thresholds.660 

Another commenter stated that the Commission’s estimated costs in the proposing release, in 

general, were “materially understated”.661 However, the Commission has attempted to use the 

applicable resources available to it to estimate the costs of implementing adopted Rule 13f-2, 

Form SHO, and the CAT amendment. The Commission did not receive any information from 

 
institutions that maintain long positions in equities for extended periods (such as pension funds). See, e.g., 
2011 Letter from Alternative Investment Management Association, available at 
https://www.sec.gov/comments/4-627/4627-138.pdf.  

659  See supra Table 1, Table 2, and Table 3 in Part VII. These costs assume 1,000 Managers would file Form 
SHO annually and 35 Managers would file amendments each month. The initial costs are calculated by 
adding the Form SHO Initial Technology Projects cost, the CAT: Central Repository – Short Sale Data 
cost, CAT: Reporting of Bona Fide Market Making Exception – Insourcers cost, and the CAT: Reporting 
of Bona Fide Market Making Exception – Outsourcers cost. ($118,950,000 + $113,800 + $870,000 + 
$42,000 = $119,975,800). The annual costs are calculated by adding the Form SHO Filings cost, the Use of 
Structured XML-Based Data Language cost, the Amended Form SHO Filings cost, and the amending Use 
of Structured XML-Based Data Language cost. ($60,326,400 + $9,264,000 + $2,111,424 + $324,240 = 
$72,026,064). See also infra Part VIII.C.6.a and Part VIII.C.6.c for further explanations of these costs.  

660 See infra note 679. 
661 See MFA Letter, at 19. 



232 

commenters that might otherwise have been used to refine or adjust its estimates of the 

implementation costs of adopted Rule 13f-2, Form SHO, and the CAT amendment. Thus, the 

Commission believes its estimates to be reasonable given the information it has available. 

Furthermore, the Commission has adjusted estimates in response to policy choices that differ 

from the Proposing Release, some of which will lower compliance costs, including the exclusion 

of the “buy to cover” proposals (proposed Rule 205 and the related CAT amendment) and a 

change to one of the reporting thresholds that will likely result in fewer Managers having to 

report Form SHO. As discussed in Part II.B, these policy changes, to the extent possible, address 

or are in response to statements from commenters regarding costs stemming from the Proposing 

Release.  

a. Form SHO Compliance Costs 

The Commission believes that Managers will incur an initial technology-related burden 

to update their current systems to capture the required information and automate and facilitate the 

completion and filing of Form SHO.662 While Managers likely have other existing reporting 

obligations that are similar to Form SHO filing obligations, Managers will need to update their 

systems to ensure timely and accurate filing of the specific information required under Form 

SHO.663 The estimated aggregate cost of Form SHO initial technology projects across all 

Managers ranges from $29,975,400 to $118,950,000. The Commission estimates that between 

252664 and 1,000 Managers will be required to file Form SHO. The lower estimate is based on 

 
662  See supra Part VII.4. 
663  See infra Part VIII.C.6.c. 
664  In the Proposing Release, the Commission estimated 346 Managers would be required (on the low end of 

the estimate). The Commission changed the parameters for this estimate to match the scenario of a $10 
million daily average over the month or 2.5% daily average over the month of shares outstanding 
thresholds that are being adopted as Threshold A. 



233 

the number of Form SH filers above Threshold A. The actual number of reporting Managers will 

likely be higher than our low estimate, because Managers that exercise investment discretion 

with respect to accounts holding section 13(f) securities having an aggregate fair market value of 

less than $100 million were not required to file Form SH.665 However, the actual number of 

reporting Managers will likely be lower than the Commission’s high estimate, since this estimate 

is also based on an initial analysis of Form SH filings, which were filed weekly and therefore 

more likely to trigger reporting thresholds, as compared to adopted Form SHO, which will 

involve monthly assessment and therefore require a longer-held large short position to trigger a 

reporting threshold.666 The Commission discusses the use of Form SH Data, including 

commenter concerns about the use of the data in this and other contexts, in Box 1: Use of Form 

SH Data.  

 
665 See Proposing Release, at Table I. See also Proposing Release, at 14963 for more information on the 

methodology and caveats of using Form SH data.  
666 See Disclosure of Short Sales and Short Positions by Institutional Investment Managers, 73 FR 61679. 

Form SH filers filed weekly reports. As a result, each reporting manager would file fewer reports under 
Rule 13f-2, because Form SHO would be filed monthly. See also 73 FR 61686 (estimating 1,000 weekly 
Form SH filings by reporting Managers). 



234 

Box 1: Use of Form SH Data: 

The Commission’s estimation of the minimum number of Managers likely to report Form 
SHO draws on an analysis of data collected under Form SH, the only existing data source of 
individual Manager-level short sale positions. In addition to estimating the minimum number of 
reporting Managers, the Economic Analysis also uses Form SH data for comparisons of alternative 
thresholds and to estimate the share and number of potential reported securities with only one 
reporting Manager, the potential share of gross short sale dollar volume covered by reporting 
Managers, and statistics on potential holding periods after hitting a threshold.  

The Commission received several comment letters questioning the applicability of Form SH 
data to the current time period.a One commenter stated that the period surrounding the filing of 
Form SH was an abnormal period for financial markets, and also stated that many prominent short 
sellers have left the industry.b While there are various limitations to be considered when using Form 
SH data,c Form SH data are the most relevant and applicable source of data available for the 
purposes of estimating the costs of the design and analysis of Rule 13f-2. There are no other data 
sources, public or regulatory, which specifically track Managers’ short position activities in the U.S. 
While the Commission agrees that having more current data would be useful for the purposes of 
Rule 13f-2’s design and analysis, no commenters provided such data, and the Commission believes 
Form SH data are sufficiently informative to analyze the predicted impact of the amendments.d  

Further, in response to these comments, the Commission analyzed FINRA short interest data 
over the period of 2008 to present with the goal of seeing if short interest was comparable between 
the current period and the period surrounding Form SH filings.e Specifically, we compared the trend 
of average short interest to the trend of the number of equities counted from each FINRA short 
interest files covered 2009 to 2023. The analysis revealed that the average short interest per equity 
symbol has increased over time by approximately 46 percent, while the number of symbols has 
increased at a much slower rate of 17 percent. Thus, we observe that the average short interest per 
equity symbol has increased from 2009 to present. However, the Commission cannot assess whether 
the size of Manager positions has changed over time.f Without this piece of knowledge, it is 
indeterminate whether the average amount of short interest generated by a manager has changed 
over time. If there are currently more Managers relative to 2008, it is possible that the average short 
position per manager is smaller than during the period Form SH was used. Conversely, if there are 
fewer Managers, it is likely the average short position per manager has increased relative to 2008.  
a See, e.g., Law and Finance Professors Letter, at 3; AIMA Letter at 11-12; Two Sigma Letter at 5-6. 
b See Law and Finance Professors Letter, at 3. 
c See supra Part VIII.B.4.e and note 670 for a discussion of limitations in the use of Form SH data. See also Part VII.B.1 

for a discussion of other ways Form SH data differ from Form SHO data. 
d See supra Part II.A.3 for additional discussion of comments regarding the Reporting Thresholds and note 177 for 

further discussion of the time period of the data.   
e FINRA Short Interest data are available at https://www.finra.org/finra-data/browse-catalog/equity-short-interest/data. 

See also Part VIII.B.4 a for further information about FINRA Short Interest Data.  
f See supra Part VII.B.1 for a discussion of estimates of the number of affected Managers using Form SH, which most 

closely mirrors the criteria of Rule 13f-2 and Form SHO and how the number may have changed over time.  
 



235 

The Commission estimates that the annual cost to Managers for filing Form SHO ranges 

from $15,202,252 to $60,326,400.667 The Commission estimates that Managers will collectively 

spend an additional $2,334,528 to $9,264,000 per year to structure Form SHO directly in Form 

SHO-specific XML.668 The Commission estimates that the Managers that will file amended 

Form SHOs will collectively spend $542,938 to $2,111,424 per year to file amended Form 

SHOs.669 Further, the Commission estimates that Managers filing amended Form SHO will 

collectively spend an additional $83,376 to $324,240 per year to structure Form SHO directly in 

Form SHO-specific XML.670 The Commission thus estimates that the aggregate cost of 

structuring and filing Form SHO across all Managers ranges from $18,163,094 to 

$72,026,064.671 Costs might be underestimated to the extent that wages are higher than those 

used in the estimation. The initial costs are likely higher than the lower bound estimates as 

Managers who may not file Form SHO on a monthly basis will likely still incur the initial costs. 

Furthermore, because Manager short positions are fluid, some Managers will not be required to 

file a report every month when they do not cross the reporting threshold. As a result of this 

 
667 See supra PRA Table 2 and note 450. The lower estimate was calculated using 252 Managers. 20 hours per 

filing x 252 filings by Managers each month x 12 months x $251.36 = $15,202,252. The Commission 
estimates that 252 Managers would have been required to file Form SH had Form SH been subject to the 
same $10 million and 2.5% threshold. 

668  See infra Part VIII.C.6.c and infra note 686. The lower estimate was calculated as follows: 2 hours per 
filing x $386 per hour for a programmer x 252 filings by Managers each month x 12 months = $2,334,528. 

669  See supra PRA Table 1 and accompanying text discussing amended Form SHO estimates. We maintain the 
assumption of 3.5% of Managers amending monthly in all of our estimated costs for amending Form SHO. 
Using the lower estimate of 252 Managers, this would result in 9 Managers filing amendments monthly. 20 
hours per filing x 9 filings by Managers each month x 12 months x $251.36 per hour = $542,938.  

670  Using the lower estimate of 9 Managers filing amendments monthly would result in $83,376 to structure 
amended Form SHO filings in Form SHO-specific XML. 2 hours per filing x 9 filings by Managers each 
month x 12 months x $386 per hour = $83,376. 

671  See supra PRA Table 2. These costs are calculated by adding the costs for Form SHO Filings, Use of 
Structured XML-Based Data Language, Amended Form SHO Filings, and the amending Use of Structured 
XML-Based Data Language together. For the lower estimate, we calculate using 252 Managers filing each 
month annually and 9 Managers filing amendments monthly. ($15,202,252 + $2,334,528 + $542,938 + 
$83,376 = $18,163,094). 



236 

fluidity, ongoing costs could be lower than our estimates. Moreover, to the extent that the 

number of reportable short positions varies across Managers, the costs to track and report those 

positions will also vary by Manager. Initial costs might also be higher for some Managers who 

do not currently have systems built to report to EDGAR.672 By contrast, because we expect 

Managers will have a financial incentive to automate the reporting process by leveraging Form 

SHO-specific XML reporting, the aggregate costs associated with Form SHO-specific reporting 

may be meaningfully lower going forward.673  

For some Managers, there may be additional considerations, which may increase costs. 

For example, rules for filing Form SHO require Managers to prevent duplicative reporting.674 

The burden to ensure that duplicative reporting doesn’t occur will vary by Manager and will 

depend on whether two or more Managers exercise investment discretion over the same 

reportable securities position. Also, Managers managing multiple accounts with short positions 

requiring aggregation may have additional costs associated with the aggregation when modifying 

systems to track the Reporting Thresholds and report positions on Form SHO. 

The Commission believes the need to amend Form SHO may vary by familiarity with 

filing Form SHO. These costs may be more common for Managers who do not hold short 

positions often and are likely to decrease with time as Managers become more experienced with 

filing Form SHO. As part of updating systems to comply with the reporting requirements of Rule 

13f-2, Managers must calculate the market value of their position using the official closing price 

as of the close of regular trading hours for the trade settlement date in question at the end of the 

 
672  Most Managers will be familiar with EDGAR filing requirements through other reporting obligations, such 

as Form 13F. See supra notes 193 and 452. See also infra Part VIII.C.6.c. 
673  See supra note 451 and infra note 711. 
674 See Form SHO, General Instructions at Rules to Prevent Duplicative Reporting. 



237 

month, which may not be the fair market value at the time in which the trade occurred.675 

However, the Commission believes that in most cases this will be a small burden on Managers as 

the data needed for the calculation will be publicly available and that Managers may already 

track the end of day fair market value of short positions. Even in cases that the reportable equity 

security is not traded on an exchange, the Commission believes that Managers may be able to 

calculate the value of their short positions by using publicly available closing prices from the 

OTC Reporting Facility. In circumstances where closing prices of non-reporting company issuers 

are not available, the Commission believes the tracking such information will still not impose a 

large burden as a Manager can use the price at which they last purchased or sold any share of 

that security, which will be readily available to the Manager.  

b. Costs of Tracking Threshold Status 

There will be costs associated with tracking short positions in relation to the threshold.676 

Particularly, after the last day of each calendar month, Managers must calculate their average 

short positions over the month to be aware if their average daily gross short position exceeds $10 

million677 or 2.5 percent of shares outstanding; or in the case of equity securities of non-reporting 

company issuers, if Managers meet or exceed a gross short position of $500,000 at the close of 

regular trading hours on any settlement date. However, the Commission believes that the 

Reporting Thresholds will generally limit the burden on Managers, in aggregate, as fewer 

 
675 See Form SHO, General Instructions at INSTRUCTIONS FOR CALCULATING REPORTING 

THRESHOLD. See also PRA Table 2 in Part VII for an estimate of these burden hour. 
676 As stated in the proposing release, based on the number of registered investment companies reporting short 

positions and the number of hedge funds engaged in a strategy including short selling, we continue to 
anticipate that only a small fraction of Managers is likely to have monitoring responsibilities pursuant to 
the rule and, given the Reporting Thresholds and the modification of Threshold A, an even smaller fraction 
is likely to have reporting obligations. Proposing Release at 14998 n. 298.  

677  Under Proposed Form SHO, the threshold was triggered if a gross short position exceeded $10 million on a 
single day. Adopted Form SHO requires a daily average gross short position of $10 million over the month. 



238 

Managers will be required to report than if the Commission did not adopt an amended reporting 

threshold. For example, the Commission believes that certain types of Managers that carry short 

positions will not meet a Reporting Threshold.678 Additionally, certain types of Managers may 

be less likely to meet the threshold, resulting in lower overall costs for these Managers.679 Using 

Form SH data, the Commission estimates that an average of 442 Managers were required to file 

Form SH each month under the threshold in place during temporary Rule 10a-3T. However, only 

252 eligible Managers would have been required to file had Threshold A of adopted Form SHO 

been in place instead of the threshold in temporary Rule 10a-3T.680  

The Commission received several comment letters that described what they believed 

were the high cost of monitoring with respect to the thresholds to file Form SHO under Rule 13f-

2. 681 One commenter stated that the cost of daily monitoring would be high, although no specific 

estimated cost is provided.682 While the costs would likely be higher if firms choose to monitor 

daily, Rule 13f-2 does not require daily monitoring, either for reporting or non-reporting stocks.  

For Managers engaged in shorting selling, the rule necessitates that Managers calculate 

their average daily gross short position in equity securities for which they have conducted short 

 
678 See supra Part VIII.B.1 for a discussion on why certain types of Managers are more likely to have reporting 

requirements. For example, market makers and algorithmic technical traders are not likely to meet the 
thresholds because they generally close their positions by the end of the day.  

679  However, Managers that trigger a threshold(s) but do not currently report to EDGAR may face additional 
compliance costs associated with Rule 13f-2. 

680 The lower number of estimated reporting Managers in Form SHO compared to Form SH is due to the fact 
that the Reporting Thresholds are higher for Form SHO than Form SH in Threshold A (average daily gross 
position of $10 million vs. a single day threshold of $10 million, and 2.5 % of shares outstanding vs. 0.25 
% of shares outstanding). This estimate differs from the Proposing Release due to modification of the part 
of the threshold from $10 million daily to $10 million average daily over the month. Commenters 
questioned the use of Form SH data in this and other contexts. See supra Box 1: Use of Form SH Data for 
responses to comments on the use of these data. 

681  See, e.g., MFA Letter, at 13; AIMA Letter, at 12-14; ICI Letter, at 5; Ropes & Gray Letter, at 2 and 5-7; 
SBAI Letter, at 4; SIFMA Letter, at 4, 7-8, and 13-19; T. Rowe Price Letter, at 3-4, Two Sigma Letter, at 
6-7 and 10. 

682  See ICI Letter, at 11. 



239 

sales during that calendar month in order to know if they are required to file Form SHO within 

14 days of the end of that month.683 Managers may choose to do this calculation on a rolling 

basis, or to do the calculation after the month has ended. While some Managers may choose to 

incur the higher costs of daily tracking and calculation for purposes of compliance with Rule 

13f-2, the final rule’s Threshold A is not based on a Manager’s gross short position on a single 

trading date, reducing the need for daily tracking. 

The Commission understands that the cost of tracking short positions might be higher for 

certain types of equity securities. For example, tracking the short position in an ETF as a percent 

of shares outstanding will be more difficult as the number of shares outstanding changes 

frequently. Additionally, Managers who hold short positions in non-reporting company issuers 

may have difficulty calculating the value of their position, however Managers may use the last 

price at which the Manager traded even though the price may be stale.684  

c. Cost of Reporting Form SHO to EDGAR 

Requiring Form SHO to be filed on EDGAR in Form SHO-specific XML will not impose 

significant incremental costs on Managers. The Commission expects most Managers who will be 

required to file Form SHO will likely have experience filing EDGAR forms that use similar 

EDGAR Form-specific XML data languages, such as Form 13F. In that regard, the process for 

filing Form SHO, as well as the XML-based data language used for Form SHO, will be similar 

 
683  As discussed in supra Part II.A.3, Managers with gross short sale positions that exceed a daily average 

during the previous month of $10 million or a daily average of 2.5% of a reporting firm’s shares 
outstanding will have to file Form SHO. With regard to short sale positions of non-reporting firms, 
Managers will have to file Form SHO if their short sale position exceeded $500,000 on any single day 
during the previous month. 

684  See supra Part II.A.3.b for discussion of comments received related to tracking non-reporting company 
short positions. 



240 

to the filing process and data language used for Form 13F.685 We expect that Managers with such 

experience that choose to file Form SHO directly in Form SHO-specific XML will incur some 

compliance costs associated with doing so.686  

In addition, Managers will be given the alternate option of filing Form SHO using a 

fillable web form that will render into Form SHO-specific XML in EDGAR, rather than filing 

directly in Form SHO-specific XML using the technical specifications published on the 

Commission’s website. We expect Managers who do not have experience filing Form 13F or 

other EDGAR Form-specific XML filings will likely choose this option. In that regard, 

Managers are only required to file Form 13F if they exercise investment discretion with respect 

to accounts holding section 13(f) securities having an aggregate fair market value on the last 

trading day of any month of any calendar year of at least $100 million.687 Of Managers that do 

not have experience filing Form 13F, only a subset are subject to other EDGAR Form-specific 

XML filing requirements.688 For any Managers that choose to file Form SHO using a fillable 

 
685 See EDGAR Filer Manual (Volume II) version 67 (September 2023), at 9-1 (“EDGAR Filer Manual 

Volume II”) (describing process for submitting Form-specific XML filings directly to EDGAR); see also 
Form 13F XML Technical Specification, available at https://www.sec.gov/edgar/filer-information/current-
edgar-technical-specifications. 

686 See supra PRA Table 2 (estimating the ongoing burden for the Form SHO-specific XML requirement at 
two hours per Manager per filing and two hours per amended filing). These estimates conservatively 
assume that Managers will structure their filings in Form SHO-specific XML, incurring $772 (2 hours x 
$386 per hour for a programmer = $772) per filing or amended filing, rather than use a fillable form. 
Assuming 1,000 Managers filing 12 Form SHO filings per year would equal 12,000 filings per year, 
resulting in 24,000 total annual industry burden hours (12 filings x 1,000 Managers x 2 hours = 24,000) and 
$9,264,000 in industry costs for filings per year (24,000 hours * $386 per hour = $9,264,000) attributable to 
the Form SHO-specific XML requirement. In addition, based on an estimate of 420 amended filings per 
year, the total industry cost for the Form SHO-specific XML would be $324,240 for amended filings (420 
amended filings x 2 hours per amended filing x $386 per hour = $324,240). As such, the total annual 
industry cost attributable to the Form SHO-specific XML requirement (including amended filings) is 
$9,588,240 ($9,264,000 for filings + $324,240 for amended filings = $9,588,240). Using a lower estimate 
of 252 Managers would result in $2,417,904 in total annual industry costs to structure initial and amended 
filings in Form SHO-specific XML. See supra note 517. 

687 See 17 CFR 240.13f-1(a). 
688 For example, registered brokers or dealers that are subject to the reporting requirements set forth in 17 CFR 

240.17h-2T must file Form 17-H either electronically or in paper. Those that choose to file electronically241 

web form, whether or not they have prior experience with filing forms in EDGAR Form-specific 

XML, the Form SHO-specific XML requirement (i.e., the requirement to place the collected 

information in a fillable web form provided by EDGAR, rather than in an HTML or ASCII 

document to be filed on EDGAR as is required for most other EDGAR forms) will not impose 

any additional compliance costs.689  

d. Costs associated with reporting Bona Fide Market Making locate 

exception to CAT 

The 25 Plan Participants will face costs associated with the CAT amendment, as they will 

be required to engage the Plan Processor to modify the Central Repository to accept and process 

new short sale data elements on order receipt and origination reports. Additionally, the 

Commission estimates an external cost of $4,522 per participant or $113,800 total to compensate 

the Plan Processor for staff time required to make the initial necessary programming and systems 

changes.690 However, these initial costs might be higher if the Commission underestimated the 

time and wages necessary for programming and systems changes for the plan processor to accept 

and process new data elements. Furthermore, the Commission believes that CAT amendment 

will not impose additional ongoing cost to Participants beyond those costs already accounted for 

 
must file Form 17-H partially in EDGAR Form-specific XML. Insurance companies may offer variable 
contracts that are registered under the Investment Company Act of 1940, and would thus be required to file 
annual reports on Form N-CEN in EDGAR Form-specific XML as well as, in some cases, monthly 
portfolio information on Form N-PORT in EDGAR Form-specific XML. Corporations may make exempt 
offerings and be required to file Form 1-A, Form C, or Form D in EDGAR Form-specific XML either in 
part or in full, depending on the nature of the offering. 

689 See 17 CFR 232.101(a)(1)(iv); 17 CFR 232.301; EDGAR Filer Manual Volume II at 5-1 (requiring 
EDGAR filers generally to use ASCII or HTML for their filed documents, subject to certain exceptions). 

690 See supra note 475. 



242 

in existing Paperwork Reduction Act estimates that apply for Rule 613 and the CAT NMS Plan 

approval order.691 

The Commission believes that the CAT amendment involving the bona fide market 

making exception from the locate requirement will impose a one-time cost to Industry 

Members.692 These costs will involve creating an additional field in the order origination report. 

Some broker-dealers will incur ongoing costs related to the recording of the use of the BFMM 

locate exception.693 To the extent that broker-dealers are not already recording the use of the 

exception, broker-dealers may have costs to inputting the use of the exception into their current 

systems.694   

The Commission recognizes that costs will vary broadly across Industry Members, 

particularly depending on whether the Industry Member outsources the provision of an order 

handling system and regulatory data reporting to a service provider. In the CAT NMS Plan 

Approval Order,695 the Commission identified 126 Industry Members that do not outsource these 

activities. For these Industry Members, implementation is likely to require changes both to their 

order handling systems as well as their regulatory data reporting systems that produce their CAT 

reporting data. Additionally, 58 insourcing Industry Members will incur an aggregate initial cost 

of $870,000 or $15,000 individually to update systems to facilitate reporting the new bona fide 

 
691 See supra Part VII.C.4 for more information on costs for CAT Plan Participants. 
692 Id.  
693  The Commission believes these costs will be comparable to those estimated in the Proposing Release in 

connection to the burden of marking an order. The Commission estimates that recording (marking) this 
information will take between 0.42 and 0.5 seconds per trade, with an annual time burden per Manager 
equal to 592-7,104 hours. See Table 3 from Proposing Release at 14975, available at 
https://www.sec.gov/files/rules/proposed/2022/34-94313.pdf. 

694  See supra Part IV.B for description of Industry Members’ use of BFMM. 
695 See CAT NMS Plan Approval Order, 81 FR 84860. 



243 

market making exception elements to CAT.696 However, this cost might be lower if the 

Commission is overestimating the number of insourcing industry members, in particular, the 

additional cost might drive some insourcing industry members to begin to outsource. The 

Commission believes that ongoing costs associated with reporting the newly required 

information to CAT will already be covered by ongoing cost estimates included in its cost 

estimates for the CAT NMS Plan. The Commission further believes that similar implementation 

and ongoing costs will be borne by each of the service providers that provide order handling 

systems and regulatory data reporting services to Industry Members that outsource these 

systems.  

For Industry Members that outsource, the Commission believes that implementation costs 

will be far lower because the service bureaus that provide them with order handling systems and 

regulatory data reporting services will adapt those systems on their customers’ behalf.697 

Additionally, 42 outsourcing industry members will incur an aggregate one-time cost of $42,000 

or $1,000 individually to update systems to facilitate reporting the new bona fide market making 

exception elements to CAT.698 However, these costs might be higher if some current insourcing 

industry members begin to outsource as a result of the increased costs, which will lead to an 

overall reduced cost for the rule as outsourcing is less costly than insourcing. The Commission 

believes that the costs of service bureaus adapting those systems will be passed to their Industry 

Member customers.  

 
696 See supra Part VII.C.4.  
697 One commenter stated that support from third-party data service providers could make Form SHO 

reporting less burdensome. See S3 Letter, at 5. 
698 See supra Part VII.C.4 



244 

e. Comparison to Rule 10a-3T Costs 

The Commission is cognizant of the burdens Managers experienced of filing Form SH in 

compliance with temporary Rule 10a-3T and has designed Rule 13f-2 and Form SHO to attempt 

to reduce those burdens. First, commenters on the temporary Rule 10a-3T stated that the 0.25 

percent threshold was too low.699 The two-pronged threshold in Rule 13f-2 is higher than the 

threshold in Rule 10a-3T, reducing the number of Managers likely to have a reporting obligation. 

For example, the Commission estimates that only 28 percent of positions reported under Rule 

10a-3T will be required to report given the higher threshold in Rule 13f-2 and Form SHO, while 

still collecting 78 percent of the dollar value.700 Additionally the threshold might be less 

burdensome to assess than the one in Rule 10a-3T because it requires the Manager to assess 

whether it is above the threshold on a monthly basis rather than on each individual day.701 

Second, many commenters believed that weekly reporting was overly burdensome.702 The short 

selling information required by Rule 13f-2 and Form SHO will be reported less frequently 

(monthly rather than weekly) and will involve reporting end of month positions rather than daily 

 
699 See Temporary Rule 10a-3T Comment letters (including Seward & Kissel LLP Letter), available at 

https://www.sec.gov/comments/s7-31-08/s73108-43.pdf; MFA Letter, available at 
https://www.sec.gov/comments/s7-31-08/s73108-41.pdf; IAA Letter, available at 
https://www.sec.gov/comments/s7-31-08/s73108-38.pdf; ICI Letter, available at 
https://www.sec.gov/comments/s7-31-08/s73108-47.pdf; SIFMA Letter, available at 
https://www.sec.gov/comments/s7-31-08/s73108-52.pdf. See also supra Part III.D.2. (for more information 
on Threshold A using Form SH data). 

700 See Proposing Release at Economic Analysis Table I: Various Threshold Levels for Monthly Average 
Positions and Monthly Maximum Dollar Value. However, the Commission recognizes that temporary Rule 
10a-3T was in effect in 2008-2009 and the market may be different, particularly the average short position 
may be larger. Only Managers that exercise investment discretion with respect to accounts holding section 
13(f) securities having an aggregate fair market value of at least $100 million were required to file Form 
SH. Additionally, the data lacked data validation according to the needs of the end user when filed, making 
the data hard to work with. 

701 This example assumes the equity is from a reporting company. Thresholds for non-reporting companies are 
triggered following a single day in which the short sale position exceeds $500,000. See supra Part II.A.3 

702 See supra note 697 for the comment letters in note, as well Coalition of Private Investment Companies 
letter, available at https://www.sec.gov/comments/s7-31-08/s73108-46.pdf. 



245 

positions. Third, Managers will have more time to compile and file the Form SHO reports than 

they had to compile Form SH.  

Notwithstanding these cost-reducing differences, the Commission does recognize that 

other differences might offset some or all of these cost reductions. In particular, Rule 13f-2 and 

Form SHO will require that the information on activity include daily records if the Manager 

exceeds a position threshold that month rather than include daily records if the Manager exceeds 

an activity threshold that week.703 Also, unlike the Form SH required under Rule 10a-3T, the 

Form SHO that will be required by Rule 13f-2 will feature an XML schema that will incorporate 

technical validations of certain data fields on the Form, and will flag technical errors and require 

the filer to correct the technical errors before successful submission on EDGAR. However, 

because the field validations implemented by Rule 13f-2 and Form SHO will be limited to 

technical errors (e.g., letters instead of numbers in a field requiring only numbers) that will be 

straightforward to resolve, such resubmission costs will not be significant. Finally, the rule might 

impose costs on Managers who were not required to report Form SH because Rule 10a-3T and 

Form SH did not apply to Managers that exercise investment discretion with respect to accounts 

holding section 13(f) securities with an aggregate fair market value of less than $100 million. 

f. Other Compliance Costs 

One commenter stated that the Commission should consider that “the sheer number and 

complexity of the Proposals, when considered in their totality, if adopted, would impose 

 
703 Rule 10a-3T required institutional investment managers to report beginning and end of day short position, 

number of securities sold short each day if the particular data item exceeded the threshold. See P 3 final 
Rule 10a-3T, 73 FR 61678 (Oct. 17, 2008), available at https://www.sec.gov/rules/final/2008/34-
58785fr.pdf. However, in analysis of Form SH data intraday short selling volume could not be examined 
for Form SH because the data field for “Number of Securities Sold Short” was populated in only 7% of 
observations after filters were applied. See Proposing Release note 80 at 14963 for more information on 
short volume in Form SH data. 



246 

staggering aggregate costs, as well as unprecedented operational and other practical 

challenges.”704 But, consistent with its long-standing practice, the Commission’s economic 

analysis in each adopting release considers the incremental benefits and costs for the specific 

rule—that is the benefits and costs stemming from that rule compared to the baseline. In doing 

so, the Commission acknowledges that in some cases resource limitations can lead to higher 

compliance costs when the compliance period of the rule being considered overlaps with the 

compliance period of other rules. In determining compliance periods, the Commission considers 

the benefits of the rules as well as the costs of delayed compliance periods and potential 

overlapping compliance periods.  

In this regard, some commenters mentioned the proposals which culminated in the recent 

adoptions of Rule 10c-1a, Beneficial Ownership Reporting, Private Fund Advisers, Settlement 

Cycle Adopting Release, and May 2023 SEC Form PF Amending Release.705 The Commission 

acknowledges that there are compliance dates for certain requirements of these rules that overlap 

in time with the final rule, which may impose costs on resource constrained entities affected by 

multiple rules.706  

However, we do not think these increased costs from overlapping compliance periods 

will be significant for several reasons. First, the number of Managers who will also be subject to 

one or more of these recently adopted rules could be limited; we estimate that 252 to 1000 

Managers may be required under the final rules to report on new Form SHO, and of those, 

 
704  NAPFM Letter 3. 
705  See supra note 499. As stated above, commenters also specifically suggested the Commission consider 

potential overlapping compliance costs between the final rule and certain proposing releases. See supra 
note 505. These proposals have not been adopted and thus have not been considered as part of the baseline 
here. To the extent those proposals are adopted in the future, the baseline in those subsequent rulemakings 
will reflect the regulatory landscape that is current at that time. 

706  See supra notes 500-504 (summarizing compliance dates). 
 



247 

depending on their activities, only a portion may also be required to comply with one or more of 

the recently adopted rules raised by commenters (and even fewer may need to comply with more 

than one of those other rules).707 In addition, commenters’ concerns about the costs of 

overlapping compliance periods were raised in response to the proposal and as discussed above, 

we have taken steps to reduce costs of the final rule.708 Finally, although the compliance periods 

for these rules overlap in part, the compliance dates adopted by the Commission are generally 

spread out over more than a two-year period from 2023 to 2026.709 

7. Effect of Certain Electronic Filing and Dissemination Requirements 

Rule 13f-2 and Form SHO will require the short position and activity disclosures to be 

filed on the Commission’s EDGAR system using a structured, machine-readable data language. 

In particular, the rule and Form will require Form SHO to be filed on EDGAR in a custom 

XML-based data language specific to that Form (“custom XML,” here “Form SHO-specific 

XML”). The XML schema for Form SHO-specific XML will incorporate validations of certain 

data fields on the Form to help ensure consistent formatting and completeness.710 While the field 

 
707  For example, broker-dealers who need to report on Form SHO under Rule 13f-2 will also need to comply 

with Settlement Cycle Adopting Release but may not need to comply with the requirements of any of the 
other recently adopted rules. 

708  The final rule mitigates costs relative to the proposal in three ways. First, the reporting threshold for the 
U.S. dollar value-based prong for reporting company issuer securities is being adopted as a monthly 
average, rather than the daily end-of-day calculation that was proposed. See supra Part II.A.3.b. Second, 
Form SHO is being adopted without the proposed requirement to report hedging classifications in 
Information Table 1, and includes a streamlined Information Table 2, which reduces the form’s complexity 
and the granularity of the information reported. See supra Parts II.A.4.d.iii, II.A.4.d.iv. Third, proposed 
Rule 205 and related CAT reporting requirements are not adopted. See supra Part III.B. 

709  For example, compliance periods for the May 2023 SEC Form PF Amending Release and the Settlement  
Cycle conclude by mid-2024 while reporting under the final rule will be required by the end of 2024 at the 
earliest. Similarly, certain compliance deadlines for Rule 10c-1a extend into early 2026. See supra notes 
500-504. 
 

710 See supra Part II.A.4.b. Field validations are restrictions placed on each data element which would not 
allow a filer to file a form if there are certain technical errors in critical fields. If a Form SHO were to 
include, for example, letters instead of numbers in a field requiring only numbers, it would be flagged as a 
technical error, at which point the filer would either be unable to file the Form (if completed using the 

 



248 

validations will act as an automated form completeness check when a Manager files a Form 

SHO, the field validations will not be designed to verify the accuracy of the information filed in 

Form SHO filings. EDGAR will subsequently aggregate the reported information at the equity 

security level and release the aggregated data to the public on EDGAR. These requirements will 

incrementally augment the various effects of the short position and activity disclosures discussed 

herein by enhancing the accessibility, usability, and quality of the Form SHO disclosures (for use 

by the Commission) and the aggregate security-level disclosures (for use by the public). By 

requiring a structured machine-readable data language and a centralized filing location 

(EDGAR) for the disclosures on Form SHO, the Commission will be able to access and 

download large volumes of Form SHO disclosures in an efficient manner. To the extent that the 

efficiencies derived from the centralized filing of the Form SHO disclosures facilitate more rapid 

Commission response to potential market manipulation, investors could indirectly benefit from 

the fact that such practices are detected, and possibly addressed, earlier than might otherwise be 

the case.  

One commenter agreed with the Commission’s proposal to require Managers to provide 

Form SHO in EDGAR in a Form SHO-specific XML.711 Another commenter stated that “XML 

is a widely used language and therefore implementation and maintenance would keep costs low 

and efficiency high.”712  

 
fillable web form provided by EDGAR) or the filing would be rejected (if directly filed in EDGAR in Form 
SHO-specific XML). To complete the filing, the filer would need to correct the error and re-file. 

711  See Comment Letter from Aaron Franz, available at https://www.sec.gov/comments/s7-18-21/s71821-
20120685-272855.pdf (“This form and forum are ideal for reporting purposes. Further, since the Form 
SHO is proposed to be published in XML format it should be easy for Managers to automate the process of 
filling and filing the Form SHO.”).  

712  “[XML] would also allow for easy parsing and review of the data. The costs shouldn’t vary very much 
between managers as the SHO form should be uniform for all managers, which means they will all use 
similar implementations to conform to its usage.” Anonymous Comment Letter (Apr. 4, 2022), available at 
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm. 



249 

Similarly, the provision of the aggregated security-level information at a centralized, 

publicly accessible location in a structured, machine-readable data language, will enable 

investors and other public data users to download the aggregated information directly, and the 

data might then be analyzed using various tools and applications. Placing the security-level 

information someplace other than a centralized location in a structured, machine-readable 

language would mean that data users seeking to analyze the information using tools and 

applications would need to search for, extract, and structure the security-level short position and 

activity information or pay a third-party vendor to do so. 

Requiring the short position and activity disclosures to be filed in Form SHO-specific 

XML will facilitate more thorough review and analysis of the reported short sale disclosures by 

the Commission, which will increase the efficiency and effectiveness with which the 

Commission could identify manipulative short selling strategies—which may also serve as a 

deterrent to would be manipulators and thus may help prevent manipulation. 

The requirement for short sale disclosures to be filed on EDGAR in Form SHO-specific 

XML will result in additional incremental compliance costs on filing Managers. These direct 

compliance costs are detailed in a subsequent section.713 Moreover, to the extent these 

incremental compliance costs further chill the incidence of short-selling, the EDGAR and Form 

SHO-specific XML requirements will increase the likelihood of the indirect costs that are 

discussed elsewhere in Parts VII.C.2, VII.C.3, VII.C.4, and VII.C.6. 

Some commenters expressed concerns with regard to the risks of cyber criminals 

accessing non-public Form SHO data.714 Although the SEC is not exempt from cyberattacks, the 

 
713 See supra Part VIII.C.6. 
714 See MFA Letter, at 8 and Two Sigma Letter, at 5. 



250 

Commission is pursuing several actions to protect SEC data and strengthen the EDGAR system 

as described above. The Commission recently deployed security and modernization 

enhancements focusing on technology upgrades to the EDGAR system.715 The Commission 

recognizes that the Rule collects sensitive information and that, while the likelihood of a data 

breach is low, the costs of a data breach could be substantial. These costs include but are not 

limited to the following: trading losses that could occur due to the revelation of private trading 

strategies or economic positions which may enable identifying and trading opportunistically 

around such strategies, such as facilitating a short squeeze; business disruptions that could occur 

if the data breach results in temporary system down time; data breach response costs as market 

participants must devote resources to determining how to respond to the data breach; and 

reputational harm to individual Managers and the broker-dealers that employ them. While the 

potential costs of a breach, to the extent that one occurs, could be severe, RNSAs, ATSs, and 

SROs, are currently subject to existing requirements designed to improve the resiliency and 

oversight of securities market technology infrastructure, such as Regulation Systems Compliance 

and Integrity (“Regulation SCI”) (17 CFR 242.1000 through 242.1007). Adherence to such 

regulations can reduce the probability of a data breach and mitigate the costs associated with a 

breach, should it occur. 

As stated previously, one commenter stated that the LEI and the FIGI of issuers is “not 

commonly provided” in other holding reports and would therefore cause Managers to incur 

additional costs.716 While LEIs are widely used in the global financial markets (for example, the 

 
715  See Annual Report on SEC Website Modernization Pursuant to Section 3(d) of the 21st Century Integrated 

Digital Experience Act (Dec. 2022), available at https://www.sec.gov/files/21st-century-idea-act-report-
2022-12.pdf.  

716  MFA Letter, at 9. 



251 

Commission currently requires funds to identify themselves with LEIs in portfolio holding 

reports on Form N-PORT),717 we agree that there are costs associated with obtaining and 

maintaining LEIs. Currently, U.S. entities may obtain an LEI for a one-time fee of $60 and an 

annual renewal fee of $40.718  

FIGIs also are widely used in the financial markets, and the Commission recently added 

FIGI as an optional securities identifier on Form 13F.719 Further, FIGIs, which are automatically 

assigned and are retrievable and redistributable without licensing restrictions and at no cost,720 

are not expected to result in compliance costs for reporting persons. Lastly, firms can use 

identifier mapping tables, and thus likely would not need new technology systems to accept LEIs 

 
717  Item A.1.d and Item A.2.c of Form N-PORT. See also Item B.1.d of Form N-CEN (requiring funds to 

disclose their LEIs on annual reports); 17 CFR 242.903(a) (requiring security-based swap participants to 
report LEIs to swap data repositories). Additionally, other U.S. and foreign regulators require firms to 
identify themselves with LEIs. For example, Commodity Futures Trading Commission (CFTC) regulations 
require counterparties to swaps, including interest-rate swaps, to report their LEIs. See 17 CFR 45.6 (CFTC 
LEI requirement for parties to swap transactions).  

718  A U.S. entity can currently obtain and renew an LEI from one of eleven LEI operating units. See Get an 
LEI: Find LEI Issuing Organizations, GLOB. LEGAL ENTITY IDENTIFIER FOUND., available at 
https://www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations (2023). One LEI operating unit 
currently discloses an initial fee of $60 and a renewal fee of $40. See Frequently Asked Questions, Fees, 
Payments & Taxes, BLOOMBERG LEI, available at https://lei.bloomberg.com/docs/faq#what-fees-are-
involved (2023). 

719  Special Instruction 11.b.iii of Form 13F. Based on Commission staff analysis of Form 13F filings in 
EDGAR, at least 500 unique filers have included FIGIs on their Form 13F filings since the amendments to 
Form 13F became effective on January 3, 2023. As of the second quarter of 2022, 1 billion FIGIs had been 
assigned to financial instruments. Financial Instrument Global Identifier Newsletter Q2 2022, OPENFIGI 
(June 30, 2022), available at https://www.openfigi.com/about/news/2022/6/30/financial-instrument-global-
identifier-newsletter-q-2-2022. 

720  ALLOCATION RULES FOR THE FIN. INSTRUMENT GLOB. IDENTIFIER (FIGI) STANDARD (OBJECT MGMT. GRP. 
& AM. NAT’L COMM. X9, amended 2022) section 1.2.1, available at 
https://www.openfigi.com/assets/local/figi-allocation-rules.pdf (“FIGI Allocation Rules”); Symbology, 
OPENFIGI, available at https://www.openfigi.com/about/symbology. FIGI is an open-source, non-
proprietary data standard for the identification of financial instruments across asset classes. FIGI Allocation 
Rules sections 1.1.1, 1.2.1, 1.4.1. The Share Class level FIGI is assigned to equities and funds, and enables 
users to link multiple FIGIs for the same instrument to obtain an aggregated view for that instrument across 
all countries globally. Id. section 1.4.3. 



252 

and FIGIs.721 However, the Commission recognizes that Managers who do not currently use 

those identifiers and who do not already have identifier mapping capabilities in their data 

systems would incur one-time costs to build such functionality. 

8. Potential Increased Use of Derivatives 

The Commission recognizes the risk that the benefits of Form SHO data could be 

diminished to the extent that Managers avail themselves of economically similar arrangements.  

For example, Managers might consider trading derivatives in place of engaging in short selling, 

particularly for stocks with liquid options.722 Benefits might similarly be diminished if a robust 

single-stock futures market develops over time.723 Indeed, Rule 13f-2 and its accompanying 

Form SHO might be a catalyst for growth in derivatives markets if short sellers were to look for 

avenues to take the economic equivalent of short positions that did not require similar 

disclosures. 

The Reporting Thresholds in Rule 13f-2 are based on a Manager’s gross short position in 

the equity security itself, and do not consider derivative positions. Consequently, a Manager 

seeking to build a large short position without incurring a reporting obligation might hold a short 

position just below a Reporting Threshold and use derivatives to take positions that effectively 

rise above that threshold.724 One commenter stated that this may be viewed as regulatory 

arbitrage.725 

 
721  FIGI allows users to link various identifiers for the same security to each other, which includes mapping 

the FIGI of a security to its corresponding CUSIP number. See Financial Instrument Global Identifier, 
OMG STANDARDS DEV. ORG. (2023), available at https://www.omg.org/figi/. 

722 See supra note 527, R. Battalio, and P. Schultz (2011), Grundy, Lim, and Verwijmeren (2012). One 
commenter agreed that this is a likely outcome. See Better Markets Letter at 9-10. 

723 See supra note 527, Jiang, Shimizu, and Strong (2019).  
724 While combining short positions with derivatives may allow a Manager not to trigger the Reporting 

Thresholds, using options may trigger a report to FINRA’s LOPR. See supra note 78. 
725 See Law and Finance Professors Letter, at 3. 



253 

Using derivatives to establish an economically equivalent short position that does not 

include a reporting obligation may be costly. Options tend to be more expensive than equity 

transactions, particularly for less liquid securities. Additionally, some equities do not have listed 

options. Consequently, the Managers’ desire to avoid the costs associated with reporting Form 

SHO information articulated in Parts VIII.C.1 and VII.C.2 is balanced against the increased cost 

of using derivatives such as options to execute a short position. Thus, for some stocks, i.e., those 

with illiquid or non-existent options, the likelihood that Managers will seek to employ alternative 

arrangements through options may be minimal. However, academic research has shown that 

investors have used options as an alternative means to obtain short-like economic exposure when 

short selling is restricted, thus there is a significant risk that there will be some attempt to employ 

alternative arrangements using derivatives, particularly in stocks with liquid options markets.726 

D. Efficiency, Competition and Capital Formation 

1. Efficiency 

Markets function best and are most efficient when all relevant information regarding a 

security is known and is incorporated into prices.727 This includes negative information. When 

negative information is not tradable, stocks tend to be overpriced, leading to an inefficient 

allocation of capital across the economy.728 More efficient prices lead to better economic 

outcomes for the macro economy as capital flows into high value projects and out of low value 

projects. Short sellers have incentive to uncover negative information and to trade in order to 

 
726 See supra note 527. 
727 See Eugene F. Fama, Efficient Capital Markets a Review of Theory and Empirical Work, The Fama 

Portfolio 76-121 (2021). 
728 See supra note 624. 



254 

profit from that information.729 As discussed in Part VIII.D.2, more transparency in short selling 

will improve the amount of information that investors have to value a stock – increasing price 

efficiency. However, it might also disincentivize fundamental research which may harm price 

efficiency by limiting the amount of total information has been discovered, and thus, limiting the 

amount of information incorporated into stock prices. Overall, the impact of the adopted rule and 

CAT amendment on price efficiency is uncertain.730 

 Additionally, the CAT amendment will improve the efficiency of the Commission’s 

oversight and enforcement of regulations relating to the bona fide market making exception by 

providing more efficient access to data on how individual market makers are using the exception. 

Currently, the Commission must request information about the use of the market maker 

exception from specific broker-dealers.731 

2. Competition 

Investors compete with one another to gather information that they use to enact trading 

strategies. Academic research indicates that when short selling is costly, investors owning the 

asset have an advantage in gathering information due to the reduced cost of acting on whatever 

information that they gather.732 The final rule may increase this advantage since it will increase 

the cost of short selling for Managers above the Reporting Thresholds, as discussed in Parts 

VIII.C.1 and VIII.C.2. Relatedly, fund performance is a key determinate of drawing investor 

flows. The Commission believes that Rule 13f-2 and Form SHO might harm competition for 

 
729  See supra Part VIII.C.2 for discussion of short selling motivation. 
730  See supra Part VIII.C.2 for discussion of price efficiency effects.  
731  See supra Part VIII.B.3 for a further discussion of the inefficiencies of existing data with regards to 

oversight and enforcement of rules relating to bona fide market making. In examinations and enforcement 
matters, the Commission has used broker-dealer trade blotters in combination with other regulatory data to 
consider whether conditions were met for the use of BFMM locate exemptions. 

732  See Dixon (2022), supra note 581. 



255 

fund flows between Managers who do and do not use short selling strategies. For instance, 

Managers that are skilled at uncovering negative information may face additional costs when 

transacting on this information, potentially leading to lower returns.  

The Commission believes that the CAT amendment will not alter significantly the 

competitive landscape for broker-dealer services. Because small broker-dealers are likely to use 

a service bureau to report their CAT data,733 the Commission believes that implementation costs 

will be borne by service bureaus and are likely to be recovered across many service bureau-client 

broker-dealers. Individual small broker-dealers may face expenses in configuring service bureau 

software packages, but these expenses are likely to be one-time and modest because the bulk of 

implementation activities will have been performed by the service bureau.734 Because larger 

broker-dealers that self-report CAT Data enjoy economies of scale, they should be able to absorb 

the costs associated with compliance more easily, and they may choose to contract with a service 

bureau if implementation is unusually burdensome due to the operation of multiple legacy order-

handling systems. 

In addition, as stated above, some commenters requested the Commission consider 

interactions between the economic effects of the proposed rule and other recent Commission 

rules, as well as practical realities such as implementation timelines.735 As discussed above, the 

Commission acknowledges that overlapping compliance periods may in some cases increase 

costs.736 This may be particularly true for smaller entities with more limited compliance 

 
733  See Rule 613 Adopting Release for the Commission discussion of CAT costs to broker-dealers. 
734  See supra Part VIII.C.6 for a discussion of compliance costs. 
735  See supra Part VIII.C.6. 
736  See id. 



256 

resources.737 This effect can negatively impact some competitors because these entities may be 

less able to absorb or pass on these additional costs, making it more difficult for them to remain 

in business or compete. However, the final rule mitigates overall costs relative to the proposal,738 

and we do not believe these increased compliance costs will be significant for most Managers.739 

We therefore do not expect the risk of negative competitive effects from increased compliance 

costs due to simultaneous compliance periods to be significant.  

3. Capital Formation  

One of the primary roles of the securities markets is to allocate capital (money) across the 

economy. If investors believe that a company is undervalued then, all else being equal, they will 

buy that stock; if many investors buy the stock, the price for that stock will increase – lowering 

the cost of equity financing and making funding projects easier for the firm. On the other hand, if 

investors believe that a company is overvalued then, all else being equal, they will sell or short 

sell the stock to invest in other more profitable ventures. If enough investors sell or short the 

stock, then the stock price will decline. A lower stock price implies more expensive equity 

financing and thus a higher weighted average cost of capital. When stocks are overpriced, they 

are inherently allocated too much capital, which deprives more productive ventures from 

receiving optimal capital and hinders economic progress. Consequently, short sellers contribute 

to capital formation by enhancing price efficiency which helps to ensures an optimal allocation 

of capital across firms. Thus, to the extent that the adopted rule and CAT amendment discourage 

 
737  But see supra Part VII.B.2 and infra Part IX (the Commission anticipates that the type of Manager that will 

trigger a reporting threshold likely already has sophisticated information technology and the ability to 
automate reporting; and that the reporting thresholds will not apply to a significant number of small 
Managers). 

738  See supra note 706 and accompanying text. 
739  See supra Part VIII.C.6.f. 



257 

short selling, as discussed in Parts VIII.C.1 and VIII.C.2, it may lead to the overpricing of some 

stocks and the underpricing of others.740 This mispricing distorts optimal capital formation as it 

implies that some firms may have a cost of capital that is relatively too high or too low with 

respect to that firm’s fundamentals and risk profile.  

Additionally, academic research suggests that managers learn from stock price changes, 

using them as a way to tap into the ‘wisdom of crowds’ phenomena to improve decisions.741 For 

instance, if a firm announces a capital investment or other project, and the stock price moves up 

or down, then managers may use this information as a signal about the market’s perception of the 

value of that project. Thus, stock price reactions may be an input into manager decisions in terms 

of when and how to invest capital. To the extent that the rule discourages short selling, it may 

make it more difficult for managers to extract signals from stock prices about the value of capital 

investments – particularly low value projects as the rule may attenuate the market’s ability to 

respond to negative information.  

The costs associated with Managers monitoring their short positions for compliance with 

reporting Form SHO along with the negative economic effects detailed in Parts VIII.C.1, 

VIII.C.2, and VIII.C.7 may harm capital formation, specifically capital formation using 

convertible debt, if it increases the cost of short selling. Investors may be less inclined to 

purchase convertible debt if the cost of hedging that purchase by short selling the security 

becomes more expensive – through both the direct and indirect costs associated with Form 

SHO.742 Thus, to the extent that the costs associated with Form SHO increase the cost of short 

 
740 See supra note 624, Miller (1977). 
741 See I. Goldstein and A. Guembel, Manipulation and the Allocational Role of Prices, 75 (1) THE REV. OF 

ECON. STUDIES 133-164 (2008). 
742 See, e.g., Stephen J. Brown, Bruce D. Grundy, Craig M. Lewis and Patrick Verwijmeren, Convertibles and 

Hedge Funds as Distributors of Equity Exposure, 25 (10) REV. FIN. STUD 3077-3112 (Oct. 2012). 



258 

selling they may also increase the cost of hedging convertible debt and may make that form of 

financing more expensive. This effectively increases the weighted cost of capital for firms that 

use convertible debt and may hinder their ability to fund operations, including new investments.  

In contrast, adopted Rule 13f-2, Form SHO, and the CAT amendment may have a 

positive influence on capital formation if they disincentivize short selling that takes place in 

connection with securities fraud. For example, in one type of fraud, investors holding convertible 

debt would engage in a manipulation including short sales of a stock in an attempt to drive down 

the price artificially in order to convert their debt to equity and cover their short positions at a 

lower price. To the extent that the rule facilitates better oversight and prosecution of this sort of 

fraud, it may facilitate capital formation by lowering the risk that convertible debt holders will 

engage in this sort of fraud. More generally, to the extent that enhanced oversight of short sale 

activity deters manipulative activity such as short squeezes and associated price bubbles 

stemming from short squeezes, price efficiency may be enhanced, which in turn, could further 

promote capital formation. 

Rule 13f-2 may also affect capital formation through investor confidence. Some 

commenters on FINRA’s short interest proposal suggested that short selling, and in particular a 

lack of short selling disclosure, leads some investors to have less confidence in financial 

markets.743 One commenter, however, stated that, “Rule 13f-2 will not promote greater risk 

management among market participants, and hence, not bolster confidence in the markets by 

providing greater transparency,” because investors already use aggregate short interest data from 

FINRA, the exchanges, and data vendors for risk management purposes.744 As discussed 

 
743 See letters from NASDAQ, OTC Markets, and CFA Institute in response to FINRA’s short interest 

proposal) available at https://www.finra.org/rules-guidance/notices/21-19#comments.  
744  See SBAI Letter, at 3. 



259 

throughout this release, the Commission, however, believes that the data from Form SHO and 

the amendment to CAT will provide information that is additive to these and other data sources 

and will therefore improve short selling transparency and strengthen investor confidence, which 

might increase investment activity and, in turn, promote capital formation. 

E. Reasonable Alternatives 

1. Alternative Approaches 

a. Releasing Aggregated CAT Data 

As an alternative to collecting, aggregating, and publishing Form SHO, the Commission 

considered amending the CAT NMS Plan to collect additional information so that the 

Commission or the Plan Processor could aggregate and publish CAT Data. This alternative 

would effectively eliminate the thresholds for reporting.745  

CAT data currently contains a short sale mark and, as part of the implementation of the 

Customer Account Information System (CAIS), will also provide the identities of those 

transacting. Consequently, the Commission or the Plan Processor could aggregate information on 

the number of short sales that Managers engage in from CAT, assuming that the Commission or 

the Plan Processor could determine that a transaction is by or on behalf of a Manager, and 

disseminate aggregated information to the public at monthly intervals – or more frequently. The 

Commission or Plan Processor could publish daily statistics on the number of short sales 

engaged in by Managers each day in the prior month as reported in CAT. Additionally, the 

reports could include information on options transactions that lead to short exposure, such as 

purchasing a put option, or writing a call option.746 Furthermore, a longer time series (for 

 
745  See Proposing Release, at 15003. 
746 In this alternative, however, CAT would not contain the information on option expirations or assignments. 



260 

example, a rolling year) to estimate a Manager’s position could be aggregated using CAT data. 

These could be aggregated to create a market-wide short position estimate. However, this 

estimate would be inaccurate because the alternative does not consider collecting in CAT 

information on changes in positions that come from activity other than secondary market 

transactions, such as secondary offering purchases, conversions, creations and redemptions, and 

option exercises and assignments. This inaccuracy could also result in the market-wide short 

position estimate being less accurate than current short interest data.747 

The alternative would result in lower benefits than those from Rule 13f-2 and the 

disclosures Form SHO requires. The data published under this alternative would have significant 

overlap with the data that would be published under Rule 13f-2 and Form SHO. However, again 

assuming that the Commission or the Plan Processor could determine that a transaction is by or 

on behalf of a Manager, the data in this alternative could be more comprehensive in terms of the 

breadth of Managers whose short selling information could be aggregated and published,748 

because the Commission could publish aggregated data on short selling transactions from all 

Managers instead of just those that meet the threshold. However, the published data would be 

less accurate in terms of estimating positions and changes in positions as they would not include 

certain activity, such as options assignments, that are not collected in CAT but that may affect a 

short position. As a result of these differences, this alternative would result in less clarity about 

bearish sentiment among Managers. Thus, in terms of price efficiency, this approach would not 

have many of the same benefits as adopted Rule 13f-2 and Form SHO. 

 
747 FINRA’s process of gathering and validating short interest data takes approximately two weeks. See supra 

note 561. 
748 This assumes the Managers that could be identified in CAT could include all those that would be 

responsible for reporting under Proposed Rule 13f-2 and Proposed Form SHO.261 

The alternative would also reduce the benefits of comparing the published data to short 

interest because the alternative would focus on transaction dates rather than settlement dates and 

the alternative would not be restricted to large positions.749 Short interest measures short 

positions as of two settlement dates per month. A comparison of the data in the alternative to the 

short interest data would require either publishing the position data as of the transaction dates 

that correspond to the short interest settlement dates or users would have to use the activity data 

to offset the dates themselves. Further, the inclusion of more than just Managers with large short 

positions means that the information conveyed by the alternative relative to short interest data 

would be less additive than the data provided that will be provided by adopted Rule 13f-2 and 

Form SHO. 

This alternative would mitigate some of the concerns associated with Managers being 

exposed to increased risk of short squeezes or other retaliation as discussed in Parts VIII.C.1 and 

VIII.C.2. This reduced risk stems from the fact that it would be more difficult to determine 

whether the short selling activity reported was due to many Managers short selling small 

amounts, or just a few Managers short selling large amounts. It would also be more difficult to 

identify individual short sellers based on the data. A lower risk of retaliation or short squeezes 

may also mitigate some of the negative effects of Rule 13f-2 and Form SHO with regard to less 

overall short selling or fundamental research that are described in Part VIII.C.2, depending on 

the delay in publication under the alternative. 

Additionally, this approach would have lower compliance costs for Managers than the 

current proposal, as it would not require Managers to file Proposed Form SHO. One commenter 

 
749 Adopted Rule 13f-2 requires reporting based on the settlement date, which is normally two business days 

after the transaction day. 



262 

agreed that releasing CAT data with short sale information would be less costly for Managers 

than Proposed Form SHO.750 While it would result in the same costs for Industry Member 

reporting as those associated with the CAT amendment, it would increase costs associated with 

the Plan Processor improving processing power for the aggregation of CAT data if such 

computations could not be performed with existing resources (without reducing other 

functionality). Any costs incurred by the Plan Processor would be passed along to Plan 

Participants and Industry Members. 

There are several drawbacks to this alternative relative to the existing proposal. First, it 

would take some time before CAT data could be used to develop an estimate of the size of short 

positions. Thus, the data would not immediately provide the Commission or market participants 

with information about the size of individual large short positions. Consequently, to the extent 

that knowing the total size of short positions held by Managers with large positions conveys 

fundamental information to the market, then this fundamental information would not be 

immediately available if the Commission were to adopt a version of this alternative. 

Additionally, the data provided by this alternative would exclude transactions outside of the 

purview of CAT that may affect short positions. Thus, the data provided under this alternative 

would always be estimates of total short positions, which could be inaccurate for some 

Managers. Another drawback to this alternative is that releasing CAT data to the public could 

increase security risks. CAT contains highly sensitive information and creating a process that 

would release portions of the data, even if aggregated, could present risks.  

 
750  See SBAI Letter, at 2. 



263 

A larger expansion of CAT could achieve at least the same data value as in Rule 13f-2 

and Form SHO.751 For example, CAT could expand to require the reporting of all the 

information that will be collected in adopted Form SHO. Specifically, the Commission could 

expand CAT to include data on account positions, including short selling positions associated 

with those positions. In addition, CAT could be expanded to capture information on changes in 

those positions. Under this approach, regulators would have access to the same data as if 

Managers filed Form SHO but for all short sellers, not only the subset of Managers reporting on 

Form SHO. This approach would also result in additional information available to regulators not 

collected in Form SHO that could improve investor protections. In addition, this alternative 

would reduce costs for Managers who are not Industry Members because they would not be 

required to report new information. However, costs would increase for Industry Members, who 

would have to report a significant amount of new information on CAT report types that do not 

exist today and for Participants who would have to work out technical specifications and 

implement changes for new types of CAT reports. Further, more Industry Members would report 

this information to CAT than Managers who, under the final rule, would be required to report 

information on Form SHO. It would be a major undertaking for both the Plan Processor and 

industry participants to build out and adapt systems to collect, process, and publish this 

information. This implementation would likely be very complex and take a significant amount of 

time to compile. Overall, the cost of this alternative is likely to exceed the costs of adopted Rule 

13f-2 and Form SHO. 

 
751  See Proposing Release, at 15004. 



264 

Further, if the Commission were to expand CAT to collect additional information beyond 

what would be captured by the amendment to CAT, such as position information, then these 

additional expansions would impose significant direct costs to CAT-reporting firms. 

a. FINRA Reporting 

As discussed in Part VIII.C.4.i, FINRA already collects and, together with the listing 

exchanges, disseminates aggregate short interest that it collects from member broker-dealers. 

Consequently, the Commission could codify FINRA’s existing process to ensure that it continues 

in perpetuity.752 This alternative would have no additional costs to market participants but would 

substitute a Commission mandate for the publication of the short interest data. Several 

commenters expressed support for the use of FINRA to satisfy DFA requirements in lieu of Rule 

13f-2 and Form SHO.753 The commenters’ support is motivated by familiarity with current 

FINRA short reporting requirements and costs that would not be incurred to comply with Rule 

13f-2 and Form SHO. 

Similarly, the Commission could require FINRA to publish a version of its short interest 

information that specifically identifies the aggregate short interest of Managers – separate from 

other short interest.754 To accomplish this, reporting broker-dealers would separately include in 

their reports to FINRA the short positions that originate from Managers. FINRA would then 

compile both total short interest, as it currently does, as well as a Manager specific short interest. 

Because broker-dealers already have experience reporting short interest data to FINRA and 

would thus not need to build out new systems to report the data, this alternative might have been 

less expensive than the existing proposal as it would have only required a modification of an 

 
752  See Proposing Release, at 15004. 
753  See, e.g., AIMA Letter, at 8; ICI Letter, at 51; Ropes & Gray Letter, at 4; Two Sigma Letter, at 9. 
754  See Proposing Release, at 15004. 



265 

existing process. Since this alternative would not have provided the Commission with the 

positions of any identified Managers or any Manager-specific activity data, the benefits and risks 

associated with these data articulated throughout Part VIII.D would decline. In addition, it would 

not have distinguished Managers with large positions from other Managers. Therefore, neither 

market participants nor regulators would know what share of short interest was concentrated 

among Managers with large positions. As discussed above in Part VIII.C.1, Managers often 

accumulate large short sale positions based on fundamental market research or other factors that 

differ from investors with smaller positions, the latter of which are more likely shorting for 

hedging or smaller-scale speculative purposes. Therefore, this alternative would have provided 

less transparency into the short sale market relative to the Rule 13f-2 and Form SHO because it 

would not have revealed the degree to which short interest was concentrated among Managers 

with large positions. 

The Commission also expects that data on Manager short interest in addition to total short 

interest would have likely not provided much incremental value over the existing short interest 

data due to the likely significant overlap of the short positions of Managers and total short 

interest, and the absence of activity information to better understand changes in short interest.755 

Thus, while the alternative that requires FINRA to produce separate short interest data for 

Managers would have reduced costs to market participants relative to the existing proposal, it 

also might not have provided the market or regulators a significant incremental benefit relative to 

existing short selling data. 

 
755 Analysis of Form SH data indicates that these data, which would be a subset of the data collected in this 

alternative, amounted to a high percentage of short interest. Commenters questioned the use of Form SH 
data in this and other contexts. See supra Box 1: Use of Form SH Data for responses to comments on the 
use of these data. 



266 

b. Broker-Dealer Reporting to EDGAR on Behalf of Managers 

The Commission could adopt a modified rule that allows broker-dealers to file Form 

SHO reports with the Commission on behalf of Managers.756 This alternative might reduce costs 

as it could concentrate reporting with broker-dealers that have significant experience collecting 

and providing such information – increasing operational efficiency. On the other hand, Managers 

may use multiple prime brokers and thus the reporting prime broker may not have easy access to 

information about all such Manager’s positions and activity in a security. Consequently, the 

reporting prime broker may not know whether the sum of the manager’s positions exceeds either 

of the thresholds and thus whether reporting is necessary. Thus, the reporting broker would need 

to gather additional information from the Manager about activity associated with other prime 

broker(s).757 In the absence of such information gathering, the reporting broker may mistakenly 

not report Form SHO for a Manager whose position with that particular reporting broker is under 

the threshold, but over the threshold when positions across brokers are combined. Requiring 

additional data collection of a Manager’s short positions by the reporting broker might increase 

complexity and costs as Managers and broker-dealers would need to develop systems by which a 

Manager provides information to its reporting broker about its activity with other prime brokers. 

Alternatively, the Commission could permit broker-dealers to report on behalf of Managers only 

if the broker-dealer could report full information. Thus, Managers using multiple prime brokers 

would have the option of providing comprehensive information to their reporting prime broker, 

or they could report Proposed Form SHO data themselves. 

 
756 See Proposing Release, at 15004. 
757 The latter could result in the additional complication of double reporting or prime brokers having to 

coordinate on who reports a position. Likely, the least costly solution could involve Managers being 
responsible for informing their prime brokers of their threshold status. 



267 

c. Harmonization with European Disclosure Requirements 

The Commission could also craft Rule 13f-2 and Form SHO to be consistent with 

European disclosure requirements.758 In 2012, the European Parliament and the Council of the 

European Union adopted regulations on short selling (the “SSR”) that standardized the reporting 

threshold for all EU member states.759 Under the SSR, a natural or legal person holding a short 

position is required to report to the relevant regulator when its short position (“net short 

position”), computed by taking into account relevant derivative positions such as options, if any, 

reaches the initial threshold of 0.2 percent of the issued share capital of the company, and in 0.1 

percent up and down increments thereafter.760 The threshold for reporting to a regulator recently 

was lowered to 0.1 percent.761 If the net short position reaches 0.5 percent of the share capital of 

the company, then the relevant market regulator reports the net short position to the public with 

the identity of the short seller revealed. New filings are required to be made whenever the net 

short position increases or decreases by 0.1 percent of the share capital of the company. In the 

EU, trading entities must submit their data to the relevant regulator by 3:30 pm on the following 

trading day.762 Trading entities accomplish public disclosure via a central website operated or 

supervised by the relevant competent authority.763 

 
758 See Proposing Release, at 15005. 
759 See European Parliament and Council Regulation 236/2012, 2012 O.J. (L 86) 1, available at https://eur-

lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:086:0001:0024:en:PDF. The SSR was adopted 
on Mar. 14, 2012 and its provisions had applicability dates of Mar. 25 and Nov. 1, 2012. 

760 Id. at Article 5(2). 
761 The threshold was temporarily lowered in Mar. 2020 in response to the COVID-19 pandemic. See ESMA 

Decision of 16 Mar. 2020, ESMA 70-155-9546, available 
at https://www.esma.europa.eu/sites/default/files/library/esma70-155-9546_esma_decision_-
_article_28_ssr_reporting_threshold.pdf. In September 2021, the change was adopted on a permanent basis. 
See European Union, Commission Delegated Regulation 2022/27, art. 1, 2022 O.J. (L 6) 9, available 
at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32022R0027.  

762 Id. at Article 9(2). 
763 Id. at Article 9(4). 



268 

Consequently, the Commission could structure the rule to require Manager short selling 

reports that are consistent with the European regulations in terms of the thresholds for 

reporting, the computation of the threshold, the items reported, the timing for when short sale 

information is made public, and the timing for when new reports have to be issued. This 

alternative would provide directional information about short positions because only net short 

positions are required to be reported; would likely impose lower compliance costs to 

Managers;764 would likely raise the risk of abusive practices towards short sellers; would likely 

increase Managers’ ability to evade the threshold; and would lower the detail of the data the 

Commission receives relative to the data from adopted Form SHO.  

One advantage of this alternative would be likely lower compliance costs for Managers 

that engage in short selling in both the EU and US.765 By only needing one set of compliance 

systems in place to satisfy both rules, Managers might enjoy lower costs to comply in both 

systems. Additionally, Managers might face lower costs to track and report net short positions. 

Moreover, in connection with Regulation SHO compliance, some Managers already track net 

positions on an aggregation unit basis.766 Thus, the computation of net positions for such 

Managers might be less costly than that of gross short positions as required by Rule 13f-2. 

However, for other Managers who are not currently aggregating positions on a net basis, costs of 

tracking may be higher under this alternative than under Rule 13f-2. 

This alternative also could have some negative consequences. The EU data are timelier 

than data available under adopted Rule 13f-2, since the forms are posted publicly immediately 

 
764  For Managers operating in both the EU and the US, these costs may be lower. 
765 Due to uncertainties regarding the EU short selling data regarding the identities of short sellers and the 

ability to map those IDs to US Managers, the Commission cannot identify the number of US Managers that 
currently comply with EU regulations. 

766  See supra note 263. 



269 

after receipt by the regulator, which potentially facilitates greater price discovery. However, this 

comes at the cost of increasing the possibility of revealing short sellers’ proprietary information 

and its associated risks, including short squeezes and copycat trading. Additionally, the EU 

structure, whereby individual short sellers’ names are made public, might raise the risk of 

retaliation towards short individual sellers, as well as the ability for market participants to engage 

in copycat strategies that decrease the profitability of gathering information. As a result of these 

costs to short sellers, investors may not be able to gather as much fundamental information as 

under the final rule.767 One commenter,768 however, stated that a recent study has found that the 

EU’s regulation finds no evidence that the disclosure requirements have resulted in increased 

coordination or have resulted in short sellers being targeted for short squeezes.769 

Another potential consequence of this alternative would be adjusting position sizes to 

evade the Reporting Threshold. Multiple studies found evidence that short sales in the EU are 

clustered below the threshold, suggesting that investors are trying to conceal their positions to 

protect their underlying investment strategies.770 Thus, short sellers may adjust their positions to 

either increase their long exposure or reduce their short exposure, leading to loss of price 

efficiency. The Commission believes that since there are benefits to short sale activity, including 

 
767 For analyses of how the SSR lead to increased copycat trading, lower price efficiency, and increased 

volatility, see Stephan Jank, Christoph Roling, and Esad Smajlbegovic, Flying Under the Radar: The 
Effects of Short-Sale Disclosure Rules on Investor Behavior and Stock Prices, 139 (1) J. OF FIN. ECON. 209-
233 (2021); Charles M. Jones, Adam V. Reed, and William Waller, Revealing Shorts an Examination of 
Large Short Position Disclosures, 29 (12) THE REV. OF FIN. STUDIES 3278-3320 (2016). 

768  See Better Markets Letter, at 13.  
769  See Charles M. Jones, Adam V. Reed, and William Waller, Revealing Shorts an Examination of Large 

Short. Position Disclosures, 29 Rev. of Fin. Studies 3278, 3282 (2016).  
770  See Stephan Jank, Christoph Roling, and Esad Smajlbegovic, Flying Under the Radar: The Effects of 

Short-Sale Disclosure Rules on Investor Behavior and Stock Prices, 139 (1) J. OF FIN. ECON. 209-233 
(2021); Mazzacurati, Julien, The Public Disclosure of Net Short Positions, European Securities and 
Markets Authority (ESMA), Trends, Risks, Vulnerabilities (TRV) Report No. 1, 2018. 



270 

increased price efficiency, then there would likely be increased costs to disclosing manager 

identities, since this would reduce short sale activity. 

By reporting net short positions, rather than gross short position, the Commission and the 

public would not receive information about large, but hedged, short positions. For instance, the 

alternative would allow771 a comparison of total short interest with reported large hedged short 

positions, which might provide additional information to the market about the activities of large, 

though perhaps non-information based, traders. While hedged short positions are less likely to be 

manipulative in nature, or to pose systemic risk, large short positions are still potential sources of 

systemic risk. One commenter stated that using thresholds based on net short positions would 

allow market makers that carry large gross short positions for market making purposes rather 

than directional trading strategies to avoid having to submit Form SHO and incur its associated 

costs. According to the commenter, since net positions of market makers tend to be close to zero, 

including market maker gross positions in the public release of Rule 13f-2 data could be 

misleading to market participants (assuming that those market participants did not understand 

what data Rule 13f-2 will and will not provide).772 The Commission believes, however, that 

market makers will rarely if ever be required to report their short positions because the dollar-

value threshold of Rule 13f-2 was increased from the proposal’s $10 million on a single trading 

day to a $10 million daily average over the course of a month. It is the Commission’s 

understanding that markets makers are highly unlikely to hold a gross short position averaging 

$10 million over the course of trading month. 

 
771  This comparison, however, would be different than that of comparing Form SHO data to short interest data. 
772 See HSBC Letter 2, at 3.  



271 

A reporting requirement for only net short positions would reduce the value of Rule 13f-2 

data for use in reconstructing market events. For instance, during the recent meme stock 

phenomenon, for certain stocks it became difficult to hedge options transactions using the 

underlying security due to the significant price changes in the spot market. Consequently, 

positions that were previously judged to have been hedged, and thus low risk, may no longer 

have been hedged. In addition, large short positions with hedges that have been significantly 

weakened or broken due to unforeseen extreme market events, may have become systemically 

important. In such cases, it would be useful for the Commission to have information on large 

short positions, regardless of perceived net short position, in order to aid in the reconstruction of 

market events. This is a loss of value compared to adopted Rule 13f-2 and Form SHO, which are 

triggered by large gross short positions.  

 Further, the EU regulations provide activity data if positions change by 0.1 percent or 

more. Thus, market participants could only learn about measured positions changes, rather than 

position changes of all sizes. As an example, there may be times where the public may be 

interested in seeing the reaction to a corporate announcement, but this may be limited if 

Managers do not adjust short positions above the 0.1 percent threshold to trigger reporting.  

2. Data modifications 

a. Release Proposed Form SHO Data in Alternative Formats 

The Commission could release the information included in Form SHO in a different 

manner. This alternative could take one of several forms.773 For example, the Commission could 

release each Form SHO report to the public exactly as it is filed, identifying the Managers. The 

Commission could also release the Forms as filed, but with the identities of the filers removed. 

 
773  See Proposing Release, at 15005. 



272 

The Commission could also release the aggregated data as in the current proposal, but it could 

publish the data in different ways in the aggregated Form SHO report, such as publishing the 

number of entities underlying the aggregated data or publishing increases in short positions 

separate from decreases.  

In the first alternative, the Commission could release Form SHO as filed, allowing all 

market participants to see the identities of short sellers – similar to the EU regulation discussed 

above. This would increase the information that market participants have to evaluate sentiment 

on particular equities in the market. In particular, for some market participants, this information 

would also allow market participants to better manage risk by allowing them to manage their 

exposure to Managers with large short positions. There are also potential costs to this alternative. 

One potential result from this alternative is that if a short seller is viewed as sophisticated and 

informed, then releasing identifying information would likely spur copy-cat trading strategies. 

This outcome has been documented with respect to the EU regulation and suggests that revealing 

the identities of the short sellers may diminish the value of becoming informed.774 In addition, 

the detailed information on daily short activity could reveal not just market sentiment, but 

trading strategies of individual Managers. Additionally, releasing the names of large short sellers 

would further increase the likelihood that the short seller would be the victim of a short squeeze 

or other retaliatory actions as described in Part VIII.C.1.  

Similarly, the Commission could publicly release individual Form SHO filings with 

identification information removed from the released data. This alternative would provide market 

participants a clearer view into the activities of large short sellers, potentially improving their 

ability to learn from the actions of large short sellers relative to the current proposal. For 

 
774 See supra Part VIII.F.1.iv. 



273 

instance, the data would allow market participants to know whether short sentiment was broadly 

held – as would be indicated by many filings – or concentrated – as would be indicated by few 

filings. This information could potentially improve the market assessment of bearish sentiment 

relative to Rule 13f-2, improving price efficiency.  

However, the indirect costs of this alternative would be greater than for Rule 13f-2 and 

Form SHO. Releasing all the information from Proposed Form SHO could reveal trading 

strategies that would be costly even if the identities of the short sellers remained anonymous. For 

example, releasing this information, even without naming the short sellers, might increase the 

risk of copycat trading which reduces the profits of acquiring information. It might also provide 

information about how vulnerable short sellers may be to a short squeeze as it could give a signal 

about whether a short seller has a large and potentially vulnerable short position. In this case, the 

negative effects of the rule on the value of collecting information and of short selling in general 

would be greater than under the final rule, leading to less price efficiency and potentially more 

volatility. Additionally, even though the data could be released anonymously, it is not clear that 

in all cases the identities of the individual short sellers would remain anonymous.775 If market 

participants were able to uncover the identities of individual short sellers, then the risk of 

retaliation or short squeezes would increase relative to Rule 13f-2 and Form SHO.  

Alternatively, the Commission could release the data as specified in the current proposal 

but also include the number of entities whose Form SHO reports were collected. This 

 
775 Issuers have been known to hire private investigators to try and uncover the identities of short sellers when 

they learn that their stock is being targeted by short sellers. See supra note 622. Additionally, researchers 
have used algorithms to unmask the identities of individuals from masked data released to the public by the 
SEC. See Huaizhi Chen, Lauren Cohen, Umit Gurun, Dong Lou, and Christopher Malloy, IQ from IP: 
Simplifying Search in Portfolio Choice, 138 (1) J. OF FIN. ECON. 118-137 (2020). While the Commission 
could design this alternative to avoid the specific vulnerabilities exploited by Chen et al (2020) it is 
possible that motivated researchers and market participants could find some other unforeseen way to link 
the public data to individual short sellers. 



274 

information would provide the market with additional detail about whether short sentiment was 

broadly held by multiple Managers, or narrowly held by just one or a few. This information 

could be useful as market participants assess bearish sentiment in the market and adjust their 

actions accordingly. However, adding this information might also increase the risk of short 

squeezes or other retaliatory actions in the case where there are very few reporters of Form SHO. 

In the Form SH data collected under temporary Rule 10a-3T, 32 percent of stocks had only one 

Manager reporting a position per month.776 Such a situation could signal to market participants 

that one, or a few, short sellers have large short positions that could potentially be vulnerable to a 

short squeeze.  

Similarly, the Commission could collect Form SHO data but publicly release the daily 

aggregate increases separately from the daily aggregate decreases in short positions as opposed 

to daily net changes to short positions as adopted in Form SHO. This approach would provide 

the public more detailed information and understanding on what drives changes to short 

positions. However, separating daily aggregate increase from decreases in short positions could 

increase the risk of revealing trading strategies, which could disincentivize short selling and 

harm market quality. 

b. Collect Data on Derivatives Positions 

Investors can use derivatives to take an economically short position in a security. For 

example, an investor with a bearish view of a stock can purchase a put option in that stock. 

Consequently, for a more complete view of the total economic short position that a Manager has 

taken, the Commission could require Managers who report adopted Form SHO to also disclose 

 
776 See Proposing Release, at 14963 for more information on methodologies and caveats for using Form SH 

data. See also supra Box 1: Use of Form SH Data for responses to comments on the use of these data. 



275 

their derivatives positions on underlying equity securities such as options and total-return swaps 

as an alternative to Form SHO as adopted, which does not directly collect information on 

derivatives.777 This alternative refers only to options and other derivative securities for which 

their transactions do not fit the definition of a short sale under Rule 200(a) of Reg SHO. 

Requiring this data would provide a more complete view of the economic short position 

that a Manager engaging in a large short sale has taken.778 Consequently, the information would 

aid market participants in gauging bearish sentiment in a security relative to Rule 13f-2 and 

Form SHO, as adopted. This information may also help the Commission to better evaluate 

potentially risky short positions and respond more quickly in the case of a market event. The 

Commission could also better reconstruct market events, such as the recent meme stock events in 

January 2021, with options positions data. 

Requiring options data to be reported on Form SHO would increase the compliance costs 

to Managers of reporting on Proposed Form SHO. One commenter stated that the inclusion of 

derivatives, warrants, convertible debt, and ETFs would be costly.779 Adopted Rule 13f-2 will 

compel Managers to track their gross short positions in individual equities in a month. Tracking 

of ETFs for the purposes of adopted Rule 13f-2 is the same as tracking any equity security with 

the exception of tracking shares outstanding, which might be marginally more costly. 

Additionally, securities that may be used to change a gross short position, such as options or 

convertible debt, are unaffected by Rule 13f-2 unless they are used in a manner that changes 

 
777 See Proposing Release, at 15006. 
778  One commenter argued including derivatives for Rule 13f-2 would give a more complete picture of 

Managers’ positions. See NASDAQ Letter, at 3.  
779  See MFA Letter, at 12. 



276 

gross short position in an equity security.780 The alternative discussed here would require explicit 

tracking and reporting of such securities. 

While Managers generally track their options exposure carefully, it is frequently different 

trading desks that execute options trades and equity transactions. Thus, it is possible that 

Managers use separate systems to track their options and equity positions. For these Managers, 

collecting options and equity transactions to report the data required for Proposed Form SHO 

would require building a process to pull data from two separate systems - increasing the cost of 

complying with the rule. Requiring derivative position information might also be duplicative of 

other derivatives reporting requirements.  

3. Threshold Modifications 

As an alternative to the adopted Form SHO Thresholds, the Commission could require 

reporting Form SHO at either higher or lower thresholds – or no threshold.781 Commenters to the 

Proposal Release expressed a range of opinions on the thresholds, some of whom supported 

increasing the thresholds and others decreasing the thresholds relative to Proposed Form SHO.782 

When selecting thresholds, the fundamental economic tradeoff is the value of the data versus the 

cost of collecting the data. Alternative thresholds that are lower than Threshold A or Threshold B 

specified in Rule 13f-2 or an alternative that would not contain a threshold would produce more 

data as more entities would be required to report.  

 
780  Such as a Manager exercising a call option to buy equity, and thus decreasing the Manager’s gross short 

position, if any. 
781  See Proposing Release, at 15007. 
782 Furthermore, in response to a solicitation of comments on Temporary Rule 10a-3T, commenters suggested 

thresholds generally ranging from 1% to 5%. See Proposing Release, at 14963 n.79 for links to specific 
comment letters. 



277 

Commission analysis of Form SH data collected under temporary Rule 10a-3T indicates 

that the gross short position thresholds in adopted Form SHO for Threshold A, equal to daily 

averages of $10 million or 2.5 percent of shares outstanding, would have collected more than 

three-quarters (78.5 percent) of the dollar value of short positions.783 Therefore, an alternative 

that lowers the threshold might lead to only a minor increase in coverage relative to the adopted 

thresholds in Form SHO. Nevertheless, the Commission recognizes that even a relatively small 

increase in coverage could increase benefits. For example, such an alternative would provide 

market participants with a clearer view of Manager bearish sentiment compared to adopted rule 

and form, as more Managers would be required to report the data, making the data more 

comprehensive.  

A lower threshold would also enhance Commission oversight of short selling and allow 

the Commission to more easily reconstruct significant market events involving short selling – 

again because the data would be more comprehensive. One commenter stated that reducing or 

eliminating the reporting thresholds to Form SHO would provide additional benefits, since 

unknown, hidden short positions pose risks to investors and the markets. Reducing or eliminating 

reporting thresholds would reveal the identity of all holders of short sale positions, thereby 

reducing these risks.784 

However, a lower or no threshold would increase the cost of reporting Form SHO data in 

terms of compliance costs associated with Managers compiling and filing the required data 

thorough EDGAR and in the indirect costs associated with revealing short sellers’ information. 

Evidence of this increase in aggregate reporting costs can be seen through an analysis of Form 

 
783  Commenters questioned the use of Form SH data in this and other contexts. See supra Box 1: Use of Form 

SH Data for responses to comments on the use of these data. 
784  See Better Markets Letter, at 12. 



278 

SH data. For example, if the reporting thresholds of adopted Form SHO were reduced from 

average daily gross position of 10 million or 2.5 percent of shares outstanding to $5 million or 1 

percent of shares outstanding, the number of reporting Managers would rise from 252 to 314. 

Furthermore, the increase in the share of gross short sale dollar volume covered by reporting 

Managers would rise from 78.5 percent to 88.6 percent. In addition, Managers would likely be 

required to file reports for more securities, which would further increase compliance costs. 

Indirect costs include increased risk of copycat short selling strategies, which can lead to herding 

and increased volatility, and short sellers engaging in strategic behavior to build short positions 

just underneath the threshold, which would lead to lower price efficiency.785  

In some cases, a lower threshold would decrease the indirect costs associated with 

adopted rule because it would be harder to identify individual short positions from aggregate 

reporting if there are many entities reporting.786 This effect may not be universally true, 

however. In particular, at thresholds just below Threshold A, the number of securities in which 

only one entity reported Form SH increases.787 This result implies that there are a number of 

securities for which only one short seller held a short position at a level lower than the current 

cutoff. In these cases, lowering the threshold might increase the risk of identifying individual 

short sellers. 

In contrast, alternatives that would raise the reporting threshold would lower many of the 

costs associated with providing Form SHO data, since fewer entities would be required to report. 

 
785 See supra Part VIII.F.1.iv for discussion of this behavior in Europe.  
786 See supra Part VIII.C.1 and Part VIII.E.1 with accompanying text for more information on risks of 

identifying individual short sellers. 
787 According to Form SH data, 39% of securities would have only one Manager reporting at or above the 

threshold of $10 million average daily and 2.5% average daily of shares outstanding. If the percent 
threshold was reduced to 1% average daily of shares outstanding along with the $10 million average daily 
threshold the number of securities with only one Manager reporting would increase to 41%.  



279 

It would also limit somewhat the value of the data – again as the reported data would reflect a 

smaller portion of overall short positions. One means of increasing the threshold would be to 

require that both thresholds in Threshold A (i.e., both daily averages of $10 million and 2.5 

percent of shares outstanding) be reached before a Manager is required to file, instead of either 

threshold. Another alternative would be to increase one or both of thresholds in Threshold A but 

continue to require only one of them be reached before a Manager is required to file Form SHO. 

This decline in aggregate reporting costs can be seen with an analysis of Form SH data, which 

show that increasing the Form SHO daily average thresholds from 2.5 percent and $10 million to 

5 percent and $25 million would reduce the number of reporting Managers from 252 to 165. In 

addition, it would reduce the percentage of short sale dollar volume covered by reporting 

Managers from 78.5 percent to 58.4 percent. 

Higher thresholds, however, might also come with increased risk of identification and 

retaliation towards short sellers because at some point the likelihood that more than one investor 

holds a very large short position diminishes. For example, according to analysis of Form SH 

data, if the Form SHO thresholds rose from an average daily position of $10 million or 2.5 

percent of share outstanding to $25 million or 5 percent of shares outstanding, the share of 

reported securities with only one Manager would rise from 39.3 percent to 48.4 percent.788 

Another alternative would be to raise the percent threshold from 2.5 percent to 5 percent, 

as suggested by one commenter,789 without altering the $10 million threshold. Commission 

analysis of Form SH data indicates that this would only reduce the number of reporting 

Managers from 252 to 247. However, further analysis reveals that there could be a substantial 

 
788 See Proposing Release, at 14963 for more information on methodologies and caveats for using Form SH 

data. 
789  See supra note 120 and associated discussion. 



280 

loss of transparency into stocks with less than a $400 million market capitalization. Since stocks 

with market caps exceeding $400 million will always trigger the $10 million threshold before the 

2.5 percent trigger (2.5 percent of $400 million = $10 million), raising the 2.5 percent to 5 

percent will not impact the number of large positions reported in stocks with market caps 

exceeding $400 million. However, stocks with market caps under $400 million will always 

trigger the 2.5 percent threshold before the $10 million threshold. Thus, raising the 2.5 percent 

threshold to 5 percent without altering the $10 million threshold would result in fewer smaller 

stock positions being reported. Furthermore, analysis of Form SH data indicates that for stocks 

that are specifically sensitive to the 2.5 percent threshold (i.e., stocks in which all reportable 

short sale positions are under $10 million and therefore only trigger the 2.5 percent threshold), 

raising the threshold to 5 percent would reduce the number of reportable stocks from 131 to 30, a 

decline of about 77 percent. Thus, Form SH data analysis indicates that while raising the 

threshold from 2.5 percent to 5 percent might only result in a small reduction in the number of 

reporting Managers, it could nevertheless lead to a significant loss of transparency in small 

stocks (stocks with market capitalizations under $400 million).   

For securities subject to Threshold B, the economic impact of either raising or lowering 

the dollar threshold would be similar. Raising the threshold would lower compliance costs but 

also the quality of the data, while lowering the threshold would do the opposite. For example, if 

the Commission raised Threshold B from $500,000 to $10 million, then under the assumption of 

one manager short selling each Threshold B security, the total number of short positions captured 

for Threshold B securities would decrease from 23.72 percent to 8.76 percent.790 Similarly, 

 
790 See Proposing Release, at Table II (analysis within table).281 

under the same assumptions, lowering the threshold to $50,000 would increase the number of 

short positions captured to 48.08 percent.  

As another alternative to the proposed Threshold A, the Commission could establish a 

threshold based on one rather than both of the thresholds in Rule 13f-2, i.e., either the average 

daily dollar short position or the percent of shares outstanding.791 The advantage of this 

alternative is that it might reduce compliance costs by simplifying reporting requirements. One 

commenter stated that the two-prong threshold for reporting companies was, “overly and 

unnecessarily complex.”792 In addition, the commenter said that using a percentage-based 

threshold was more costly to Managers, in part because it can be burdensome to obtain data on 

shares outstanding, which serves as the denominator in the calculation of the percentage-based 

threshold.793 Another commenter, however, stated that, relative to percentage-based threshold, 

“compliance with a dollar value threshold typically requires significant manual processes and 

more difficult system buildouts.”794 The Commission acknowledges that a dollar-value threshold 

might be somewhat less complicated for some Managers, but nevertheless believes that data 

tracking the number of shares outstanding are generally readily available, and that it is 

straightforward to calculate an average daily gross short position as a percentage of outstanding 

shares. 

The Commission also acknowledges that using a single threshold for Threshold A would 

lower compliance costs, primarily because fewer entities would be required to report. However, 

choosing which of the two thresholds to drop would impact which positions are more likely to 

 
791  See Proposing Release, at 15008 for discussion of this alternative with the $10 million threshold as 

proposed, not as adopted. 
792  See MFA Letter, at 13 
793  See Proposing Release, at 15008. 
794  See ICI Letter, at 9. 



282 

trigger the remaining threshold. For example, an alternative that retained only the $10 million 

daily average threshold would decrease the likelihood of small cap positions being reported, 

since these firms reach the 2.5 percent threshold before the $10 million threshold.795 Smaller 

market capitalization stocks tend to be easier to manipulate and less stable. Thus, an alternative 

that excludes the 2.5 percent threshold would result in less visibility into the actions of short 

sellers among smaller market capitalization stocks and may undermine the ability of Rule 13f-2 

to reduce manipulative behavior among these stocks, as articulated in Part VIII.C.1.  

Commission analysis of Form SH data suggest that an alternative that includes only the 

2.5 percent threshold would result in a substantial reduction in the number of reporting Managers 

relative to the two-prong threshold in adopted Rule 13f-2. More specifically, switching from the 

adopted Form SHO thresholds of $10 million daily average or 2.5 percent of shares outstanding 

to a single prong threshold of 2.5 percent would cause the number of reporting Managers under 

Form SH to fall from 252 to 115. Furthermore, it would drastically reduce the share of covered 

short sale volume of reporting Managers from 78.5 percent to 16 percent. One commenter stated 

that excluding the dollar-based threshold and solely using a threshold of 5 percent or more, 

“…would allow the Commission to achieve its objectives without imposing unnecessary 

complexity on advisers and other reporting Managers.”796 Form SH data, however, indicate that 

this would reduce the number of reporting Managers from 252 to 55 and the share of covered 

short sale volume from 78.5 percent to 9 percent.  

More generally, the alternative of requiring a threshold based only on short positions as a 

percent of shares outstanding would largely eliminate reporting in larger securities. Note that for 

 
795  Short positions in stocks with market capitalizations below $400 million will trigger the 2.5 % threshold 

before they trigger the $10 million threshold. 
796  See ICI Letter at 9. 



283 

stocks with market capitalization above $400 million, short sellers reach the $10 million 

threshold before the 2.5 percent threshold. Furthermore, for large cap stocks, generally defined 

as having a market capitalization exceeding $10 billion, short position would have to be more 

than $250 million in order to trigger the 2.5 percent threshold. Consequently, an alternative in 

which the Commission required reporting based only on the percent of shares outstanding would 

result in fewer Form SHO reports for stocks with larger market capitalizations. Less visibility 

into the actions of short sellers in larger market capitalization stocks would provide less 

information about bearish sentiment in the economy. This is because larger market capitalization 

stocks, which are more well-established than small cap stocks, are more likely to be shorted due 

to general pessimism about the macroeconomy and less likely to be targeted as part of 

manipulative strategy in comparison to small cap stocks.797  

As another alternative, the Commission could structure the Reporting Thresholds to 

include the nominal economic value of short derivative positions. Specifically, reporting on 

Form SHO would be required if a Manager’s total short position in the stock and in derivatives 

such as options and security-based swaps exceeded the relevant Reporting Thresholds.798 This 

alternative would decrease the likelihood that Managers seek to avoid the Reporting Thresholds 

by transacting in derivatives and thus, may increase the benefits of the data from Form SHO.799 

Making it more difficult to circumvent the reporting requirements using derivatives might also 

decrease strategic, and sub-optimal, trading around the Reporting Thresholds which leads to 

 
797  See, e.g., Carole Comerton-Forde & Tālis J. Putniņš, Stock Price Manipulation: Prevalence and 

Determinants, 18:1 REV. OF FIN. 23-66 (2014), available at https://doi.org/10.1093/rof/rfs040 (for evidence 
on small and less liquid stocks higher exposure to manipulative behavior by investors). See also discussion 
in supra Part VIII.C.1. 

798  See Proposing Release, at 15008 (discussing this alternative with the $10 million threshold as proposed, not 
as adopted). 

799 See supra Part VIII.C.8. 



284 

lower price efficiency.800 However, increasing the amount of information that was disclosed on 

publicly released Form SHO may increase copycat activity that leads to herding and increased 

volatility. Conversely, incorporating derivatives in Form SHO reports may dilute the information 

filed by Managers relative to the case where only equity gross short positions are included, 

thereby reducing the amount of herding. This alternative could also result in situations in which 

Managers would have a reporting obligation despite having large long positions in the equity 

over the entire month, which would increase costs for the Managers and would provide less 

relevant information. Additionally, including derivatives in the Reporting Threshold 

computations would increase the complexity of the rule and the cost of implementing the rule. 

For instance, Managers may need to pull information from multiple systems to determine the 

total value of their short position for reporting. Pulling information from multiple systems can be 

costly. Additionally, while valuing short positions in most equities is fairly straightforward, this 

is not true for derivatives. There are often multiple methodologies used by different market 

participants to value derivative contracts such as options. Thus, an alternative including a 

threshold for a Manager’s short exposure in derivatives would be significantly more complicated 

than Adopted Rule 13f-2 and Form SHO.  

An additional alternative could also involve requiring reporting thresholds to be based on 

activity and not just positions.801 This alternative would increase the amount of information 

available to the Commission regarding the activities of entities engaging in a high volume of 

short selling. This alternative might provide additional insight into Managers that sell short but 

do not hold short positions. Specifically, entities with high volumes of short selling are likely to 

 
800 See supra Part VIII.C.1 for further discussion on strategic trading around the threshold and how the rule is 

designed to reduce it. 
801  See Proposing Release, at 15009. 



285 

be market makers who use short selling to maintain two sided quotes in the absence of inventory 

and other high frequency traders. These entities trade in large volumes but tend to end trading 

sessions fairly flat on inventory in larger stocks. Consequently, requiring reporting based on 

activity might not significantly improve the market’s ability to assess of bearish sentiment. 

However, one area where reporting based on activity may be beneficial would be in identifying 

short selling attacks that are relatively short lived. For example, an investor with a convertible 

bond may seek to distort the stock price right around the exercise date of their bond as such 

contracts stipulate that the holder of the convertible bond receives more shares if the stock price 

is lower. In this case, an attempted manipulator may seek to aggressively short sell right around a 

convertible bond exercise date. Activity that is concentrated enough in time might not trigger a 

reporting threshold based on average position over the prior month under the final rule. While 

this activity information may be helpful in flagging unusual short selling activity, the 

Commission could conceivably build reports based on existing CAT data802 that would be more 

effective at detecting such behavior and Rule 13f-2 would identify these activities if the market 

participant exceeds the Reporting Thresholds.  

As an alternative, the Commission could measure the thresholds as of the last settlement 

day of the month rather than using the $10 million average daily prong or 2.5 percent average 

daily prong for Threshold A and the $500,000 threshold over any single day for Threshold B.803 

This alternative would have the advantage of simplifying compliance with Rule 13f-2 and Form 

SHO and thus may reduce compliance costs. Form SH data analysis indicates that using last 

 
802  In particular, because such an analysis would not involve estimating a position for the Manager, the 

limitations of CAT are less important. 
803  See Proposing Release, at 15009 (discussing this alternative with the $10 million threshold as proposed, not 

as adopted). 



286 

settlement day of the month instead of average daily thresholds for Threshold A would only 

result in a marginal increase in the number of reporting Managers, from 252 to 256. However, 

the Commission is concerned that this alternative might also invite more strategic trading around 

the end of the month than adopted Form SHO, which is structured to prevent trading around the 

threshold. For instance, Managers with short positions near the threshold may temporarily reduce 

their positions to below a Reporting Threshold on exactly the days that short positions are 

measured for compliance with the threshold to avoid reporting. This inefficient trading may 

reduce price efficiency right around the reporting days as trading to avoid holding a position that 

would trigger reporting is not trading based on economic considerations but rather trading based 

on regulatory considerations and thus is inefficient and may harm price efficiency on these days. 

Instead of Threshold B, the Commission could require the same two prong, $10 million 

or 2.5 percent daily average gross position reporting threshold for short positions in equity 

securities of non-reporting company issuers, as well as for equity securities of reporting company 

issuers.804 This approach might be less complex as all short positions would be subject to the 

same reporting threshold. Further, it would retain a threshold that relates to the size of the short 

position and to the size of the issuance to ensure capturing positions that are relatively large 

whereas the Threshold B imposes a flat threshold that could result in some relatively large 

positions, in terms of daily average gross position of percentage of shares outstanding, not being 

filed on Form SHO. 

However, this alternative would increase the burden for Managers as information for 

non-reporting company issuers can be hard to find, making threshold calculations difficult. In 

particular, information on the number of shares outstanding can be difficult to obtain for non-

 
804  See Id. 



287 

reporting company issuers and when it is available it is often stale and inaccurate. This could 

lead to problems with the calculations for the 2.5 percent threshold. One commenter stated that a 

single percentage-based threshold level applied to both reporting and non-reporting company 

issuers, “…would mitigate unnecessary operational and cost burdens on managers, including 

complexities from monitoring and reporting with up to three separate thresholds.”805 However, 

this alternative would require Managers to know the number of shares outstanding in non-

reporting companies for each trading day for their short positions, and would therefore 

effectively impose new recordkeeping costs on Managers. Further, there are multiple sources 

from which Managers can obtain shares outstanding for securities of non-reporting company 

issuers. At times these sources may report different numbers for total shares outstanding. 

Consequently, Managers could also feel the need to track the sources used to identify shares 

outstanding each day and would incur costs to determine which sources to trust for compliance. 

One concern is that Managers would try to game different data sources in order to avoid having 

to report Form SHO.  

The Commission could enhance record keeping requirements associated with this 

alternative by requiring Managers to record and report on Form SHO the source of data used to 

calculate shares outstanding.806 This could improve the quality of the information reported in 

Form SHO for securities of issuers who do not report with the Commission by improving the 

quality of the data that Managers use when calculating their positions. It might also help mitigate 

concerns that Managers may try to game different data sources to avoid complying with the 

regulation. For securities of reporting issuers, accurate shares outstanding information is readily 

 
805  See ICI Letter, at 9. 
806  See Proposing Release, at 15009. 



288 

available, thus concerns about gaming data sources or using low quality information is not as 

relevant. However enhanced record keeping requirements would increase the costs to Managers. 

While the Commission believes that most Managers have ready access to this information, 

requiring that Managers record and report the information would require Managers to further 

build out systems, in conjunction with the systems already required to report Form SHO, to also 

capture the source of information used.  

4. Other Alternatives 

a. Alternative Reporting Frequency or Additional Reporting 

Delay 

As alternatives, the Commission could require reporting at different frequencies than the 

monthly reporting mandated by the rule. Specifically, the Commission could require gross short 

position assessment and reporting (assuming at least one of the thresholds had been crossed) at 

frequencies that are shorter than a month.807 For example, the Commission could require 

reporting daily, weekly,808 biweekly, or whenever there is a significant change in short position 

(as is currently the standard in the European Union), but at least monthly. These alternatives 

could require reporting if the average short position surpasses the threshold for the month prior 

to the reporting period or if average positions surpass the threshold for the prior period (e.g. 

week, or two weeks). This could result in an increase in the number of Managers that report, 

since it is likely that some Managers hold short positions that cross a Form SHO threshold for 

 
807  See Proposing Release, at 15009. In this alternative, the thresholds would conform to the reporting period, 

such that the 2.5 % and $10 million daily average thresholds would be calculated over the alternative 
shortened time period. 

808 Many commenters on temporary Rule 10a-3T stated that weekly reporting was overly burdensome. See, 
e.g., Seward Kissel LLP, available at https://www.sec.gov/comments/s7-31-08/s73108-43.pdf; Investment 
Adviser Association, available at https://www.sec.gov/comments/s7-31-08/s73108-38.pdf; and Securities 
Industry and Financial Markets Association, available at https://www.sec.gov/comments/s7-31-08/s73108-
52.pdf. 



289 

the alternative time frequencies (e.g. one week) but not for the entire month. These Managers 

may be required to report with more frequent disclosures relative to Adopted Form SHO.  

The fundamental tradeoff with such thresholds compares the simplicity of the rule with 

the potential to game the threshold by strategic trading. Such alternative frequencies face the 

fundamental tradeoff of increased cost and increased transparency of the data. Put simply, 

increasing the reporting frequency increases the number of reports and thus increases the cost 

associated with reporting by a similar factor.  

Increased reporting frequency could also result in collecting more information than the 

current proposal. The difference between the information collected in the current proposal and 

this alternative would mainly come from the frequency and timeliness of the reports. The 

improved timeliness could increase the risk of copycat strategies and short squeezes, but also 

improve price efficiency. One commenter stated that a study of the EU’s short sale disclosure 

policy, which requires, “immediate public disclosure of large short positions,” finds no evidence 

of increased manipulation or short squeezes.809 However, multiple studies have found evidence 

that the EU’s policy has result in short sellers seeking to avoid disclosure by accumulating 

positions slightly under the threshold, which could result in a loss price efficiency.810 

Furthermore, one commenter stated that increasing the disclosure delay to 45 days would help 

prevent copycat trading and short squeezes.811 The Commission recognizes that there are 

benefits and costs to more timely disclosure, and believes that the two week delay incorporated 

in adopted Form SHO effectively balances these costs and benefits. 

 
809  See Better Markets Letter, at 13 and Charles M. Jones, Adam V. Reed, and William Waller, Revealing 

Shorts an Examination of Large Short. Position Disclosures, 29 Rev. of Fin. Studies 3278, 3282 (2016). 
810  See supra note 770. 
811  See MFA Letter at 4. 



290 

The Commission could also consider different reporting windows for Managers who 

meet the threshold short positions to report on Form SHO.812 The current proposal requires 

Managers to report on Form SHO within 14 calendar days of the end of each month. Shorter time 

horizons may increase the cost of reporting as Managers would have less time to gather and file 

the data on Form SHO and may need to build costlier procedures to ensure compliance with the 

reporting requirement.813 A mitigating factor would be that most of this reporting is likely to be 

done electronically, consequently it may not take the full 14 calendar days for Managers to 

gather and file the required data to the Commission. 

Additionally, the Commission could adopt different horizons for releasing the aggregated 

data after the reporting deadline.814 The fundamental tradeoff in terms of the delay between 

reporting and when the Commission releases the aggregated data is that a shorter delay increases 

the relevance of the data, in terms of the bearish sentiment it contains, which may improve 

managerial decision making, as well as providing more timely information about bearish 

sentiment in the market.815 At the same time a shorter delay increases the likelihood of copycat 

behavior, which decreases the incentive that short sellers have to gather information potentially 

leading to lower price efficiency and greater volatility.816 The converse is true for longer delays. 

 
812  See Proposing Release, at 15010. 
813 See Seward & Kissel LLP Letter (discussing Temporary Rule 10a-3T) at 5, available at 

https://www.sec.gov/comments/s7-31-08/s73108-43.pdf.  
814  See Proposing Release, at 15010. 
815  One commenter stated that the “…proposed data framework will not provide timely insight for the SEC to 

act given that it is monthly data with 14 days delay after month end.” See SBAI Letter, at 2. The 
Commission recognizes that removing the 14-day delay would increase its ability to monitor and respond 
more rapidly to market events stemming from short sale activity. However, as discussed elsewhere in this 
release, the delay is in part necessary to review and validate the data, and may also serve to reduce the 
likelihood of short squeeze and copycat behavior. 

816  One commenter stated that the public dissemination of Rule 13f-2 data should be increased from 14 days to 
45 days in order to provide additional protection against exposure of trading strategies, which could be used 
as part of a replication strategy or to facilitate a short squeeze. See MFA Letter, at 4. More generally, the 

 



291 

Additionally, a shorter delay provides less time for the Commission to aggregate the data and run 

checks on the aggregated data to ensure the Commission’s aggregation is error-free, and also 

provides less time for amendments to be filed, both of which could harm the quality of the data.  

b. Report Form SHO in Inline XBRL 

The adopted rule would require Form SHO to be filed in Form SHO-specific XML, a 

structured, machine-readable data language. As an alternative, the Commission might require 

Form SHO to be filed in Inline eXtensible Business Reporting Language (“Inline XBRL”), a 

separate data language that is designed for business reporting information and is both machine-

readable and human-readable.817 Compared to the adopted Form SHO, the Inline XBRL 

alternative for Form SHO would provide more sophisticated validation, presentation, and 

reference features for filers and data users. However, given the fixed and constrained nature of 

the disclosures to be reported on Form SHO (e.g., the information would be as of a single 

reporting date rather than multiple reporting dates, and Managers would not be able to customize 

the content or presentation of their reported data), the benefits of these additional features would 

be muted. Compared to the adopted Form SHO, this alternative would impose greater initial 

implementation costs (e.g., licensing Inline XBRL filing preparation software) upon reporting 

persons that have no prior experience structuring data in Inline XBRL.818 By contrast, because 

many Managers that would be Form SHO filers would likely have experience structuring filings 

 
commenter believes that since the amendments would provide only “limited marginal benefits,” reducing 
the cost of compliance, including the risk of exposing the identities of investment managers and their 
proprietary trading strategies, is warranted. 

817  See Proposing Release, at 15010. 
818 See Inline XBRL Filing of Tagged Data, Securities Act Release No. 10514 (June 28, 2018), 83 FR 40846 at 

40862, available at https://www.sec.gov/rules/final/2018/33-10514.pdf (discussing costs associated with 
Inline XBRL filing of operating company financial statements and investment company risk/return 
summaries, including software licensing costs). 



292 

in a similar EDGAR Form-specific XML data language, such as in the context of filing Form 

13F, the Form SHO-specific XML requirement will likely impose lower implementation 

compliance costs on Form SHO filers than an Inline XBRL requirement would impose. 

IX. Regulatory Flexibility Act Certification 

The Regulatory Flexibility Act (“RFA”)819 requires Federal agencies, in promulgating 

rules, to consider the impact of those rules on small businesses. Section 603(a) of the 

Administrative Procedure Act, as amended by the RFA, generally requires the Commission to 

undertake a final regulatory flexibility analysis of rules it is adopting, to determine the impact of 

such rulemaking on “small businesses” unless the Commission certifies that the rule would not 

have a significant economic impact on a substantial number of “small entities.”820 

Certification for Rule 13f-2 and Form SHO. Although section 601(b) of the RFA defines 

the term “small business,” the statute permits agencies to formulate their own definitions. The 

explanation of the term “small entities” and the definition of the term “small business” in 17 

CFR 240.0-10821 of the Exchange Act do not explicitly reference Managers. Rule 0-10 does 

provide, however, that the Commission may “otherwise define” small entities for purposes of a 

particular rulemaking proceeding. For purposes of Rule 13f-2 and related Form SHO, therefore, 

the Commission has determined that the definition of the term “small business” found in 17 CFR 

275.0-7(a)822 under the Investment Advisers Act of 1940823 is more appropriate to the functions 

 
819  5 U.S.C. 601 et seq. 
820  In response to the Commission’s request for comment, commenters provided general predictions without 

empirical data to support their assessments that Proposed Rule 13f-2, Proposed Form SHO, and the 
Proposed CAT Amendments would have a significant economic impact on a substantial number of “small 
entities.” See supra note 324 and accompanying text. 

821  Rule 0-10. 
822  Rule 0-7(a). 
823  15 U.S.C. 80b-1 et seq. 



293 

of institutional managers such as the Managers with reporting obligations under Rule 13f-2. The 

definition will help ensure that all persons or entities that might be Managers subject to reporting 

requirements under Rule 13f-2 will be included within a category addressed by the Rule 0-7(a) 

definition. 

Therefore, for purposes of this rule and the RFA, a Manager is a small entity if it: (i) has 

assets under management having a total value of less than $25 million; (ii) did not have total 

assets of $5 million or more on the last day of its most recent fiscal year; and (iii) does not 

control, is not controlled by, and is not under common control with another investment adviser 

that has assets under management of $25 million or more, or any person (other than a natural 

person) that had total assets of $5 million or more on the last day of its most recent fiscal year.824 

The Commission did not receive any comments on the certification as it related to entities 

impacted by Rule 13f-2.  

Under Rule 13f-2, Managers are not required to report on Form SHO unless they meet or 

exceed a specified Reporting Threshold. Managers with a gross short interest position in an 

equity security of a reporting company issuer will be subject to a two-pronged reporting 

threshold structure: a monthly average gross short position in the equity security with a U.S. 

dollar value of $10 million or more; or a monthly average gross short position as a percentage of 

shares outstanding in the equity security of 2.5 percent or more (Threshold A). Managers with a 

gross short interest position in an equity security of a non-reporting company issuer will be 

subject to a single-pronged reporting threshold structure: a gross short position in the equity 

security with a U.S. dollar value of $500,000 or more at the close of regular trading hours on any 

 
824  Rule 0-7(a), supra note 822. See generally, Reporting Threshold for Institutional Investment Managers, 

Exchange Act Release No. 89290 (July 10, 2020), 85 FR 46016, 46031 n.90 (July 31, 2020) (stating that 
“[r]ecognizing the growth in assets under management at investment advisers since Rule 0-7(a) was 
adopted, the Commission plans to revisit the definition of a small entity in Rule 0-7(a).”). 



294 

settlement date during the calendar month (Threshold B). While the parameters of the Reporting 

Thresholds under Rule 13f-2 relate to the number and dollar value of shares of short positions, 

rather than assets under management, the Commission nevertheless anticipates that application 

of the Reporting Thresholds will result in Rule 13f-2 not applying to a significant number of 

“small businesses” as defined under Rule 0-7(a). 

With respect to the first prong of Threshold A, a monthly average gross short position in 

the equity security with a U.S. dollar value of $10 million or more for reporting company issuer 

securities represents forty percent of the assets of an entity that qualifies as a “small entity” under 

Rule 0-7(a). The Commission believes it is also unlikely that a significant number of small 

entities would place 40 percent of their respective assets under management in a short position in 

a single security. Further, many types of Managers that could be small entities, including bank 

trustees, endowments, and foundations, are subject to fiduciary standards that prohibit them from 

investing in large, concentrated short positions. Such restrictions deter small entities (with less 

than $25M of assets under management) from investing over $10M (greater than 40 percent) of 

their assets in a single short position, and therefore prevent them from triggering the first prong 

of Threshold A.825 

With respect to the second prong of Threshold A, smaller Managers (those with under 

$25M in assets under management) would likely try to leverage their assets through a 

combination of traditional short sales and derivatives and similar transactions that create 

economic short exposure to a security. Such entities therefore, would likely engage in strategies 

that do not lend themselves to a clear determination that the second prong of Threshold A under 

 
825  See Molk and Partnoy, supra note 510, describing impediments that have kept different types of 

institutional investment managers from engaging in short selling. 



295 

Rule 13f-2 has been met.826 Further, the Commission estimates, based on an analysis of US 

common stocks,827 that Managers that qualify as small entities under Rule 0-7(a) would not meet 

the 2.5 percent monthly average reporting threshold for securities representing over ninety-eight 

percent (98 percent) of the overall market value.828 

When it comes to meeting the dollar value limits of Threshold B and the first prong of 

Threshold A, it is important to note that for the subset of Managers that engage in the most short 

selling activity—hedge funds829—less than twenty-five percent have less than $50M in assets 

under management.830 Indeed, research shows that most hedge funds have assets under 

management above the amount that would qualify them as small entities under Rule 0-7(a), i.e., 

above $25M.831 Further, the Commission certified in the Proposing Release that Proposed Rule 

13f-2 would not have a significant economic impact on a substantial number of small entities, as 

defined under Rule 0-10, for purposes of the RFA. The Commission requested written comments 

regarding this certification and did not receive any. Additionally, and as described above, the 

adopted dollar-value based prong of Threshold A for reporting company issuer securities is 

 
826  Id. at 839 (positing that “institutions incorporate short selling into their strategies, not necessarily by taking 

net-short positions, but instead by combining leveraged long equity index positions with smaller actively 
managed short portfolios.”). 

827  A small entity, with less than $25M in assets under management, is not able to hold a short position of at 
least 2.5% in a company with a market capitalization above $1B. Such companies represent over 98.5% of 
the overall market cap of US equities. See also Stock Market Size Categories (2021), available at 
https://stockmarketmba.com/sizecategories.php (calculating approximately three percent (3%) of the US 
stock market consists of common stocks of companies with less than $2B in market capitalization (i.e., 
small-cap and micro-cap stocks) and stating that micro-cap companies are generally too small for even 
most large institutional investment managers to invest in). 

828  An analysis by Commission of the daily dataset of the Center for Research in Security Prices (“CRSP”) 
showed that for the month of Oct. 2021, on average, the number of companies with less than $1B in market 
capitalization (2,293) constituted 1.51% of the overall market capitalization. 

829  See Molk and Partnoy, supra note 510, at 846. 
830  See David Goldin, Elephant in the room? Size and hedge fund performance, AURUM (June 28, 2019), 

available at https://www.aurum.com/insight/elephant-in-the-room-size-and-hedge-fund-performance/.  
831  See Daniel Barth et. al., The Hedge Fund Industry is Bigger (and Has Performed Better) Than You Think 

(Office of Fin. Research, Working Paper No. 20-01, Feb. 25, 2020, Revised Mar. 8, 2021). 



296 

based on a monthly average rather than a daily calculation, likely capturing fewer Managers than 

would have been required to report under the proposed daily dollar-value prong of Threshold A, 

so it is even less likely that small entities will be required to report on Form SHO as adopted.  

For these reasons, the Commission certifies that Rule 13f-2 will not have a significant 

economic impact on a substantial number of small entities, as defined under Rule 0-10, for 

purposes of the RFA. 

Certification for the Amendment to CAT. The amendment to the CAT NMS Plan will 

impose requirements on the CAT NMS Plan Participants (the national securities exchanges 

registered with the Commission under section 6 of the Exchange Act and FINRA), and broker-

dealers that effect short sales utilizing the bona fide market making exception pursuant to Rule 

203(b)(2)(iii) of Regulation SHO and report use of the exception to CAT.  

With respect to the national securities exchanges, the Commission’s definition of a small 

entity is an exchange that has been exempt from the reporting requirements of Rule 601 of 

Regulation NMS, and is not affiliated with any person (other than a natural person) that is not a 

small business or small organization.832 None of the national securities exchanges registered 

under section 6 of the Exchange Act that will be subject to the amendments are “small entities” 

for purposes of the RFA. In addition, FINRA is not a “small entity.”833 Based on Commission 

knowledge and experience with broker-dealers that identify as market makers, the Commission 

does not believe that any broker-dealer that effects short sales utilizing the bona fide market 

making exception pursuant to Rule 203(b)(2)(iii) of Regulation SHO and reports to the CAT will 

 
832  See 17 CFR 240.0-10(e) (stating that a broker-dealer is a small entity if it has total net capitalization (net 

worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its 
audited financial statements were prepared pursuant to 17 CFR 240.17a-5(d), and it is not affiliated with 
any person (other than a natural person) that is not a small business or small organization). 

833  See 13 CFR 121.201. 



297 

qualify as a small entity pursuant to Exchange Act Rule 0-10(c), because they either exceed 

$500,000 in total capital or are affiliated with a person that is not a small entity as defined in 

Rule 0-10. Given the above estimates it is possible, but unlikely, that in the future a small entity 

may come within scope of the Amendment to CAT, because such firms are likely to exceed 

$500,000 in total capital or be affiliated with a person that is not a small entity. 

For the foregoing reasons, the Commission certifies that the Amendment to CAT will not 

have a significant economic impact on a substantial number of small entities for purposes of the 

RFA. 

X. Other Matters 

Pursuant to the Congressional Review Act,834 the Office of Information and Regulatory 

Affairs has designated these rules as a “major rule,” as defined by 5 U.S.C. 804(2).  

If any of the provisions of these final rules, or the application thereof to any person or 

circumstance, is held to be invalid, such invalidity shall not affect other provisions or application 

of such provisions to other persons or circumstances that can be given effect without the invalid 

provision or application.  

Statutory Authority  

The Commission is adopting the rule and form contained in this document under the 

authority set forth in the Exchange Act [15 U.S.C 78a et seq.], particularly sections 3, 10(b), 12, 

13(f), 15, (d), 23(a), 35A, 36 thereof [15 U.S.C. 78c, 78j(b), 78l, 78m(f), 78o(d), 78w(a), 78ll, 

and 78mm], and Public Law 111-203, 929X, 124 Stat. 1376 (2010). The Commission is 

amending the CAT NMS Plan pursuant to the Exchange Act, particularly Sections 2, 3, 5, 6, 

 
834  5 U.S.C. 801 et seq.  



298 

11A, 15, 15A, 17(a) and (b), 19, and 23(a) thereof [15 U.S.C. 78b, 78c, 78e, 78f, 78k-1, 78o, 

78o-3, 78q(a) and (b), 78s, and 78w(a)], and Rules 608(a)(2) and (b)(2) thereunder. 

List of Subjects in 17 CFR Parts 240 and 249 

Reporting and recordkeeping requirements, Securities. 

Text of Amendments 

In accordance with the foregoing, the Commission is amending title 17, chapter II of the 

Code of the Federal Regulations as follows.  

PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE 

ACT OF 1934 

1. The authority citation for part 240 is amended by removing the sectional authority for 

§ 240.13f-2(T) to read in part as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 

77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78j-4, 78k, 78k-1, 78l, 78m, 78n, 

78n-1, 78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 80a-20, 

80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 

U.S.C. 5221(e)(3); 18 U.S.C. 1350; and Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. 

L. 112-106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.  

*  *  *  *  * 

2. Add § 240.13f-2 to read as follows: 

§ 240.13f-2 Reporting by institutional investment managers regarding gross short position 

and activity information. 



299 

(a) An institutional investment manager shall file a report on Form SHO (referenced in 17 

CFR 249.332), in accordance with the form’s instructions, with the Commission within 14 

calendar days after the end of each calendar month with regard to: 

(1) Each equity security that is of a class of securities that is registered pursuant to section 

12 of the Exchange Act or for which the issuer of that class of securities is required to file reports 

pursuant to section 15(d) of the Exchange Act over which the institutional investment manager 

and all accounts over which the institutional investment manager (or any person under the 

institutional investment manager’s control) has investment discretion with respect to either:  

(i) A monthly average gross short position at the close of regular trading hours in the 

equity security with a U.S. dollar value of $10 million or more; or  

(ii) A monthly average gross short position at the close of regular trading hours as a 

percentage of shares outstanding in the equity security of 2.5 percent or more; and  

(2) Each equity security that is of a class of securities that is not registered pursuant to 

section 12 of the Exchange Act or for which the issuer of that class of securities is not required to 

file reports pursuant to section 15(d) of the Exchange Act over which the institutional investment 

manager and all accounts over which the institutional investment manager (or any person under 

the institutional investment manager’s control) has investment discretion with respect to a gross 

short position in the equity security with a U.S. dollar value of $500,000 or more at the close of 

regular trading hours on any settlement date during the calendar month.  

(3) Form SHO and any amendments thereto must be filed with the Commission via the 

Commission’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”), in 

accordance with 17 CFR part 232 (Regulation S-T). The Commission will publish, on an 



300 

aggregated basis, certain information regarding each equity security reported by institutional 

investment managers on Form SHO and filed with the Commission via EDGAR. 

(b) For the purposes of this section: 

(1) The term institutional investment manager has the same meaning as in section 

13(f)(6)(A) of the Exchange Act. 

(2) The term equity security has the same meaning as in section 3(a)(11) of the Exchange 

Act and § 240.3a11-1 (Rule 3a11-1). 

(3) The term investment discretion has the same meaning as in § 240.13f-1(b) (Rule 13f-

1(b)). 

(4) The term gross short position means the number of shares of the equity security that 

are held short as a result of short sales as defined in 17 CFR 242.200(a) (Rule 200(a) of 

Regulation SHO), without inclusion of any offsetting economic positions such as shares of the 

equity security or derivatives of such equity security. 

(5) The term regular trading hours has the same meaning as in 17 CFR 242.600(b)(77) 

(Rule 600(b)(77)). 

PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934  

3. The general authority citation for part 249 continues to read as follows:  

Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 

1350; Sec. 953(b) Pub. L. 111-203, 124 Stat. 1904; Sec. 102(a)(3) Pub. L. 112-106, 126 Stat. 309 

(2012), Sec. 107 Pub. L. 112-106, 126 Stat. 313 (2012), Sec. 72001 Pub. L. 114-94, 129 Stat. 

1312 (2015), and secs. 2 and 3 Pub. L. 116-222, 134 Stat. 1063 (2020), unless otherwise noted. 

*  *  *  *  *301 

4. Add § 249.332 to read as follows: 

§ 249.332 Form SHO, report of institutional investment managers pursuant to section 

13(f)(2) of the Securities Exchange Act of 1934. 

This form shall be used by institutional investment managers that are required to furnish 

reports pursuant to section 13(f)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 

78m(f)(2)) and 17 CFR 240.13f-2 (Rule 13f-2).  

5. Add Form SHO referenced in §249.332. 

Note: Form SHO is attached as Appendix A to this document. Form SHO will not appear 

in the Code of Federal Regulations.  

By the Commission. 

Dated: October 13, 2023. 

 

 

J. Matthew DeLesDernier, 

Deputy Secretary. 

Note: The following appendix will not appear in the Code of Federal Regulations. 

  



302 

Appendix A—Form SHO 

OMB Number: XXXX-XXXX 

FORM SHO 

INFORMATION REQUIRED OF INSTITUTIONAL INVESTMENT MANAGERS 

PURSUANT TO SECTION 13(f)(2) OF THE SECURITIES EXCHANGE ACT OF 1934 

AND RULES THEREUNDER 

GENERAL INSTRUCTIONS 

Rule as to Use of Form SHO. Institutional investment managers (“Managers”) must use Form 

SHO for reports to the Commission required by Rule 13f-2 [17 CFR 240.13f-2] promulgated 

under section 13(f)(2) of the Securities Exchange Act of 1934 [15 U.S.C. 78m(f)(2)] (“Exchange 

Act”). A Manager shall file a report on Form SHO in accordance with these instructions with the 

Commission within 14 calendar days after the end of each calendar month with regard to: 

(1) each equity security that is of a class of securities that is registered pursuant to section 12 of 

the Exchange Act or for which the issuer of that class of securities is required to file reports 

pursuant to section 15(d) of the Exchange Act over which the Manager and all accounts over 

which the Manager (or any person under the Manager’s control) has investment discretion with 

respect to either (A) a monthly average gross short position at the close of regular trading hours 

in the equity security with a value of $10 million or more, or (B) a monthly average gross short 

position at the close of regular trading hours as a percentage of shares outstanding in the equity 

security of 2.5 percent or more; and (2) each equity security that is of a class of securities that is 

not registered pursuant to section 12 of the Exchange Act or for which the issuer is not required 

to file reports pursuant to section 15(d) of the Exchange Act over which the Manager and all 

accounts over which the Manager (or any person under the Manager’s control) has investment 



303 

discretion with respect to a gross short position in the equity security with a U.S. dollar value of 

$500,000 or more at the close of regular trading hours on any settlement date during the calendar 

month. For purposes of Rule 13f-2 and Form SHO, “regular trading hours” shall have the 

meaning ascribed in Rule 600(b)(77) under the Exchange Act [17 CFR 242.600(b)(77)]. 

A Manager that determines that it has filed a Form SHO with errors that affect the accuracy of 

the short sale data reported must file an amended and restated Form SHO within ten (10) 

calendar days of discovering the error. 

Rules to Prevent Duplicative Reporting. If two or more Managers, each of which is required by 

Rule 13f-2 to file Form SHO for the reporting period, exercise investment discretion with respect 

to the same securities, only one such Manager must report the information in its report on Form 

SHO. If a Manager has information that is required to be reported on Form SHO and such 

information is reported by another Manager (or Managers), such Manager must identify the 

Manager(s) reporting on its behalf in the manner described in Special Instruction 5. 

Filing of Form SHO. A reporting Manager must file Form SHO with the Commission via the 

Commission’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”), in 

accordance with Regulation S-T. The Commission plans to publish certain data from the filings 

on an aggregated basis. 

All information included in a Form SHO report is deemed subject to a confidential treatment 

request under 17 CFR 200.83. The Commission plans to publish only aggregated data derived 

from information provided in Form SHO reports. 

Technical filing errors may cause delays in the filing of Form SHO. Technical support for 

making Form SHO reports is available through EDGAR Filer Support.  



304 

INSTRUCTIONS FOR CALCULATING REPORTING THRESHOLD 

A Manager shall file a report on Form SHO: 

• with regard to each equity security that is of a class of securities that is registered 

pursuant to section 12 of the Exchange Act or for which the issuer is required to file 

reports pursuant to section 15(d) of the Exchange Act (a “reporting company issuer”) in 

either of the following circumstances: (1) the Manager and all accounts over which the 

Manager or any person under the Manager’s control has investment discretion that are a 

monthly average gross short position at the close of regular trading hours in the equity 

security with a U.S. dollar value of $10 million or more, or (2) the Manager and all 

accounts over which the Manager or any person under the Manager’s control has 

investment discretion that are a monthly average gross short position at the close of 

regular trading hours as a percentage of shares outstanding in the equity security of 2.5 

percent or more (“Threshold A”). 

• with regard to each equity security that is of a class of securities of an issuer that is not a 

reporting company issuer as described above (a “non-reporting company issuer”), when 

the Manager and all accounts over which the Manager or any person under the 

Manager’s control has investment discretion that are a gross short position in the equity 

security with a U.S. dollar value of $500,000 or more at the close of regular trading 

hours on any settlement date during the calendar month (“Threshold B”). 

With respect to each equity security to which the circumstances described in Threshold A or 

Threshold B applies, the Manager shall report the information, as described in the “Special 

Instructions” below, aggregated across accounts over which the Manager, or any person under 

the Manager’s control, has investment discretion.  



305 

To determine whether the dollar value threshold described in (1) of Threshold A above is met, a 

Manager shall determine its gross short position at the close of regular trading hours in the equity 

security (as defined in Rule 13f-2) on each settlement date during the calendar month and 

multiply that figure by the closing price at the close of regular trading hours on the settlement 

date (“end of day dollar value”). The Manager shall then add all end of day dollar values during 

the calendar month and divide that sum by the number of settlement dates in the month to arrive 

at a “monthly average” for each equity security the Manager traded during that calendar month 

reporting period. 

To determine whether the dollar value threshold described in Threshold B above is met, a 

Manager shall determine its gross short position at the close of regular trading hours in the equity 

security (as defined in Rule 13f-2) on each settlement date during the calendar month and 

multiply that figure by the closing price at the close of regular trading hours on the settlement 

date. If such closing price is not available, a Manager shall use the price at which it last 

purchased or sold any share of that security. 

To determine whether the percentage threshold described in (2) of Threshold A above is met, the 

Manager shall (a) determine its gross short position at the close of regular trading hours in the 

equity security (as defined in Rule 13f-2) on each settlement date during the calendar month, and 

divide that figure by the number of shares outstanding in such security at the close of regular 

trading hours on the settlement date, and (b) add up the daily percentages during the calendar 

month as determined in (a) and divide that sum by the number of settlement dates in the month to 

arrive at a “monthly average” for each equity security the Manager traded during that calendar 

month reporting period. The number of shares outstanding of the security for which information 



306 

is being reported shall be determined by reference to an issuer’s most recent annual or quarterly 

report, and any subsequent update thereto, filed with the Commission. 

SPECIAL INSTRUCTIONS 

1. This form consists of two parts: the Cover Page, and the Information Tables. 

Cover Page: 

2. The period end date used in the report (and in the EDGAR submission header) is the last 

settlement day of the calendar month. The date shall name the month, and express the day and 

year in Arabic numerals, with the year being a four-digit numeral (e.g., 2023). 

3. Amendments to Form SHO must restate the Form SHO in its entirety. If the Manager is 

filing the Form SHO report as an amendment, then the Manager must check the “Amendment 

and Restatement” box on the Cover Page; and enter the amendment number. Each Amendment 

and Restatement must include a complete Cover Page and Information Tables. Amendments 

must be filed sequentially. 

a. In the space designated on the Cover of Page of each Amendment and Restatement, a 

Manager shall (1) provide a written description of the revision being made; (2) explain 

the reason for the revision; and (3) indicate whether data from any additional Form 

SHO reporting period(s) (up to the past 12 calendar months) is/are affected by the 

Amendment and Restatement.  

b. If (3) applies, a Manager shall complete and file a separate Amendment and 

Restatement for each previous calendar month so affected (up to the past 12 months) 

and provide a description of the revision being made and explain the reason for the 

revision. 



307 

4. Present the Cover Page information in the format and order provided in the form, 

including the non-lapsed Legal Entity Identifier (“LEI”), if any, of the Manager filing the Form 

SHO report. The Cover Page shall include only the required information. Do not include any 

portions of the Information Tables on the Cover Page. 

5. Designate the Report Type for the Form SHO by checking the appropriate box in the 

Report Type section of the Cover Page, and include, where applicable, the Name and non-lapsed 

LEI (if available) of each of the Other Managers Reporting for this Manager on the Cover Page, 

and the Information Tables, as follows: 

a. If all of the information that a Manager is required by Rule 13f-2 to report on 

Form SHO is reported by another Manager (or Managers), check the box for 

Report Type “FORM SHO NOTICE,” include on the Cover Page the Name and 

non-lapsed LEI (if available) of each of the Other Managers Reporting for this 

Manager, and omit the Information Tables. 

b. If all of the information that a Manager is required by Rule 13f-2 to report on 

Form SHO is reported in this report, check the box for Report Type “FORM SHO 

ENTRIES REPORT,” omit the “Name and Non-Lapsed LEI (if available) of each 

of the Other Managers Reporting for this Manager” section of the Cover Page, 

and include the Information Tables. 

c. If only a part of the information that a Manager is required by Rule 13f-2 to report 

on Form SHO is reported in this report, check the box for Report Type “FORM 

SHO COMBINATION REPORT,” include on the Cover Page the name and non-

lapsed LEI (if available) of each of the Other Managers Reporting for this 

Manager, and include the Information Tables. 



308 

Information Tables:  

6. Do not include any additional information in the Information Tables. Do not include any 

portions of the Information Tables on the Cover Page. 

7. In reporting information required on Information Tables 1 and 2, Managers must account 

for a gross short position in an ETF, and activity that results in the acquisition or sale of shares of 

the ETF resulting from call options exercises or assignments; put options exercises or 

assignments; tendered conversions; secondary offering transactions; or other activity, as 

discussed further below. In determining its gross short position in an equity security, however, a 

Manager is not required to consider short positions that the ETF holds in individual underlying 

equity securities that are part of the ETF basket. 

8. Instructions for Information Table 1—Manager’s Gross Short Position: 

a. Column 1. Settlement Date. Enter in Column 1 the last day of the calendar month of the 

reporting period on which a trade settles (“settlement date”). 

b. Column 2. Issuer Name. Enter in Column 2 the name of the issuer of the security for 

which information is being reported. Reasonable abbreviations are permitted. 

c. Column 3. Issuer LEI. If the issuer has an LEI, enter the issuer’s LEI in Column 3. 

d. Column 4. Title of Class. Enter in Column 4 the title of the class of the security for which 

information is being reported. Reasonable abbreviations are permitted. 

e. Column 5. CUSIP Number. Enter in Column 5 the nine (9) digit CUSIP number of the 

security for which information is being reported, if applicable. 

f. Column 6. FIGI. Enter in Column 6 the twelve (12) character, alphanumeric Financial 

Instrument Global Identifier (“FIGI”) of the security for which information is being 

reported, if a FIGI has been assigned. 



309 

g. Column 7. End of Month Gross Short Position (Number of Shares). Enter in Column 7 

the number of shares that represent the Manager’s gross short position in the security for 

which information is being reported at the close of regular trading hours on the last 

settlement date of the calendar month of the reporting period. The term “gross short 

position” means the number of shares of the security for which information is being 

reported that are held short, without inclusion of any offsetting economic positions—

including shares of the reportable equity security or derivatives of such security. 

h. Column 8. End of Month Gross Short Position (rounded to nearest USD). Enter in 

Column 8 the U.S. dollar value of the shares reported in Column 7, rounded to the nearest 

dollar. A Manager shall report the corresponding dollar value of the reported gross short 

position by multiplying the number of shares of the security for which information is 

being reported by the closing price at the close of regular trading hours on the last 

settlement date of the calendar month. In circumstances where such closing price is not 

available, the Manager shall use the price at which it last purchased or sold any share of 

that security. 

9. Instructions for Information Table 2—Daily Activity Affecting Manager’s Gross Short 

Position During the Reporting Period:  

a. Column 1. Settlement Date. Enter in Column 1 each date during the reporting period on 

which a trade settles (settlement date). The Manager shall report information for each 

settlement date during the calendar month reporting period as described in these 

instructions. 

b. Column 2. Issuer Name. Enter in Column 2 the name of the issuer of the equity security 

for which information is being reported. Reasonable abbreviations are permitted. 



310 

c. Column 3. Issuer LEI. If the issuer has an LEI, enter the issuer’s LEI in Column 3. 

d. Column 4. Title of Class. Enter in Column 4 the title of the class of the security for which 

information is being reported. Reasonable abbreviations are permitted. 

e. Column 5. CUSIP Number. Enter in Column 5 the nine (9) digit CUSIP number of the 

security for which information is being reported, if applicable. 

f. Column 6. FIGI. Enter in Column 6 the twelve (12) character, alphanumeric FIGI of the 

security for which information is being reported, if a FIGI has been assigned. 

g. Column 7. Net Change in Short Position (Number of Shares). For the settlement date set 

forth in Column 1, enter the net change in short position (represented as a number of 

shares) reflecting how the reported gross short position in shares of the security for which 

information is being reported are being closed out—or increased—as a result of the 

acquisition or sale of shares of that equity security, by taking into account: 

1) Short sales of the security that settled on that date. 

2) Shares of the security that were purchased to cover, in whole or in part, an existing 

short position and settled on that date. 

3) Shares of the security that were acquired in a call option exercise that reduces or 

closes a short position on that security and settled on that date. 

4) Shares of the security that were sold in a put option exercise that creates or increases 

a short position on that security and settled on that date. 

5) Shares of the security that were sold in a call option assignment that creates or 

increases a short position on that security and settled on that date. 

6) Shares of the security that were acquired in a put option assignment that reduces or 

closes a short position on that security and settled on that date. 



311 

7) Shares of the security for which information is being reported that were acquired as a 

result of the tendered conversions that reduces or closes a short position on that 

security and settled on that date. 

8) Shares of the security that were obtained through a secondary offering transaction that 

reduces or closes a short position on that security and settled on that date. Such 

secondary offering purchases must be reported whether they occurred outside or 

within the restricted period of Rule 105 of Regulation M, 17 CFR 242.105, which 

prohibits purchasing offering shares within the restricted period after selling short. 

9) Shares of the security that resulted from other activity not previously reported on this 

form that creates or increases a short position on that security and settled on that date, 

or that reduces or closes a short position on that security and settled on that date. 

10) Activity other than (1) through (9) above that creates or increases, or reduces or 

closes, a short position on that security, including, but not limited to, shares resulting 

from ETF creation or redemption activity. 

PAPERWORK REDUCTION ACT INFORMATION 

Persons who are to respond to the collection of information contained in this form are not 

required to respond to the collection of information unless the form displays a currently valid 

Office of Management and Budget (“OMB”) control number. 

  



312 

OMB Number: XXXX-XXXX 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM SHO 
FORM SHO COVER PAGE 

 
Report for the Period Ended: [Month / Day / Year] 

Check here if Amendment and Restatement [ ]; Amendment Number: 

Description of the Amendment and Restatement, Reason for the Amendment and Restatement, 

and Which Additional Form SHO Reporting Period(s) (up to the past 12 calendar months), if 

any, is/are affected by the Amendment and Restatement:  

Institutional Investment Manager (“Manager”) Filing Report: 

Name: ______________________________________ 

Mailing Address: ______________________________ 

Business Telephone Number: __________________ 

Business Email: ______________________________ 

Non-Lapsed Legal Entity Identifier (“LEI”): ______ 

Contact Employee: 

Name and Title: _________________  

Business Telephone Number: _____________   

Business Email: ______________ 

Date Filed: ________  



313 

The Manager filing this report hereby represents that all information contained herein is true, 

correct and complete, and that it is understood that all required items, statements, schedules, lists, 

and tables, are considered integral parts of this form.  

Report Type (Check only one):  

[ ] FORM SHO ENTRIES REPORT. (Check here if all entries of this reporting Manager are 

reported in this report.)  

[ ] FORM SHO NOTICE. (Check here if no entries reported are in this report, and all entries are 

reported by other reporting Manager(s).)  

[ ] FORM SHO COMBINATION REPORT. (Check here if a portion of the entries for this 

reporting Manager is reported in this report and a portion is reported by other reporting 

Manager(s).)  

Name and Non-Lapsed LEI of each of the Other Manager(s) Reporting for this Manager:  

[If there are no entries in this list, omit this section.]  

Name: _____________________ Non-Lapsed LEI: ______________________ 

[Repeat as necessary.]  

 



314 

INFORMATION TABLE 1 – Manager’s Monthly Gross Short Position  

 

(Repeat as Necessary) 
  

Column 

1 

Column 

2 

Column 

3 

Column 

4 

Column 

5 

Column 

6 

Column 

7 

Column 

8 

        

Settlement 

Date  

(Month 

End) 

Issuer 

Name 

Issuer LEI  Title of 

Class  

CUSIP  

Number 

FIGI  End of 

Month 

Gross 

Short 

Position 

(Number 

of Shares)  

End of 

Month 

Gross 

Short 

Position 

(rounded 

to nearest 

USD)  

        



315 

INFORMATION TABLE 2 – Daily Activity Affecting Manager’s Gross Short Position 
During the Reporting Period 

 
 

 

(Repeat as Necessary) 

Column 

1 

Column 

2 

Column 

3 

Column 

4 

Column 

5 

Column 

6 

Column 

7 

       

Settlement 

Date 

Issuer 

Name  

Issuer 

LEI 

Title of 

Class 

CUSIP 

Number  

FIGI  Net 

Change 

in Short 

Position 

(Number 

of 

Shares)