The SEC goes Terminator on Short Selling

The SEC will take emergency action to stop abusive short-selling of stock in financial institutions such as mortgage financiers Fannie Mae and Freddie Mac and investment bank Lehman Brothers (NYSE:LEH).  Turns out: Could Lehman (LEH) trap Short Sellers? They sure can.

Christopher Cox, Securities and Exchange Commission chairman, told legislators on Tuesday that the agency would issue an emergency rule to stop so-called “naked” short-selling of shares in significant financial entities. The SEC will also consider new rules to extend those trading limits to the rest of the market.

Cox and SEC shown here delivering the news this afternoon:

The emergency rule would require any person making a short sale in the listed securities to borrow the securities before the short sale is effected and deliver the securities on the settlement date.

Tomorrow should be fun.

More from the NYTimes:

S.E.C. Emergency Rule to Curb Short Selling

The Securities and Exchange Commission will issue an emergency rule on Tuesday to curb short selling in major financial firms, including Fannie Mae and Freddie Mac.