U.S. securities regulators are crafting two types of 'circuit breakers' to restrict short selling, a type of investing often blamed by executives for declines in the stocks of their companies, a source familiar with the proposals told Reuters on Monday.
The Securities and Exchange Commission will consider at its Wednesday meeting the restoration of the uptick rule, which allowed short sales -- a bet that a stock's price will fall -- only when the last sale price was higher than the previous price.
The SEC is working on an updated version of the uptick rule to include all stocks and a bid test, which would only allow shorting at a price above the highest available bid, said the source, who requested anonymity because the proposals are still being crafted.
The source said the SEC is working on a circuit breaker proposal that could temporarily prohibit short sales of a stock if the stock has already fallen by a certain percentage. The source also said the SEC is crafting another circuit breaker that would trigger the application of the uptick rule or bid test after the price of a stock had fallen by a certain percentage.
(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)