UNITED STATES: FINRA Requests Comment on Short Interest Position Reporting Enhancements and Other Changes Related to Short Sale Reporting

Friday August 6 2021

FINRA is requesting comment on potential enhancements to its short sale reporting program.  FINRA is considering:

(1) modifications to its short interest reporting requirements (Rule 4560);

(2) a new rule to require that participants of a registered clearing agency report to FINRA information on allocations to correspondent firms of fail-to-deliver positions; and

(3) other potential enhancements related to short sale activity.

FINRA believes that these potential changes could improve the usefulness of short sale-related information to FINRA, other regulators, investors and other market participants.

FINRA currently collects short sale-related information from firms to support FINRA’s oversight of member compliance with Regulation SHO and other short sale obligations, and to provide market participants with insight into short sale activity and position information. Pursuant to FINRA Rule 4560 (Short-Interest Reporting), firms are required to report to FINRA their aggregate short position in each equity security twice a month.

The short interest data collected by FINRA includes the reporting firm’s current aggregate short interest position for the security and any short position changes at the firm since the prior reporting period, among other things. For over-the-counter equity securities, FINRA aggregates and publishes the collected short interest data (aggregated across all firms, per symbol) on the FINRA website along with additional FINRA-calculated metrics relating to short sale activity in the security (e.g., days to cover). For exchange-listed securities, FINRA provides the reported short interest data to the applicable listing exchange for processing and publication.

FINRA is considering whether amendments to its short interest reporting and dissemination program would be appropriate to improve the regulatory and public utility of the information. FINRA also is considering whether any changes to other aspects of its short sale regulatory program would be beneficial.

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