SEC Trading and Markets FAQ: Regulation SHO - Pilot Data — SEC — US

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Background

The Securities and Exchange Commission (“Commission”) adopted Regulation SHO on June 23, 2004. ( See Securities Exchange Act Release No. 50103 (July 28, 2004), 69 FR 48008 (August 6, 2004)). The Adopting Release may be found on the Commission’s Internet web site. ( See

http://www.sec.gov/spotlight/shortsales.htm , and http://www.sec.gov/rules/final/34-50103.htm ).

Rule 202T of Regulation SHO (17 CFR 242.202T) is a temporary rule that creates procedures for the Commission to establish, through separate orders, a Pilot Program. Pursuant to Rule 202T, the Commission may exclude designated securities from the operation of the “tick” test of Rule 10a-1(a) (17 CRF 242.10a-1(a)) and any short sale price test rule of any exchange or national securities association (self-regulatory organizations, or “SROs”) for a designated period of time. The Commission has approved two orders relating to the Pilot. ( See Securities Exchange Act Release No. 50104 (July 28, 2004), 69 FR 48032 (August 6, 2004), and Securities Exchange Act Release No. 50747 (November 29, 2004), 69 FR 70480 (December 6, 2004)). The Pilot Orders may be found on the Commission’s Internet web site ( See

http://www.sec.gov/rules/other/34-50104.htm , and http://www.sec.gov/rules/other/34-50747.htm ). The Commission may from time to time approve further orders affecting the Pilot.

Effective Dates

The Pilot Program begins on May 2, 2005 and ends on April 28, 2006.

Purpose

The Commission believes that conducting a Pilot Program pursuant to Rule 202T of Regulation SHO is an important component of evaluating the overall effectiveness of price test restrictions on short sales. The Pilot will allow the Commission to obtain data on the impact of short selling in the absence of a price test. This data will assist in: determining, among other things, the extent to which a price test is necessary to further the objectives of short sale regulation; studying the effects of relatively unrestricted short selling on market volatility, price efficiency, and liquidity; and obtaining empirical data to help assess whether a short sale price test should be removed, in part or in whole, for some or all securities, or if retained, should be applied to additional securities.

Pilot Data

The Commission's Office of Economic Analysis ("OEA") will gather and analyze monthly trading data provided by the SROs during the effective dates of the Pilot. Additionally, the Commission encourages researchers to provide the Commission with their own empirical analyses of the Pilot.

Submitting Analyses of Pilot Data as Comments to Regulation SHO:

Researchers who provide the Commission with their own empirical analyses should submit such studies to the Commission as comments to the Regulation SHO Proposing Release. ( See Securities Exchange Act Release No. 48709 (October 28, 2003), 68 FR 62972 (November 6, 2003)). The Proposing Release may also be found on the Commission’s Internet web site. ( See

http://www.sec.gov/rules/proposed/34-48709.htm ).

Analyses of Pilot data may be submitted to the Commission as comments by e-mail at rule-comments@sec.gov or by hard copy, but not by both methods. All comments should refer to File No. S7-23-07. In addition, comments should include: the title and date of the analysis; the names of the authors of the analysis; contact information for the authors; and the number and title of attachments, if any. Comments may be submitted in PDF format. For detailed instructions on how to submit comments, please refer to How to Submit Comments .

Viewing Analyses of Pilot Data Submitted as Comments to Regulation SHO:

The Adopting Release provides that the Commission expects to make information obtained during the Pilot publicly available. Any comments received by the Commission will be posted on the Commission’s Internet web site. To view any of these comments, please refer to Comments on Proposed Rule: Short Sales .

Comments submitted to the Commission are the analyses and studies of the commenters. They have been submitted to the Commission in response to the Commission’s request for comments. They do not represent analyses or studies of the Commission or its staff. Neither the Commission nor its staff has approved or disapproved the methods or conclusions of the comments. Any questions concerning the comments should be directed to the authors of the comments at the contact information provided by them.

Viewing SRO Trading Data:

Pursuant to a Commission request, each SRO has agreed to make publicly available the trading data in connection with the Pilot. By making the trading data publicly available, researchers may study the Pilot.

The trading data will contain information on each executed short sale involving an exchange-listed or Nasdaq National Market equity security reported by an SRO to a securities information processor (“SIP”). The SROs have agreed to standardize the format of the trading data, and will provide documentation explaining the variables and unique attributes of the data. To view SRO trading data and related documentation, please refer to the Internet web sites listed below for each SRO:

American Stock Exchange

http://www.amex.com/amextrader/ (Click on Trading Data, Reg SHO, and Monthly Data)

Archipelago Exchange

http://www.archipelago.com/traders/regsho_sh.asp

Boston Stock Exchange

http://www.bostonstock.com/cgi-bin/RegSHO.pl

Chicago Stock Exchange

http://www.chx.com/publications/reg_sho.htm

Nasdaq Stock Market ftp://ftp.nasdaqtrader.com/regshopilot/

NASD

www.nasd.com/adf

National Stock Exchange

http://www.nsx.com/RegSHO.asp

New York Stock Exchange

http://www.nysedata.com/announce.asp?id=57

Philadelphia Stock Exchange

http://www.phlx.com/regsho/

By clicking on any of the SRO Internet web sites listed above, you will leave the Commission’s Internet web site. The SROs are responsible for their own Internet web sites and the information included on the sites, including the trading data and related documentation. The SROs have provided web site links to their trading data in response to the Commission’s request to make such data public. The web sites of the SROs and the trading data and related documentation do not represent information of the Commission or its staff. Neither the Commission nor its staff is responsible for the content of the SRO web sites, including the trading data and related documentation. Any questions concerning the trading data and related documentation should be directed to the SROs and the contact information included on their web sites.

Frequently Asked Questions Concerning the Pilot

The following questions and answers regarding the Regulation SHO Pilot have been compiled by the staff to assist in the understanding and application of the Pilot. The responses to these frequently asked questions were prepared by and represent the views of the staff. They are not rules, regulations, or statements of the Commission. Further, the Commission has neither approved nor disapproved of these responses.

The staff may update these questions and answers periodically. In each update, the questions added after publication of the last version will be marked with “NEW!”

A. Frequently Asked Questions Concerning the Pilot Data

Question A.1: What is the Regulation SHO Pilot Program?

Answer: Pursuant to Rule 202T of Regulation SHO, the Commission has approved orders that establish a one-year Pilot Program. The Pilot Program designates certain equity securities and, for the one-year period of the Pilot, excludes these securities from the operation of the Commission’s “tick” test in Rule 10a-1(a), and any SRO short sale price test.

Question A.2: What is the purpose of the Pilot?

Answer: The Pilot will allow the Commission to obtain data on the impact of short selling in the absence of price tests. The Pilot data will assist the Commission in determining, among other things, the extent to which a price test is necessary to further the objectives of short sale regulation. The Commission’s Staff, as well as independent researchers, will be able to use the Pilot data to study the effects of relatively unrestricted short selling on market volatility, price efficiency, and liquidity. The empirical data obtained from the Pilot will help the Commission assess whether a short sale price test should be removed, in part or in whole, for some or all securities, or if retained, should be applied to additional securities.

Question A.3: When does the Pilot begin? How long will the Pilot last?

Answer: The Pilot begins on May 2, 2005. The Pilot will be in effect for one year. It will end on April 28, 2006.

Question A.4: What information does the Pilot data include?

Answer: The Pilot data will include monthly trading data provided by each SRO. The trading data will contain information on each executed short sale involving an exchange-listed or Nasdaq National Market equity security reported by an SRO to a SIP. Nasdaq Small Cap securities, OTCBB securities, ETFs, HOLDRs, and structured products may not necessarily be included in the trading data. To confirm the composition of the trading data provided by the SROs, please refer to the documentation posted on the SROs' Internet web sites.

Question A.5: How can I obtain the Pilot data?

Answer: At the request of the Commission, each SRO has agreed to make trading data publicly available so that researchers may study the Pilot. To view SRO trading data and related documentation, please refer to the SRO Internet web sites. The SROs have agreed to provide data on CD or by download from their web sites. Each SRO web site will include instructions and other documentation describing how to obtain the data.

Question A.6: When will I be able to obtain the Pilot data?

Answer: The SROs will release files of monthly trading data every month. Monthly trading data will be available with a lag of up to four weeks. For example, the first monthly data file will contain trading data on short sales executed during January 2005. This trading data will be available from the SROs on or before March 1, 2005.

Question A.7: Do I need any specific software or special programming tools to obtain the data?

Answer: The SROs have agreed to standardize the format of the data and will provide documentation explaining the variables and unique attributes of the data. The SRO trading data contains millions of records and will require technical expertise to manage. We do not recommend using spreadsheet programs to analyze the data. You will need an advanced statistical or programming package to analyze the data.

Question A.8: How can I analyze the data?

Answer: You may analyze the data in any way you choose. The Commission requested that the SROs make the trading data public in order to allow researchers to study the Pilot. However, you will need an advanced statistical or programming package to analyze the data. We do not recommend using spreadsheet programs to analyze the data.

Question A.9: What is the Pilot data’s control sample?

Answer: The Pilot Program allows researchers to create control samples. Researchers are free to design their studies and conduct their analyses as they see fit.

Question A.10: May I send my completed analyses to the Commission?

Answer: The Commission encourages the submission of analyses of the Pilot data as comments to the Regulation SHO Proposing Release. The Commission will make public any analyses of the Pilot data submitted as comments.

Question A.11: What information must I supply to the Commission to submit my comments?

Answer: All analyses submitted to the Commission as comments should refer to File No. S7-23-03. In addition, comments should include the title and date of the analysis, the names of the authors of the analysis, contact information for the authors, and the number and title of attachments, if any. For detailed instructions on how to submit comments to the Commission, please refer to How to Submit Comments .

Question A.12: Must my analyses be in a particular format in order to submit them to the Commission?

Answer: Comments may be submitted to the Commission by e-mail at rule-comments@sec.gov or by hard copy, by not by both methods. For detailed instructions on how to submit comments to the Commission, please refer to How to Submit Comments .

Question A.13: Where can I view the comments submitted to the Commission?

Answer: Any comments received by the Commission will be posted on the Commission’s Internet web site. To view any of these comments, please refer to Comments on Proposed Rule: Short Sales .

Question A.14: Who should I contact if I have a question about the analyses submitted as comments or the trading data?

Answer: Questions about the analyses submitted as comments to the Commission may be directed to the authors of the analyses at the contact information provided by them. Questions about the monthly trading data provided by the SROs may be directed to the SROs at the contact information posted on their Internet web sites.

B. Frequently Asked Questions Concerning Pilot Securities

Question B.1: Which securities are included in the Pilot? When are short sale price tests suspended for these securities?

Answer: The Commission identified the securities included in the Pilot in the Pilot Order. There are three different categories of securities in the Pilot: the securities identified in Appendix A of the Pilot Order that are never subject to short sale price tests (the “Category A Pilot Securities”); the securities that are eligible for the Pilot from 4:15 pm ET until the open of the consolidated tape the next day (the “Category B Pilot Securities”); and all other securities, which are not subject to a short sale price test from the close of the consolidated tape until the open of the consolidated tape the next day (the “Category C Pilot Securities”). For the one-year period while the Pilot is in effect, short sale price tests are suspended for the following securities at the designated times:

Securities identified as Pilot securities in Appendix A of the Pilot Order (“Category A Pilot Securities”)

No tick test at any time.

Securities identified as Pilot securities for the after-hours portion of the Pilot and that are not Category A Pilot Securities (“Category B Pilot Securities”)

No tick test from 4:15 pm until the open of the consolidated tape the next day only.

All other securities that are not Category A Pilot Securities or Category B Pilot Securities (“Category C Pilot Securities”)

No tick test from the close of the consolidated tape until the open of the consolidated tape the next day only.

For updated lists of Category A Pilot Securities and Category B Pilot Securities, and information concerning how to obtain additional updates once the Pilot takes effect, please see “Updated Lists of Pilot Securities” below.

Question B.2: When does the consolidated tape close? When does the consolidated tape open?

Answer:

The "consolidated tape" refers to the effective transaction reporting plan of the Consolidated Tape Association (“CTA”). It is a high-speed, electronic system that constantly reports the latest price and volume data on sales of exchange-listed stocks. The consolidated tape opens when participants in the CTA (including the SROs, electronic communications networks and third-market broker-dealers) may report last sale prices relating to transactions in eligible securities to the consolidated tape through the rules governing the CTA (“CTA Plan”). The consolidated tape closes when CTA participants may no longer report transactions to the consolidated tape through the CTA Plan.

Footnote 20 of the Pilot Order noted that, at that time, the consolidated tape operated from 8:00 am ET to 8:00 pm ET. As of April 8, 2005, however, the ArcaEx opening session began at 4:00 am ET, and ArcaEx began reporting transactions to the consolidated tape through the CTA Plan beginning at 4:00 am ET. Therefore, the consolidated tape now operates from 4:00 am ET to 8:00 pm ET. The times at which the consolidated tape opens and closes may change in the future.

Question B.3: Are OTCBB stocks included in the Pilot?

Answer: OTCBB securities are not listed on an exchange or traded on the Nasdaq National Market. For this reason, OTCBB securities are not subject to short sale price tests at any time, and are not included in the Pilot.

Question B.4: May securities be added to or deleted from the Pilot?

Answer: The Commission determined the securities included in the Pilot as of June 25, 2004, and identified the securities in the Pilot Order. Securities will not be added during the one-year term of the Pilot. Securities may be deleted from the Pilot in limited circumstances (such as a delisting of a security from an exchange and its trading as an OTCBB security). See Question B.5.

Question B.5: Will the list of securities included in the Pilot be updated (for example, to reflect name changes and corporate combinations)?

Answer: Name changes of securities included in the Pilot will not affect their status. If a security included in the Pilot changes its name and ticker symbol, then the security will remain in the Pilot but will be identified by its new name and ticker symbol.

Mergers and other business combinations involving securities included in the Pilot may affect their status. For example, if a Category A Pilot Security merges with another Category A Pilot Security, then the security resulting from the transaction will be a Category A Pilot Security. However, if a Category A Pilot Security merges with a Category B Pilot Security or a Category C Pilot Security, then the status of the security resulting from the transaction will depend on the market capitalization of the companies involved in the transaction. The company with the larger market capitalization, based on the most recent share number and price information as of the close of trading on the day before the transaction was announced, will have the Pilot status of its securities applied to the security resulting from the transaction.

Question B.6: Where may I obtain updated lists of securities included in the Pilot?

Answer: Since June 25, 2004, changes have occurred to the securities included in the Pilot as a result of name changes, business combinations and permanent delistings. The Staff has updated the list of Category A Pilot Securities and Category B Pilot Securities to reflect the changes that have occurred as of April 13, 2005. To view these lists, please see “Updated Lists of Pilot Securities” below. In addition, the Staff has prepared a summary of the updates that Category A Pilot Securities and Category B Pilot Securities have experienced since June 25, 2004. To view this summary, please see “Summary of Updates to Pilot Securities.” All lists are in downloadable, pipe-delimited ASCII format.

Once the Pilot commences on May 2, 2005 and through the end of the Pilot on April 28, 2006, the SROs will monitor the Category A Pilot Securities and Category B Pilot Securities for which they maintain the primary listing. The SROs will publish on their web sites current lists of Category A Pilot Securities and Category B Pilot Securities by midnight on each trading day. These lists will be in effect for the opening of trading immediately following the posting of the lists. Also, the SROs will publish a summary of the updates that the Category A Pilot Securities and Category B Pilot Securities for which they maintain the primary listing have experienced since June 25, 2004. All lists will be available in downloadable, pipe-delimited ASCII format.

In addition to publishing current lists and summaries of updates on their websites, the Staff understands that the SROs that maintain the primary listing of Category A Pilot Securities and Category B Pilot Securities have procedures in place to inform their members of name changes and other corporate actions that affect their listed securities generally. The SROs will follow such procedures to inform their members of any updates involving all their listed securities, including securities included in the Pilot. For information concerning the SRO lists to be published on and after May 2, 2005, and the most recent notices concerning the Category A Pilot Securities and Category B Pilot Securities, please refer to the following web sites:

(NEW! 04/29/05)

NYSE-listed Pilot Securities:

Notices:

http://www.nyse.com/Frameset.html?displayPage=http://apps.nyse.com/commdata/PubInfoMemos.nsf /AllPublishedInfoMemosNyseCom?openview&count=250& RestrictToCategory=currentyear then, click on 05-30.

Pilot Lists:

http://www.nyse.com/regshopilot

NASDAQ-listed Pilot Securities:

Notices:

http://www.nasdaqtrader.com/Trader/News/2005/ headtraderalerts/hta2005-043.stm

Pilot Lists:

ftp://ftp.nasdaqtrader.com/regshopilot

(Nasdaq will provide Pilot lists in ftp format only. Please note that ftp links may not be accessed through the Commission’s web site.)

AMEX-listed Pilot Securities:

Notices:

http://www.amex.com/amextrader/symDir/symDir_identifiers.html

http://www.amex.com/amextrader/tradingData/RegSHO/ TrDa_RegSHO_DataFieldDefs.html

http://www.amex.com/amextrader/tdrInfo/data/axNotices/2005/ reg042105.html

Pilot Lists:

http://www.amex.com/amextrader/?href=/amextrader/tradingData/RegSHO/TrDa_RegSHO_Pilot.jsp then, input date.

ftp://ftp.amex.com/amextrader/tradingData/data/RegSHO.

(Amex will provide Pilot lists in both http and ftp formats. Please note that ftp links may not be accessed through the Commission’s web site.)

(NEW! 04/29/05)

Question B.7: If OTCBB securities are not included in the Pilot (see Question B.3), then why are some OTCBB and pink sheets securities included on the list of Category A Pilot Securities?

Answer: On June 25, 2004, when the staff selected the securities to be included in the Pilot, OTCBB securities were excluded from the selection process. Since that time, changes have occurred to some Pilot securities, including delistings. The OTCBB and pink sheets securities that appear on the Category A Pilot Securities list are securities that were listed on the NYSE, Amex or Nasdaq on June 25, 2004 but since that time were delisted and now trade over-the-counter. These securities remain in the Category A Pilot Securities list in order for researchers to track them in the event they were to be re-listed under the same or a different ticker symbol. See Question B.6.

(NEW! 04/29/05)

Question B.8: Why are Nasdaq securities included on the Category B Pilot Securities list? Nasdaq securities are not subject to a bid test under NASD Rule 3350 from 4:00 pm until 9:30 am the following trading day. Does the Pilot Program impose a “tick” test on Nasdaq securities from 4:00 pm until 4:15 pm?

Answer: The Pilot Program only affects securities if they otherwise would be subject to short sale price tests. The Pilot Program does not impose a “tick” test on Nasdaq securities under Rule 10a-1(a) or any other short sale price test when such securities would not otherwise be subject to price tests. Nasdaq securities are only subject to a bid test under NASD Rule 3350, and this bid test applies from 9:30 am ET until 4:00 pm ET. At all other times, Nasdaq securities are not subject to any short sale price test. Therefore, the Pilot does not impose a bid test on Nasdaq securities included in the Category B Pilot Securities list from 4:00 pm until 4:15 pm ET, or from the open of the consolidated tape (currently 4:00 am ET) until 9:30 am ET. Nasdaq securities are included in the Category B Pilot Securities list in order for researchers to track them in the event they were to change their listing venue to the NYSE or Amex during the Pilot Program and therefore become subject to the “tick” test of Rule 10a-1(a) from the open of the consolidated tape (currently 4:00 am ET) until 4:15 pm ET.

(NEW! 04/29/05)

Question B.9: At what time on May 2, 2005 does the Pilot Program begin?

Answer: The Pilot begins on May 2, 2005 when the consolidated tape opens. Currently, the consolidated tape opens at 4:00 am ET. See Question B.2. Consequently, on May 2, 2005: Category A Pilot Securities will not be subject to short sale price tests at any time beginning at 4:00 am ET; Category B Pilot Securities will be subject to short sale price tests that would otherwise apply to such securities from 4:00 am ET until 4:15 pm ET; and Category C Pilot Securities will be subject to short sale price tests that would otherwise apply to such securities from 4:00 am ET until the close of the consolidated tape (currently 8:00 pm ET). The Pilot ends on April 28, 2006 when the consolidated tape closes.

C. Frequently Asked Questions Concerning Order Marking and Trade Execution involving Pilot Securities

Question C.1: As described in the Second Pilot Order, market centers intend to implement systems changes that will “mask” the order designations for securities included in the Pilot and process short sale orders involving such securities as “short exempt” pursuant to the provisions of the Pilot even if the short sale orders were marked “short.” If a broker or dealer communicates to a market center a short sale order for a Category A Pilot Security marked “short,” and the market center processes the order as “short exempt,” must the broker-dealer mark the order “short exempt” to reflect the processing of the order?

Answer: Under Rule 200(g) of Regulation SHO, brokers and dealers must mark all sell orders of any equity security as “long,” “short,” or “short exempt.” Brokers and dealers may satisfy this requirement by including “long,” “short,” or “short exempt,” as appropriate, on order tickets. An exemption has been granted from the order marking requirements of Rule 200(g) to brokers and dealers that communicate short sale orders in securities included in the Pilot to market centers that have implemented systems that “mask” order designations and execute short sale orders in securities included in the Pilot. See Question C.2

Question C.2: If a market center does not implement systems changes that “mask” short sale order instructions for some or all of the short sale orders involving securities included in the Pilot, are brokers and dealers required to mark such orders in compliance with Regulation SHO?

Answer: Brokers and dealers are responsible for marking all short sale orders accurately pursuant to Rule 200(g) of Regulation SHO. An exemption has been granted from the order marking requirements of Rule 200(g) to brokers and dealers that communicate short sale orders in securities included in the Pilot to market centers that have implemented systems that “mask” order designations and execute short sale orders in securities included in the Pilot. If a market center has notified brokers and dealers that it has implemented a “masking” process (in the form of general disclosure on its web site, or in a notice to members or similar information memorandum or other similar notice), and the brokers and dealers submit their orders to the market center in accordance with the “masking” process, then the brokers and dealers may rely on the market center’s representations to avail themselves of the exemption from the marking requirements granted in the exemption letter. However, if a broker or dealer knows or has reason to know that a market center’s “masking” process is not operating, or that the broker or dealer has submitted an order in a manner that is not covered by the market center’s “masking” process, then such broker or dealer may not rely on the exemption from the marking requirements granted in the exemption letter for orders sent to that market center. Such broker or dealer will be responsible for marking such orders in compliance with Regulation SHO and the Pilot.

Question C.3: How should short sale orders in securities included in the Pilot be marked if such orders were entered prior to the effective date of the Pilot but remain open on and after the effective date of the Pilot? May these orders be exempted from the marking requirement of Regulation SHO in order to preserve their execution priority?

Answer: Under Rule 200(g) of Regulation SHO, brokers and dealers must mark all sell orders of any equity security as “long,” “short,” or “short exempt.” An exemption has been granted from the order marking requirements of Rule 200(g) to brokers and dealers that communicate short sale orders in securities included in the Pilot to market centers that have implemented systems that “mask” order designations and execute short sale orders in securities included in the Pilot. See Question C.2

Short sale orders in all securities before the commencement of the Pilot Program on May 2, 2005 remain subject to the tick test set forth in Rule 10a-1(a) of the Exchange Act and any short sale price tests of the SROs. Therefore, before May 2, 2005, brokers and dealers should mark these orders “short.”

Brokers and dealers have informed the Staff that changing the marking of pending orders on May 2, 2005 to comply with Rule 200(g) of Regulation SHO will change the priority of the execution of the orders. The Staff understands that, as a part of the systems changes that the market centers have made to implement the “masking” process, the market centers will attempt to incorporate systems changes that will preserve the priority of pending orders. There should be a clear understanding between the brokers and dealers and their customers regarding how such pending orders should be executed in the event that their priority is not preserved.

Question C.4: Should brokers and dealers mark orders involving Category B Pilot Securities “short” before 4:15 pm ET, and then change the marking of the orders to “short exempt” after 4:15 pm ET?

Answer: The Pilot Order provides that short sale price tests are suspended for short sales in Category B Pilot Securities only from 4:15 pm ET until the open of the consolidated tape the next day. Therefore, from 4:15 pm ET until the open of the consolidated tape the next day, short sale orders in Category B Pilot Securities should be marked “short exempt.” At all other times, Category B Pilot Securities are subject to short sale prices tests; consequently, such securities at such times should be marked “short.” Brokers and dealers are responsible for the marking of orders under Regulation SHO. In lieu of marking orders, a broker or dealer may rely on the exemption that has been granted from the order marking requirements of Regulation SHO and process such short sale orders through market centers that “mask” short sale order instructions in accordance with the terms of Rule 200(g) and the Pilot.

Question C.5: How should brokers and dealers execute a guaranteed close short sale order for a Category B Pilot Security when such security closes on a “minus tick” or “zero-minus tick?”

Answer: There are no short sale price restrictions for any short sale order involving Category B Pilot Securities, including guaranteed close orders, from 4:15 pm ET until the open of the consolidated tape the next day. At all other times, such short sale orders are subject to short sale price tests and must not be executed on a “minus tick” or “zero minus tick.” Therefore, a guaranteed close short sale order executed before 4:15 pm ET is subject to applicable short sale price tests, but such orders may be executed after 4:15 pm ET at the closing price regardless of the “tick” of the closing price.

Although Category B Pilot Securities may be executed on a “minus tick” or “zero-minus tick” only from 4:15 pm ET until the open of the consolidated tape the next day, a customer may request that such orders be executed on a “plus tick” or “zero plus tick” during this time. There should be a clear understanding between the brokers and dealers and their customers regarding how guaranteed close short sale orders in Category B Pilot Securities may be executed.

Additional Information about Regulation SHO

The Staff of the Division of Market Regulation has published “Frequently Asked Questions Concerning Regulation SHO,” which may be found on the Commission’s Internet web site (see http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm ).

The Staff has also published “Key Points About Regulation SHO,” which may be found on the Commission’s Internet web site (see http://www.sec.gov/investor/pubs/regsho.htm ).

Updated Lists of Pilot Securities

The securities included in the Pilot were selected as of June 25, 2004. Securities will not be added, and securities will be deleted only in limited circumstances. Since June 25, 2004, name changes, business combinations, permanent delistings, and other events have taken place. The Staff has updated the list of Category A Pilot Securities and Category B Pilot Securities to reflect the changes that have occurred as of April 13, 2005. These lists, which are in downloadable, pipe-delimited ASCII format, may be found below:

Updated list of Category A Pilot Securities (no tick test at any time) as of April 13, 2005

Updated list of Category B Pilot Securities (no tick test from 4:15 pm ET until the open of the consolidated tape the next day only) as of April 13, 2005

In addition to the updated lists of Category A Pilot Securities and Category B Pilot Securities, the Staff has prepared a summary of the updates that have occurred since June 25, 2004. This summary, which is in downloadable, pipe-delimited ASCII format, as well as a description of the information and codes included in the summary, may be found below:

Summary of Updates to Category A Pilot Securities and Category B Pilot Securities as of April 13, 2005

Description of the Information and Codes included in the Summary of Updates to Category A Pilot Securities and Category B Pilot Securities as of April 13, 2005

Once the Pilot takes effect on May 2, 2005, and until the Pilot ends on April 28, 2006, the SROs that maintain the primary listing of Category A Pilot Securities and Category B Pilot Securities will publish daily current lists of these securities on their web sites. The SROs will also publish a summary of updates. These lists may be found on the web sites of such SROs, as set forth below:

(NEW! 04/29/05)

NYSE-listed Pilot Securities:

http://www.nyse.com/regshopilot

NASDAQ-listed Pilot Securities:

ftp://ftp.nasdaqtrader.com/regshopilot

(Nasdaq will provide Pilot lists in ftp format only. Please note that ftp links may not be accessed through the Commission’s web site.)

AMEX-listed Pilot Securities:

http://www.amex.com/amextrader/?href=/amextrader/tradingData/RegSHO/TrDa_RegSHO_Pilot.jsp then, input date.

ftp://ftp.amex.com/amextrader/tradingData/data/RegSHO.

(Amex will provide Pilot lists in both http and ftp formats. Please note that ftp links may not be accessed through the Commission’s web site.)

http://www.sec.gov/spotlight/shopilot.htm

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