WASHINGTON (HedgeWorld.com)–The Securities and Exchange Commission has delayed the start of pilot program for the suspension of the “uptick rule” for short sales.

The pilot, established by the SEC on July 28 (see ) and previously scheduled to commence on Jan. 3, 2005, will formally suspend the provisions of rule 10a-1(a) under the Securities Exchange Act, requiring short sales to be on the uptick, for certain listed securities. The new order resets the pilot program to begin May 2, 2005, and continue through April 28, 2006.

All other terms of the July 28 order remain unchanged.

In announcing the delay Nov. 30, the SEC said that self-regulatory organizations and broker-dealers have informed its staff of difficulties with implementation that can’t be resolved by Jan. 3. Broker-dealers will need to make significant changes to ensure that short-sale orders for pilot stocks are marked properly and that the marking is maintained at each stage of processing and order.

The announcement gave few details, except that it now appears that these systems changes will be more extensive, costly and time-consuming than had been anticipated during the comment period for the new regulation authorizing the program.

The SEC chose stocks for the program by working from the Russell 3000 index. The SEC excluded the first 32 securities in that index that are listed neither on the Nasdaq nor on the American or New York stock exchanges. Then it excluded issuers whose initial public offerings commenced after April 30, 2004. Of the remaining stocks on the index, the SEC divided them into three groups, by the exchange on which they were listed, and ranked those in each group by the average daily dollar volume over the last year. Finally, it selected every third stock from the remaining groups.

The resulting list consists of 50% NYSE listed securities, 2.2% Amex listed securities and 47.8% Nasdaq NNM securities.

Contact Bob Keane with questions or comments at: bkeane@investmentadvisor.com.