In an effort to stop abusive short selling tactics at 19 major financial firms, the Securities and Exchange Commission extended an emergency rule to Aug. 12, Reuters reports. Investors are required to borrow a stock before selling it short, and to deliver it on the settlement date. The SEC is using the time to gather more data on the rule’s impact before applying it to the rest of the industry. The temporary rule covers Fannie Mae and Freddie Mac, as well as major firms like Lehman Brothers and Citigroup.
“The order is designed to protect legitimate short selling in these securities, but helps prevent illegitimate naked short selling and potential ‘distort and short’ manipulation,” SEC Chairman Christopher Cox said in a statement.