Business: Shorts Exposed

On the defensive against threats of legislation, last week the New York Stock Exchange placed a further obstacle in the way of bear traders. Although short-sales great & small were being reported to the Exchange daily (TIME, Oct. 12), it was ruled that in addition the specialist handling a “sell order” on the Floor must be informed whether it was a real or a short sale. It soon became known that specialists were giving preference to real sales, were not executing short-sales at prices which threatened to demoralize trading. In addition, every really large short-sale was immediately investigated. Objections heard, in addition to the usual cry of “This is not a free & open market,” were: 1) a specialist can now gauge the size of the short interest in a stock, making beartraps likely; 2) lack of a big short interest might prove costly at the end of a fast rally. Strongest defense was that real sellers could get better prices.

Last week’s ruling acted as a definite curb to short-selling. The previous rules had had only a slight effect, were apparently made only to obtain data on short-selling, to be of use in the threatened investigations. Further proof of the Exchange’s anxiety to create a proper attitude was shown by the decision last week to report volume as total “transactions” instead of the former total “sales.” Amused brokers suggested it should have been changed to total “purchases,” since even the most ferocious bear cannot sell unless there is a buyer.