13(f)(2) does not require publication of such a list.
---------------------------------------------------------------------------

    \143\ See supra Part II.A.2.
    \144\ Section 13(f)(1) of the Exchange Act (15 U.S.C. 78m(f)(1))
requires any institutional investment manager exercising investment
discretion over accounts holding at least $100 million in fair
market value of certain equity securities to file reports on Form
13F with the Commission at the times set forth in Rule 13f-1. The
statute directs the Commission to make available to the public, for
a reasonable fee, a list of all equity securities described in
section 13(d)(1) of the Exchange Act and to disseminate to the
public the information contained in the reports.
---------------------------------------------------------------------------

Comments Regarding Other Concerns Related to Thresholds
Implementation and Compliance Costs
    Some commenters stated that the Proposing Release did not
adequately account for the burdens associated with monitoring for
whether a Reporting Threshold is met, i.e., whether a Manager has a
Form SHO reporting obligation.\145\ Specifically, these commenters
stated that the Proposing Release did not address the costs of those
Managers who would need to develop and implement reporting systems to
monitor for whether a Reporting Threshold is met or exceeded, that may
or may not ultimately result in a reportable gross short position.\146\
The

comments are addressed in the Economic Analysis, in Part VIII below.
---------------------------------------------------------------------------

    \145\ See, e.g., Virtu Letter, at 2 (``the dollar value
thresholds referenced in the Proposal are significantly lower than
is necessary''); MFA Letter, at 4 (recommending a single, dollar-
based threshold only); SIFMA Letter, at 5 (recommending elimination
of different thresholds for reporting and non-reporting companies in
favor of one uniform threshold for U.S. equity securities); ICI
Letter, at 9 (recommending a single, percentage-based threshold for
both reporting and non-reporting company issuers); Ropes & Gray
Letter, at 2 (recommending that all thresholds ``be determined using
average positions over a month rather than daily positions.'').
    \146\ See, e.g., MFA Letter, at 10-11; see also ICI Letter, at 5
(stating that Proposed Rule 13f-2 would require a Manager to
continuously monitor and record any activity that could potentially
be subject to future reporting on Form SHO). While the costs would
likely be higher if Managers choose to monitor daily, Rule 13f-2
does not require daily monitoring, either for reporting or non-
reporting company issuers. Managers may choose to do this threshold
calculation on a rolling basis, or to do the calculation after the
month has ended. While some Managers may choose to incur the higher
costs of daily tracking and calculation for purposes of compliance
with Rule 13f-2, the final rule's Reporting Threshold for reporting
company issuers is not based on a Manager's gross short position on
a single trading date, reducing the need for daily tracking. See
infra Part VIII.C.6.b.
---------------------------------------------------------------------------

``Gross'' Short Position versus ``Net'' Short Position
    Some commenters requested that the Reporting Thresholds be
calculated based on ``net'' short position rather than ``gross'' short
position as proposed. Multiple commenters expressed concern that using
a gross short position calculation would not accurately reflect risk in
the markets.\147\ However, other commenters supported the use of the
proposed gross short position data either instead of or in conjunction
with net short position data.\148\ One commenter proposed requiring net
short position reporting by Managers that are solely reporting on Form
SHO with regard to one issuer while requiring gross short position
reporting for Managers with short positions in more than one
issuer.\149\ One commenter proposed that, if a gross short position
calculation is used, market makers should not be subject to adopted
Rule 13f-2's reporting requirements.\150\ However, another commenter
supported applying the rule's requirements to market makers.\151\ One
commenter stated that, even though market makers do not typically carry
overnight positions and would likely not trigger the Proposed Reporting
Thresholds, market makers would still incur the costs of end-of-day
calculations to determine whether they meet or exceed the Proposed
Reporting Thresholds.\152\
---------------------------------------------------------------------------

    \147\ See, e.g., Virtu Letter, at 3 (stating that ``the
requirement to report such positions on a gross rather than net
basis would likely distort the actual degree of short positions as
it will capture circumstances where a firm is net long but may have
short positions among its accounts.''); Perkins Coie Letter, at 3-4,
6. (recommending that ``[r]ather than set a low threshold and over
capture short position information, the SEC should revise the
requirement to $10 million net short position as opposed to
gross.''); Schulte Roth & Zabel Letter, at 2 (stating that ``net
short position data would more accurately reflect actual positions
taken by institutional investment managers and provide useful
transparency to the Commission and to the marketplace.''); ICI
Letter, at 10 (recommending that ``the Commission streamline and
simplify how managers account reflect hedging positions by adopting
a net short position threshold and eliminating the required
indication of whether a position is hedged or not in Form SHO.'');
Comment Letter from Anonymous Fund Manager at 1-2, available at
https://www.sec.gov/comments/s7-08-22/s70822-20126773-287490.pdf
(``Anonymous Fund Manager Letter'') (recommending that the
Commission ``modify the proposed threshold requirements to reference
short positions on a net `delta-adjusted' basis as opposed to a
gross basis or, in the alternative, exclude from the reporting
obligations under the Proposed Rules `bona fide hedging activity' as
such term would be defined in the final rules.'').
    \148\ See, e.g., Comment from Josh Allen (Mar. 14, 2022),
available at https://www.sec.gov/comments/s7-08-22/s70822-272295.htm; Comment from An Investor (Apr. 4., 2022), available at
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm
(supported including both net and gross short positions in
reporting).
    \149\ Perkins Coie Letter, at 4 (stating that ``the SEC should
consider amending its proposal to require net position reporting by
certain types of managers that do not regularly utilize short
positions. For instance, the SEC could require net short position
reporting by filers that are solely reporting on Form SHO with
regards to one issuer. For any filer reporting more than one issuer,
the SEC could require gross short position reporting.'').
    \150\ HSBC Letter, at 16 (stating that ``[b]ecause Proposed Rule
13f-2 requires disclosure of gross positions, market makers could be
required to report large positions, even if a market makers' [sic]
net position is close to zero (i.e., because such short positions
are typically hedged via options or swaps). Subjecting market makers
to Proposed Rule 13f-2 may, therefore, result in market participants
receiving unhelpful and misleading information about the short sale
market.'').
    \151\ See Samuel Meadows Comment, at 2 (stating that ``Market
Makers should NOT be except [sic] from reporting for any reason.
Market Makers should report short sales the same as everyone else
should they pass the Reporting Threshold.'').
    \152\ See SIFMA Letter, at 11-12 (stating that ``[h]owever, as
the Proposing Release notes, requiring Institutional Investment
Managers to consider intraday short sale activity, which would not
be captured in the `gross short position' as reflected on their
trade date stock records, in determining whether the threshold has
been exceeded, would be incredibly onerous--particularly, for
example, for market makers that generally may not carry large
overnight short positions.'').
---------------------------------------------------------------------------

    As discussed in the Proposing Release, under the proposal, a
Manager would report its ``gross'' short position in an equity security
without offsetting such gross short position with ``long'' shares of
the equity security or economically equivalent long positions obtained
through derivatives of the equity security.\153\ For example, if a
Manager has investment discretion over multiple accounts, some of which
have long positions in an equity security and some have short positions
in the same equity security, only the total gross short position in the
``short accounts'' is reported, without being offset by the long
positions in the ``long accounts.'' Requiring a Manager to report its
daily gross short position in a security will provide a more complete
view of short positions held by Managers in a security, particularly
once the data is aggregated for publication.\154\ Permitting Managers
to ``net'' positions would dilute the usefulness of the data in
providing market participants with a sense of substantial short
positions. For example, requiring net short position reporting by
Managers that are solely reporting on Form SHO with regard to one
issuer, or for other types of Managers infrequently using short
positions, as one commenter suggested, would provide minimal cost
savings and create misleading data that could be difficult to aggregate
and confusing to market participants. Further, the data collected and
provided by FINRA \155\ and the exchanges is not netted.\156\ By
providing aggregate gross positions reported by Manager in a security,
the final rule will supplement such existing short sale information
with additional context on substantial gross short sale positions.
---------------------------------------------------------------------------

    \153\ Proposing Release, at 14956.
    \154\ In addition, commenters stated they would be uncertain how
to ``offset'' positions when discussing the hedging indicator. See
infra Part II.A.4.d.iii.(B). Netting would raise similar concerns.
    \155\ See, e.g., Short Interest--What It Is, What It Is Not,
FINRA Inv'r Insights (Jan. 25, 2023), available at https://www.finra.org/investors/insights/short-interest (``The short
interest data is just a snapshot that reflects short positions held
by brokerage firms at a specific moment in time on two discrete days
each month. The Short Sale Volume Daily File reflects the aggregate
volume of trades within certain parameters executed as short sales
on individual trade dates.'').
    \156\ See, e.g., Frequently Asked Questions (FAQ) about Short
Interest Reporting, FINRA, available at https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest/faq (``Q1:
Rule 4560 applies to short interest positions resulting from: (1) a
``short sale,'' as defined by Regulation SHO Rule 200(a); or (2)
where the transaction that caused the short position was marked
``long,'' consistent with Regulation SHO Rule 200(g), due to the
firm's or the customer's net long position at the time of the
transaction. For example, a sale may be marked as ``long'' because
the overall net position in the security within an aggregation unit
is long at the time of the sale. If the execution results in a short
position in a specific account (or subaccount) held within the
aggregation unit, this position is reportable pursuant to Rule
4560.''; Q11: ``Where, as part of a strategy, an account holds both
a short and long position in the same security simultaneously, the
short position is reportable as short interest pursuant to Rule 4560
and must be reported in full, i.e., not netted against the long
position.'').
---------------------------------------------------------------------------

    In addition, the Commission is making additional modifications,
discussed further below, that should alleviate burdens on market makers
that may otherwise need to undertake the obligation of calculating
reporting thresholds despite generally holding positions below such
thresholds. Specifically, the Commission is modifying the threshold
calculations to a monthly average of daily gross short positions rather
than a single daily position, as discussed under the subheading ``When
the Reporting Obligation is Triggered'' below. Further, as discussed in
Part III below, the Commission is not adopting the proposed requirement
to report ``buy to cover'' activity, which a commenter \157\ stated
would be more difficult if gross positions are required to be reported.
The Commission, in adopting Rule 13f-2, will require a Manager to
report its ``gross'' monthly short position as

proposed under Proposed Rule 13f-2(b)(4).
---------------------------------------------------------------------------

    \157\ SIFMA Letter, at 24.
---------------------------------------------------------------------------

When the Reporting Obligation Is Triggered
    To ease reporting burdens and reduce costs, some commenters
proposed decreasing the frequency of certain aspects of the U.S. dollar
value-based aspects of the Reporting Thresholds by instead using
monthly average positions, instead of the proposed ``close of regular
trading hours on any settlement date'' frequency.\158\ Alternatively,
one commenter suggested that the proposed monthly reporting requirement
should only be triggered if a Manager holds a short position in excess
of the Proposed Reporting Thresholds as of the last settlement day of
the month.\159\ Commenters stated that by using average monthly
positions rather than the proposed rule's use of any settlement date
within the reporting period, the reporting burden required of Managers
would be substantially lessened, since Managers may transiently cross
the reporting thresholds through activities such as market making,
hedging, and customer facilitation activity.\160\ Requiring reporting
for Managers who temporarily cross these thresholds on an intraday
basis through such activity, one commenter stated, would not adhere to
the legislative intent of DFA section 929X.\161\ Commenters stated that
transiently crossing these thresholds would not produce reported data
that would be valuable to the Commission; for example, short-term
market disruptions may trigger reporting under the proposed frequency
for Managers that do not hold substantial short positions.\162\ For
reasons discussed below, the Commission is modifying Proposed Rule 13f-
2(a)(1)(i) (the U.S. dollar value-based prong of Threshold A) to
trigger reporting requirements when a Manager has a monthly average of
daily gross short positions (``monthly average'') with a U.S. dollar
value of $10 million or more at the end of the calendar month, rather
than, as proposed, a $10 million or more gross short position at the
close of regular trading hours on any settlement date during the
calendar month.\163\
---------------------------------------------------------------------------

    \158\ See, e.g., Virtu Letter, at 3 (stating that ``[w]e also
object to the reporting requirement being triggered by the existence
of a short position on any settlement date within a reporting
period.''); Ropes & Gray Letter, at 2 (stating that ``[a]ll filing
thresholds should be determined using average positions over a month
rather than daily positions.'').
    \159\ SIFMA Letter, at 15 (advocating ``that the proposed
monthly reporting under Information Table 1 of Proposed Form SHO
should be triggered only if the Institutional Investment Manager
holds a gross short position in an equity security, as of the last
day of such month, in excess of the threshold(s) for reporting.'').
    \160\ See Virtu Letter, at 2.
    \161\ See SIFMA Letter, at 4.
    \162\ See Ropes & Gray Letter, at 6-7.
    \163\ This change to ``monthly average'' is responsive, in part,
to commenters' concerns about certain aspects of the U.S. dollar
value-based Reporting Thresholds. For reasons discussed below,
however, the Commission is adopting Threshold B as proposed
(Proposed Rule 13f-2(a)(2)), which employs an ``at the close of
regular trading hours on any settlement during the calendar month''
approach. The Form SHO ``Instructions For Calculating Reporting
Threshold,'' discussed below, explain in detail the method for
determining whether the modified threshold is met.
---------------------------------------------------------------------------

    Threshold A, as adopted, will require reporting by Managers that
have, for each equity security of a reporting company issuer, either
(1) a monthly average gross short position at the close of regular
trading hours in the equity security with a U.S. dollar value of $10
million or more,\164\ or (2) a monthly average gross short position at
the close of regular trading hours as a percentage of shares
outstanding in the equity security of 2.5 percent or more.\165\ Using a
``monthly average'' dollar value for reporting company issuers will
result in Form SHO reporting by Managers that consistently carry large
gross short positions during the reporting month. This approach should
reduce the reporting of non-directional, ``transient'' short sales
activity \166\ and provide market participants with more focused
information on substantial short positions held by Managers. The
modification should also reduce the burdens of certain Managers,
specifically those Managers, including market makers, that periodically
meet or exceed the $10 million or more threshold on a given settlement
date during a calendar month, but that do not typically carry a large
gross short position throughout the month that will meet or exceed the
monthly average reporting threshold, by eliminating the need to
calculate (and potentially trigger) the threshold on a daily basis.
This will help the Commission to distinguish directional short selling
of Managers from short sale activity effected by market makers and
liquidity providers.\167\
---------------------------------------------------------------------------

    \164\ To determine whether this Reporting Threshold has been
met, a Manager shall determine its gross short position at the close
of regular trading hours in the equity security (as defined in Rule
13f-2) on each settlement date during the calendar month and
multiply that figure by the closing price at the close of regular
trading hours on the settlement date (``end of day dollar value'').
The Manager shall then add all end of day dollar values during the
calendar month and divide that sum by the number of settlement dates
in the month to arrive at a ``monthly average'' for each equity
security the Manager traded during that calendar month reporting
period.
    \165\ The methods of calculation of the Reporting Thresholds are
prescribed in ``Instructions for Calculating Reporting Threshold''
in Form SHO. Rule 13f-2 and the instructions in Form SHO, require
that for purposes of determining whether a Manager meets or exceeds
a Reporting Threshold, a Manager shall determine its gross short
position ``at the close of regular trading hours'' in the equity
security, rather than at the ``end of day'' as was provided for in
the instructions to Proposed Form SHO. Accordingly, the Commission
is making a modification to the instructions for calculating
Threshold A and replacing ``end of day gross short position'' with
``gross short position at the close of regular trading hours.''
Addressing any potential ambiguity in terminology should facilitate
more consistency in reporting by Managers and more comparability of
the data reported on Form SHO. With this change, the calculation
instructions for Threshold A provide that to determine whether the
percentage threshold of Threshold A has been met, a Manager shall
(a) determine its gross short position at the close of regular
trading hours in the equity security (as defined in Rule 13f-2) on
each settlement date during the calendar month, and divide that
figure by the number of shares outstanding in such security at the
close of regular trading hours on the settlement date, and (b) add
up the daily percentages during the calendar month as determined in
(a) and divide that sum by the number of settlement dates in the
month to arrive at a ``monthly average'' for each equity security
the Manager traded during that calendar month reporting period. The
number of shares outstanding of the security for which information
is being reported shall be determined by reference to an issuer's
most recent annual or quarterly report, and any subsequent update
thereto, filed with the Commission.
    \166\ See supra n. 135 and accompanying text.
    \167\ See Proposing Release, at 14953.
---------------------------------------------------------------------------

    In addition, similar to the discussion in the Proposing Release
regarding the use of a monthly average gross short position of 2.5
percent or more of total shares outstanding,\168\ the Commission
continues to believe that using a monthly average gross short position
at the close of regular trading hours of $10 million or more, rather
than an end of each settlement date calculation as was originally
proposed, will reduce the risk that a Manager may time its short sales
to avoid triggering the adopted reporting threshold.\169\
---------------------------------------------------------------------------

    \168\ Proposing Release, at 14962 (``In addition, the Commission
believes that requiring the reporting of short positions with a 2.5%
or higher monthly average gross short position would capture
Managers with gross short positions that are large relative to the
size of the issuer, and could therefore have a significant impact on
the issuer. Using a monthly average gross short position, rather
than an end of month gross short position, is also designed to
prevent the scenario where a Manager engages in trading activity on
the last day of the month in order to avoid reporting.'').
    \169\ In addition, the Commission is making a modification to
specify in Rule 13f-2 and in the instructions in Form SHO that, for
purposes of determining whether a Manager meets or exceeds Threshold
A, a Manager shall determine its gross short position ``at the close
of regular trading hours'' in the equity security, rather than at
the ``end of day'' as was provided for in the instructions to
Proposed Form SHO. Reducing any potential ambiguity in terminology
should facilitate more consistency in reporting by Managers and more
comparability of the data reported on Form SHO.

---------------------------------------------------------------------------

    Threshold B, as proposed, and as adopted, will require reporting by
Managers that have, for each equity security of a non-reporting company
issuer, a gross short position in the equity security with a U.S.
dollar value of $500,000 or more at the close of regular trading hours
on any settlement date during the calendar month.\170\ A single,
dollar-based prong approach (using the $500,000 or more on any
settlement date metric) for securities of non-reporting company issuers
(Rule 13f-2(a)(2)) will capture Managers with large gross short
positions, even if such positions are relatively small compared to the
market capitalization of the issuer. As discussed above, the markets
for non-reporting company issuers are more opaque and could benefit
more from transparency. Additionally, due to their lower liquidity,
equity securities of non-reporting companies can be more sensitive to
strategic trading than those of reporting companies.\171\ As a result,
for those securities, a single dollar threshold that can be triggered
on any day of a month is more appropriate than the two-prong threshold
calculated as monthly averages for equity securities issued by
reporting companies.
---------------------------------------------------------------------------

    \170\ The methods of calculation of the Reporting Thresholds are
prescribed in ``Instructions for Calculating Reporting Threshold''
in Form SHO. To determine the dollar value-based Reporting Threshold
described in Threshold B has been met, a Manager shall determine its
gross short position at the close of regular trading hours in the
equity security (as defined in Rule 13f-2) on each settlement date
during the calendar month and multiply that figure by the closing
price at the close of regular trading hours on the settlement date.
If such closing price is not available, a Manager shall use the
price at which it last purchased or sold any share of that security.
    \171\ See infra Part VIII.E.3 (discussing difficulty in
obtaining information on non-reporting company issuers, and that
data is often stale and inaccurate).
---------------------------------------------------------------------------

Basing Reporting Thresholds on Form SH Data
    Some commenters maintained that the Commission should not have
based the Proposed Reporting Thresholds on Form SH data, as the Form SH
data was collected during ``a period of abnormal market conditions that
does not reflect recent changes in the markets,'' and urged the
Commission to more robustly support its rationale for selecting the
Reporting Thresholds.\172\ These commenters essentially suggested that
the use of Form SH data was unrealistic, and suggested that the
Commission consider whether the Reporting Thresholds are appropriate
based on more recent data and analysis.\173\ In the Proposing Release,
the Commission stated that to perform the underlying Reporting
Thresholds analysis, Form SH data on daily short positions for November
2008 through February 2009 were filtered and matched to Center for
Research in Security Prices, LLC for daily closing prices and Compustat
for daily shares outstanding. The Commission recognized that the
results of an analysis of Form SH data may not fully reflect the status
quo but that the analysis used appropriate data because it involved the
same type of entities (Managers) and the same activity (short
positions).\174\ As discussed in the Proposing Release, the Commission
believed that it struck a reasonable balance in proposing the Reporting
Thresholds with regard to the fundamental economic tradeoff of the
value of the data versus the cost of collecting the data.\175\
---------------------------------------------------------------------------

    \172\ Comment Letter from Barbara Bliss, Associate Professor of
Finance, et al. (Apr. 25, 2022), at 3, available at https://www.sec.gov/comments/s7-08-22/s70822-20126591-287247.pdf (``Law and
Finance Professors Letter'') (``we believe the Commission could and
should more robustly support its rationale for these thresholds
before adopting any final rule.''); see also AIMA Letter, at 11-12
(commenter was critical of Reporting Thresholds based on ``stale and
limited'' data). For a discussion of Form SH applicability to the
current period, see infra Part VIII.C.6.a.
    \173\ See, e.g., AIMA Letter, at 12 (stating that the Commission
should ``review and analyze current short interest market data for
reporting issuers to ensure that any final threshold based on a
gross position's dollar value accounts for the latest and most
complete data''); Law and Finance Professors Letter, at 3 (stating
that the Commission should ``consider more carefully whether the
stated disclosure thresholds are appropriate, based on more recent
data and analysis, and whether there should be a mechanism that
would permit these thresholds to change over time''); Two Sigma
Letter, at 7 (stating that Form SH burden estimates are an
``unrealistic benchmark'').
    \174\ Proposing Release, at 14963 n.80.
    \175\ Proposing Release, at 14963-64, 15007.
---------------------------------------------------------------------------

    The Commission disagrees with one commenter that stated that Form
SH data was ``stale and limited.'' \176\ The Commission continues to
believe that Form SH data is highly relevant for determining the
Reporting Thresholds. Form SH is the only existing data source of
individual Manager-level short sale positions.\177\ Form SH data was
collected from October 17, 2008, until August 1, 2009, and the
Commission analyzed daily data submitted from November 2008 until
February 2009 as representative of short positions held by Managers. By
the time Form SH was in effect, the global financial crisis was winding
down, and is considered by some to have calmed by approximately June
2009.\178\ Thus, data was analyzed for several months during which the
economy was returning to normalcy. Although the commenter suggested
such data does not address ``recent changes in the financial markets,''
the commenter did not elaborate on what ``recent changes'' would have
impacted an analysis of the Form SH data or the time period in which
the data was analyzed. Markets undergo periods of volatility and
stability and are constantly evolving over time. The data from Form SH
involves the same type of entities (Managers) and the same activity
(short positions) as Form SHO. The time period for which the Form SH
data was studied is sufficiently informative to provide a reasonable
assessment of appropriate reporting thresholds for purposes of Form
SHO.\179\
---------------------------------------------------------------------------

    \176\ See AIMA Letter, at 11-12.
    \177\ While there are various limitations to be considered when
using Form SH data, Form SH data are the most relevant and
applicable source of data available for the purposes of estimating
the costs of the design and analysis of Rule 13f-2. There are no
other data sources, public or regulatory, which specifically track
Managers' short position activities in the U.S. See infra Part
VIII.C.6.a.
    \178\ The National Bureau of Economic Research considers the
global financial crisis as having officially started Dec. 2007 and
ended June 2009. See, e.g., Nat'l Bureau of Econ. Research, Business
Cycle Dating, available at https://www.nber.org/research/business-cycle-dating.
    \179\ See discussion of Form SH in Part VIII.C.6.a.
---------------------------------------------------------------------------

4. Form SHO
a. Reporting via EDGAR
i. Proposal
    To enhance transparency of short sale-related data reported and
published pursuant to Proposed Rule 13f-2, Proposed Rule 13f-2(a)(3)
provided that Managers would file Form SHO (and any amendments thereto)
with the Commission on EDGAR.\180\ The Commission believed that most
Managers should be familiar with filing forms on EDGAR--for example,
Form 13F \181\--and relying on EDGAR to access registration statements,
periodic reports, and other filings with the Commission that are made
publicly available.\182\ The Commission believed

that requiring Proposed Form SHO to be reported via EDGAR would enhance
the accessibility, usability, and quality of the Proposed Form SHO
disclosures for the Commission, and would allow the Commission to
download disclosures from Form SHO directly, facilitating efficient
access, organization, and evaluation of the reported information.\183\
The Commission further believed that the improved quality and scope of
information available for the Commission's use in examining market
behavior and recreating market events would bolster the Commission's
oversight of short selling activity and enhance investor
protections.\184\
---------------------------------------------------------------------------

    \180\ See Proposed Rule 13f-2(a)(3) (providing that ``Form SHO
and any amendments thereto must be filed with the Commission via the
Commission's Electronic Data Gathering, Analysis, and Retrieval
System (``EDGAR''), in accordance with Regulation S-T. Certain
information regarding each such equity security reported by
institutional investment managers on Form SHO and filed with the
Commission via EDGAR will be published by the Commission on an
aggregated basis.'').
    \181\ EDGAR filing is mandatory for all public Form 13F
submissions. See Rulemaking for EDGAR System, Exchange Act Release
No. 34-40934 (Jan. 12, 1999), 64 FR 2843 (Jan. 19, 1999); see also
Electronic Submission of Applications for Orders under the Advisers
Act and the Investment Company Act, Confidential Treatment Requests
for Filings on Form 13F, and Form ADV-NR; Amendments to Form 13F,
Exchange Act Release No. 34-95148 (June 23, 2022), 87 FR 38943 (June
30, 2022).
    \182\ See, e.g., About EDGAR, available at https://www.sec.gov/edgar/about; see also Important Information about EDGAR, available
at https://www.sec.gov/edgar/searchedgar/
aboutedgar.htm#:~:text=EDGAR%2C%20the%20Electronic%20Data%20Gathering
,and%20Exchange%20Commission%20(SEC) (``The [EDGAR] system processes
about 3,000 filings per day, serves up 3,000 terabytes of data to
the public annually, and accommodates 40,000 new filers per year on
average.'').
    \183\ Proposing Release, at 14957.
    \184\ Id.
---------------------------------------------------------------------------

ii. Comments and Final Rule
    Several commenters raised concerns about how the confidentiality of
the data reported on Form SHO via EDGAR would be preserved.\185\ Most
of these commenters spoke of a need to establish robust data security
protocols for the ``valuable and proprietary'' information that would
be reported on Proposed Form SHO via EDGAR. Several such commenters
expressed concerns about cyberattacks or other breaches of account
information.\186\
---------------------------------------------------------------------------

    \185\ See, e.g., K&L Gates Letter, at 5-6 (any final rule or
final Form SHO should ensure ``indefinitely'' the confidentiality of
information that could reveal the identity of the reporting
Manager).
    \186\ See, e.g., AIMA Letter, at 14 (stating that the Commission
has not explained how it will protect the commercially sensitive
data that will be reported on Proposed Form SHO or acknowledged that
its systems are susceptible to data breaches); MFA Letter, at 8
(positing that ``the risk of increased cyberattacks or other
breaches of confidential account information far outweigh any
incremental benefit associated with requiring [Managers] to
individually report short position information''); Two Sigma Letter,
at 3-5 (cautioning that information on Proposed Form SHO reports
``will be private only so long as the Commission does not have its
systems breached, its personnel do not misappropriate the
information, the information is not unintentionally released, or
policies do not change retroactively''); SIFMA Letter, at 22 n.60
(citing cyber security, theft, and inadvertent data breach concerns
as chief among the risks of providing sensitive and confidential
information regarding short positions and short activity).
---------------------------------------------------------------------------

    While no technology system or infrastructure is impervious to
cyberattack, the Commission employs an array of actions to safeguard
and protect the confidentiality and security of all information
reported to EDGAR, which will include data reported on Form SHO.\187\
The Commission has stated that it has ``engaged in a multi-year, multi-
phase effort to modernize the EDGAR system, including both internal and
public-facing components. Security and modernization enhancements were
deployed in June 2020, focusing on technology upgrades internal to the
system.'' \188\ Moreover, as discussed in Part I.A.4.f.ii below, the
Commission is adopting an approach to the confidential treatment of
information provided on Form SHO reports that all such information will
be deemed subject to a confidential treatment request under 17 CFR
200.83 (``Rule 83''). Accordingly, the Commission is adopting Rule 13f-
2(a)(3) as proposed.
---------------------------------------------------------------------------

    \187\ See Annual Report on SEC website Modernization Pursuant to
Section 3(d) of the 21st Century Integrated Digital Experience Act
(Dec. 2022), available at https://www.sec.gov/files/21st-century-idea-act-report-2022-12.pdf.
    \188\ Id.
---------------------------------------------------------------------------

b. Filing Form SHO Reports
i. Proposal
    As described in the Proposing Release, Managers would use Proposed
Form SHO for reports to the Commission required by Proposed Rule 13f-2.
The Commission proposed that Managers would file a report on Proposed
Form SHO with the Commission within 14 calendar days after the end of
each calendar month with regard to each equity security in which the
Manager meets or exceeds a Reporting Threshold.\189\ The Commission
proposed that Managers would file the Form SHO with the Commission via
the Commission's EDGAR system in an eXtensible Markup Language
(``XML'') specific to Form SHO (``custom XML'' or ``Form SHO-specific
XML''),\190\ a structured machine-readable data language. The
Commission also proposed that Managers would either be able to file
Form SHO using a fillable web form the Commission would provide on
EDGAR to input Form SHO disclosures, or a Manager could use its own
software tool to file Form SHO to EDGAR directly in Form SHO-specific
XML.\191\ Reporting via EDGAR, as described in the Proposing Release,
would facilitate efficient access, organization, and evaluation of
reported information by the Commission.
---------------------------------------------------------------------------

    \189\ Proposing Release, at 14956.
    \190\ Id. at 14955.
    \191\ See id. at 14955. The filing options described for
Proposed Form SHO are consistent with other EDGAR filings that are
filed in form-specific XML-based languages. See, e.g., Regulation of
NMS Stock Alternative Trading Systems, Exchange Act Release No.
83663 (July 18, 2018), 83 FR 38768 (Dec. 9, 2021) (requiring new
EDGAR Form ATS-N to be filed in an XML-based language specific to
that Form).
---------------------------------------------------------------------------

    The Commission stated in the Proposing Release that requiring Form
SHO to be filed in custom XML format, since it is a structured,
machine-readable data language, would facilitate more thorough review
and analysis of the reported short sale disclosures by the Commission,
which would increase the efficiency and effectiveness with which the
Commission could identify manipulative short selling strategies.\192\
Furthermore, the Commission stated most Managers have experience filing
EDGAR forms that use similar EDGAR Form-specific XML-based data
languages, such as Form 13F and Form ATS-N.\193\
---------------------------------------------------------------------------

    \192\ See Proposing Release, at 14997 (``By requiring a
structured machine-readable data language and a centralized filing
location (EDGAR) for the disclosures on Proposed Form SHO, the
Commission would be able to access and download large volumes of
Proposed Form SHO disclosures in an efficient manner.'').
    \193\ See, e.g., Proposing Release at 14960, 14999 (first citing
Form 13F, available at https://www.sec.gov/pdf/form13f.pdf) (then
citing Regulation of NMS Stock Alternative Trading Systems, Exchange
Act Release No. 83663 (July 18, 2018), 83 FR 38768 (Aug. 7, 2018))
(requiring new EDGAR Form ATS-N to be filed in an XML-based language
specific to that Form); see also Money Market Fund Reforms,
Investment Company Act Release No. 34441 (Dec. 15, 2021), 87 FR 7248
(Feb. 8, 2022) (Form N-CR); Securities Offering Reform for Closed-
End Investment Companies, Exchange Act Release No. 88606 (Apr. 8,
2020), 85 FR 33290 (June 1, 2020) (Form 24F-2).
---------------------------------------------------------------------------

    As proposed, if a Manager uses the web-fillable Proposed Form SHO
on EDGAR and encounters a technical error when filling out the form,
such Manager would be required to correct the identified technical
error before being permitted to file the Proposed Form SHO through
EDGAR. If a Manager uses its own software tool to file a Proposed Form
SHO filing to EDGAR directly in Proposed Form SHO-specific XML, and a
technical error is identified by EDGAR after the filing is sent, such
Manager would receive an error message that the filing has been
suspended, and would be required to correct the identified technical
error and re-file the Proposed Form SHO through EDGAR.\194\
---------------------------------------------------------------------------

    \194\ The Commission stated in the proposing release that the
XML schema (i.e., the set of technical rules associated with
Proposed Form SHO-specific XML) for Proposed Form SHO would
incorporate validations of each data field on Proposed Form SHO to
help ensure consistent formatting and completeness. For example,
letters instead of numbers in a field requiring only numbers, would
be flagged by EDGAR as a ``technical'' error that would require
correction by the reporting Manager in order to complete its
Proposed Form SHO filing. Field validations act as an automated form
completeness check when a Manager files Proposed Form SHO through
EDGAR; they do not verify the accuracy of the information filed in
Proposed Form SHO filings. Proposing Release, at 14960 n.72.

---------------------------------------------------------------------------

    As an alternative, the Commission also discussed whether Proposed
Form SHO should be required to be filed in Inline eXtensible Business
Reporting Language (``Inline XBRL'').\195\ The Commission stated that,
compared to the proposal, the Inline XBRL alternative, which is both
machine-readable and human-readable, would provide more sophisticated
validation, presentation, and reference features for filers and data
users.\196\ However, the Commission stated that given the fixed and
constrained nature of the disclosures to be reported on Proposed Form
SHO, the benefits of the Inline XBRL alternative would be muted, and
therefore Managers would not be able to take advantage of customization
and presentation features.\197\ Furthermore, the Commission stated in
the Proposing Release that the alternative Inline XBRL approach would
create greater initial implementation costs, such as licensing XBRL
filing preparation software, because many Managers may not have prior
experience structuring data in Inline XBRL.\198\
---------------------------------------------------------------------------

    \195\ See Proposing Release, at 15010-11.
    \196\ See id.
    \197\ See id.
    \198\ See id.
---------------------------------------------------------------------------

ii. Comments and Final Rule
    The Commission received some comments about the use of Form SHO-
specific XML in filing Form SHO. In response to Q39 in the Proposing
Release,\199\ which asked whether the use of Form SHO-specific XML
would make the reported data more useful to users, one commenter stated
that data prepared in consistent, structured format would be
``significantly more functional and useful.'' \200\ Regarding the costs
and benefits of an Inline XBRL requirement as compared to Proposed Form
SHO-specific XML, this commenter supported using XBRL in a comma-
separated value (``CSV'') format, which is a text file that uses
delimiters such as commas to separate data fields.\201\ The commenter
stated that this would be the most appropriate standard ``for capturing
high volume, granular data in a compact format,'' and urged the
Commission to adopt XBRL rather than custom XML.\202\ The commenter
stated that XBRL-CSV has several advantages over the Commission's
proposed use of a custom XML format, such as reducing preparation costs
and processing costs, as well as improving validation.\203\ In
addition, the commenter disagreed with the Commission's view in the
Proposing Release that the benefits of the additional features of XBRL
would be muted if used for Form SHO due to the fixed and constrained
nature of the disclosures to be reported. The commenter stated that
several other agencies, such as the FDIC and FERC, have recently
adopted XBRL format over custom XML format. However, the commenter
acknowledges that initial implementation costs will be higher and
familiarization with the format will take longer for reporting
entities. Alternatively, another commenter supported the use of Form
SHO-specific XML, stating that ``XML is a widely used language and
therefore implementation and maintenance would keep costs low and
efficiency high,'' and thought it would allow for efficient review of
the reported data.\204\
---------------------------------------------------------------------------

    \199\ Proposing Release, at 15012.
    \200\ Comment Letter from Campbell Pryde, President and CEO,
XBRL US (Apr. 26, 2022), at 1 (``XBRL Letter''), available at
https://www.sec.gov/comments/s7-08-22/s70822-20126860-287597.pdf.
    \201\ See id. at 2.
    \202\ See id. at 2-5.
    \203\ See id.
    \204\ Comment from An Investor (Apr. 4, 2022), available at
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm.
---------------------------------------------------------------------------

    The Commission is adopting the custom XML data reporting
requirement as proposed. As explained in the Proposing Release, the
filing options for Form SHO are consistent with other EDGAR filings
that are filed in Form-specific XML-based languages.\205\ The
Commission also continues to believe that because many Managers have
been using custom XML-based languages through other releases, they are
more familiar with this language than other languages, such as XBRL, so
the use of XML will promote efficiency in filing and review of Form SHO
reports. Familiarity with custom XML formats will reduce implementation
and ongoing compliance costs when compared to introducing XBRL-based
formats that may be unfamiliar to Managers. Managers' greater
familiarity with custom XML formats should also reduce the possibility
of data input errors when compared to XBRL formats. The above noted
commenter likewise stated that XBRL formats would entail higher initial
implementation costs and that familiarization with the XBRL formats
would take longer for reporting entities. The costs of using XBRL
formats in implementation and user retraining, along with the
inconsistencies relative to other filings that use Form-specific XML-
based languages, do not justify the potential data formatting benefits
of XBRL. Further, the commenter stated a preference for using XBRL
specifically in CSV format. In addition to the above concerns about
XBRL-based languages generally, the Commission believes that custom XML
format is more appropriate than an XBRL-CSV format for the purposes of
Form SHO because XML format is more human-readable than CSV format, and
XML is more flexible when using more complex data.
---------------------------------------------------------------------------

    \205\ See, e.g., Regulation of NMS Stock Alternative Trading
Systems, Exchange Act Release No. 83663 (July 18, 2018), 83 FR 38768
(Dec. 9, 2021) (requiring EDGAR Form ATS-N to be filed in an XML-
based language specific to that Form).
---------------------------------------------------------------------------

    Finally, the Commission's XML schema is designed to include
validations for each data field on Form SHO to help ensure consistent
formatting and completeness. The Commission continues to believe that
requiring Form SHO to be filed via Form-SHO specific XML, a structured
machine-readable data language, will facilitate more thorough review
and analysis of the reported short sale disclosures by the Commission,
increasing the efficiency and effectiveness of the Commission's
understanding of short selling and systemic risk. Additionally, most
Managers have experience filing EDGAR forms that use similar EDGAR
Form-specific XML-based data languages, such as Form 13F.\206\
---------------------------------------------------------------------------

    \206\ See Form 13F, available at https://www.sec.gov/pdf/form13f.pdf.
---------------------------------------------------------------------------

c. Timing of Reporting by Managers and Publication by Commission
i. Proposal
    Under Proposed Rule 13f-2(a), a Manager would have been required to
file the required information on Form SHO with the Commission within 14
calendar days after the end of each calendar month. Proposed Rule 13f-
2(a)(3) provides that certain information reported on Proposed Form SHO
would be published by the Commission on an aggregated basis. No time
frame for publication by the Commission was provided in Proposed Rule
13f-2. In the Proposing Release, however, the Commission estimated that
it would publish the aggregated information within one month after the
end of the calendar month.
ii. Comments and Final Rule
    Comments on the frequency of reporting and publication varied. Some
commenters called for more frequent reporting by Managers and, by
implication, more frequent publishing by the Commission of information
from Form SHO reports. Several of these commenters suggested that
technology permits more frequent--i.e., daily, if not

monthly--reporting.\207\ Several of these comments also expressed
concern that the Commission's estimated month-long delay in publishing
the aggregated information would produce stale data that would
undermine the goal of greater transparency in the markets.\208\ The
Commission acknowledges that the technology exists for frequent
reporting of transactions and faster data processing. The Commission is
concerned, however, about the accuracy of the data reported by Managers
and the aggregated data published by the Commission pursuant to Rule
13f-2 reporting requirements. The Commission believes that the data
reported by Managers on Form SHO is more likely to be complete and
accurate if Managers are afforded sufficient time to gather, assemble,
and review the reported data.\209\ The Commission continues to believe
that 14 calendar days after the end of each month provides a reasonable
period of time for Managers to meet their Rule 13f-2 reporting
requirements. The Commission is also concerned that increasing the
frequency of Commission publication of aggregated data may increase the
risk of short squeezes or other manipulative activities that could
interfere with the price discovery function of equity markets. The
timeframes as proposed and as adopted balance such concerns with some
commenters' desire for faster transparency.
---------------------------------------------------------------------------

    \207\ See, e.g., Comment from Regina Murrell (Mar. 25, 2023)
available at https://www.sec.gov/comments/s7-08-22/s70822-20121170-273336.htm (suggesting that technology be used to report short
positions daily); Anonymously Submitted Comment (Mar. 14, 2022)
(calling for reporting to regulators within twenty-four hours);
Anonymously Submitted Comment (Apr. 26, 2022) (calling for daily, if
not intraday, Form SHO reporting rather than monthly reporting, as
proposed); Anonymously Submitted Comment (Mar. 17, 2022) (stating
that technology permits more frequent reporting and release of short
sale-related data to the public in shorter timeframes); see also
Better Markets Letter, at 13 (predicting that the Commission's
``fairly significant delay'' in publishing the aggregated
information derived from Form SHO reports will lead to published
information that is ``less timely and less informative'').
    \208\ See, e.g., Comment of Estaban Oliveras (Mar. 14, 2022)
available at https://www.sec.gov/comments/s7-08-22/s70822-20119372-272258.htm (commenting ``If data is neither accurate nor timely,
then what is the point of collecting data?'').
    \209\ See Proposing Release, at 14956.
---------------------------------------------------------------------------

    Commenters taking the opposite view recommended that additional
time be given for Manager reporting and Commission publication. One
such commenter recommended that the Commission align the proposed
timelines for preparing and filing Form SHO reports with existing
filing requirements for other Commission reports and forms, to allow
for better coordination of the process of including short sale-related
data in multiple reporting frameworks.\210\ Another such commenter
suggested an initial filing period be extended to within 28 calendar
days upon crossing the threshold and then 14 calendar days for any
subsequent filing.\211\ Another commenter suggested that a minimum of
45 days before publication of aggregated data by the Commission was
necessary to protect Managers from the risk that their positions and
strategies would be used in a ``short squeeze or other market-driven
reaction'' or as part of a copycat strategy.\212\
---------------------------------------------------------------------------

    \210\ ICI Letter, at 12 (stating that aligning Form SHO
reporting requirements with those of Form N-Port, for example, would
give Managers 30 days, rather than the proposed 14 days, after the
end of a calendar to file a Form SHO).
    \211\ See Perkins Coie Letter, at 3 (stating a request to extend
the initial filing period to within 28 calendar days upon crossing
the threshold in order ``to reduce the monitoring and compliance
burdens for infrequent short position users'').
    \212\ MFA Letter, at 18.
---------------------------------------------------------------------------

    While adopting the proposed timeframes will delay the public
dissemination of aggregate short positions by about a month, the
Commission believes a longer delay such as 28 days for initial filings
or 45 days for all filings is unnecessary. FINRA's current short
interest reporting, for example, is published twice a month, resulting
in a delay of about two weeks.\213\ The final rule here requires
slightly more time than FINRA's current reporting regimes because
Managers need additional time following determination of whether they
meet a Reporting Threshold at the end of each calendar month to prepare
and file the data on Form SHO through EDGAR. Additionally, the
Commission believes that providing Managers with a reasonable period of
time to file complete and accurate short sale-related information in
the first instance will reduce the need for Managers to file amendments
to Form SHO. However, having an asymmetric filing deadline of 28 days
for initial filing and 14 days thereafter, as one commenter suggested,
would create negligible cost savings for Managers. Meanwhile, it may
have detrimental effects on the timing of data aggregation and
publication, which could unnecessarily affect the timing and quality of
aggregated published data.
---------------------------------------------------------------------------

    \213\ See, e.g., FINRA, Short Interest Reporting, available at
https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest (presenting ``due dates'' for reporting short
interest to FINRA and publication of short interest data by FINRA).
FINRA Rule 4560 requires FINRA member firms to report their short
positions in exchange-listed and over-the-counter equity securities
to FINRA twice each month. FINRA publishes the short interest
reports it collects from member firms for all such equity
securities.
---------------------------------------------------------------------------

Final Rule
    After considering comments, the Commission is adopting Rule 13f-
2(a) as proposed, and continues to estimate that it will publish
aggregated data derived from Form SHO reports within one calendar month
after the end of the reporting calendar month.\214\ For example, for
data reported by Managers on Form SHO for the month of October, the
Commission expects to publish aggregated information derived from such
data no later than the last day of November. The Commission continues
to believe that 14 calendar days after the end of each calendar month
provides Managers with sufficient time for Managers that meet the
Reporting Threshold to prepare and file Form SHO data.
---------------------------------------------------------------------------

    \214\ Publication of the aggregated information may be delayed
for an initial period following effectiveness of Rule 13f-2 and Form
SHO.
---------------------------------------------------------------------------

d. Contents of Form SHO
    Form SHO, as proposed, consists of two parts: Cover Page and
Information Tables. As discussed more fully below:
     The Cover Page presents certain identifying information
about the Manager(s) filing the Form SHO report, the calendar month for
which the Manager is reporting, the type of Form SHO report being made,
and whether the Manager is filing the Form SHO report as an amendment;
\215\
---------------------------------------------------------------------------

    \215\ See infra Part II.A.4.d.ii.
---------------------------------------------------------------------------

     Information Table 1 presents a Manager's monthly gross
short position in the equity security on which information is being
reported, as well as certain identifying information about that
security and about the issuer of that security; \216\ and
---------------------------------------------------------------------------

    \216\ See infra Part II.A.4.d.iii.
---------------------------------------------------------------------------

     Information Table 2 presents daily activity affecting a
Manager's gross short position during a calendar month reporting
period, as well as certain identifying information about that security
and about the issuer of that security.\217\
---------------------------------------------------------------------------

    \217\ See infra Part II.A.4.d.iv.
---------------------------------------------------------------------------

i. Financial Identifiers
(A) Proposal
    The Commission proposed that a Manager provide the active LEI, if
any, of each Manager listed on the Cover Page. The Commission also
proposed that a Manager report on each of the Proposed Form SHO
Information Tables the FIGI and CUSIP number of each security on which
information is being reported, and the active LEI, if any, of

the issuer of those securities. These items are discussed in Special
Instructions 8.c, 8.e, and 8.f regarding Columns 3, 5, and 6 of
Information Table 1, and in Special Instructions 9.c, 9.e, and 9.f
regarding Columns 3, 5, and 6 of Information Table 2.
(B) Comments and Final Rule
    The Commission received only a few comments regarding the proposed
requirement to report certain financial identifiers, including CUSIP
and FIGI (which identify specific securities), and LEI (which
identifies specific entities) on Form SHO.\218\ Two commenters stated
that the Commission should only require that CUSIP be reported on Form
SHO, and that the inclusion of additional financial identifiers could
cause confusion.\219\ Another commenter stated that the LEI and the
FIGI of issuers is ``not commonly provided'' in other holding reports
and would therefore cause Managers to incur additional costs.\220\
Another commenter, citing ``substantial CUSIP licensing costs,''
expressed concern that requiring the reporting of CUSIP could create an
``unnecessary financial burden'' on Managers.\221\ However, another
commenter stated that the inclusion of multiple financial identifiers
in addition to CUSIP, such as FIGI and LEI, could help foster
competition that ultimately reduces costs and improves data
quality.\222\
---------------------------------------------------------------------------

    \218\ FIGI and LEI each serve different functions. FIGIs
identify securities, whereas LEIs identify entities. Thus, a single
issuer's LEI could be associated with multiple FIGIs. Conversely,
multiple FIGIs could be associated with the same issuer's LEI.
Furthermore, identifying reporting Managers on Form SHO would
require an entity identifier (LEI) rather than a security identifier
(FIGI).
    \219\ See, e.g., Comment Letter from CUSIP Global Services (Apr.
25, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20126577-287237.pdf (``CUSIP Letter''); Comment Letter from
American Bankers Association (Apr. 26, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20126641-287311.pdf (``ABA
Letter'').
    \220\ Jennifer Han, Executive Vice President, Chief Counsel and
Head of Regulatory Affairs, Managed Funds Association (June 15,
2023), at 9, available at https://www.sec.gov/comments/s7-08-22/s70822-206120-414822.pdf (``MFA Letter 2'').
    \221\ See Letter from Anonymous Fund Manager, at 9.
    \222\ See Comment Letter from Gregory Babyak, Glob. Head Regul.
Affs., Bloomberg L.P., at 5 (May 2, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20127745-288932.pdf.
---------------------------------------------------------------------------

    In DFA section 929X, Congress specifically directed the Commission
to include CUSIP in short sale disclosure rules.\223\ CUSIP is a
universally recognized identifier that has been used for a wide array
of financial instruments since 1964, allowing securities transactions
to be easily identified, cleared, and settled, including short sales.
Furthermore, market participants and investors are familiar with
CUSIPs, which are widely and publicly available and used to identify
most U.S. stocks.\224\ Many companies display their CUSIPs on their
websites, and brokers and dealers often provide investors with search
engines to look up stocks by CUSIPs.\225\ Accordingly, while the
Commission recognizes that there are licensing costs associated with
the CUSIP, the Commission is adopting, as proposed, the requirement
that Managers report in Column 5 of each of the Form SHO Information
Tables the CUSIP for the equity security for which information is
reported to help facilitate market participants' understanding of the
reported data.
---------------------------------------------------------------------------

    \223\ Public Law 111-203, sec. 929X, 124 Stat. 1376, 1870 (July
21, 2010).
    \224\ See, e.g., Fast Answers: CUSIP Number, available at
https://www.sec.gov/answers/cusip (referencing CUSIP Global
Services).
    \225\ See, e.g., Chad Langager, How to Locate the CUSIP Number
for a Stock, Investopedia (Apr. 6, 2022), available at https://www.investopedia.com/ask/answers/06/cusipforspecificstock.asp.
---------------------------------------------------------------------------

    The Commission will also adopt, as proposed, the requirement that
Managers report in Column 6 of each of the Form SHO Information Tables
the FIGI of the equity security for which information is being
reported, if a FIGI has been assigned. Like CUSIP, FIGI provides a
methodology for identifying securities, and reporting a FIGI, if
assigned, will provide additional identifying information that will
provide additional clarity, not confusion, to market participants and
the public. Unlike CUSIPs,\226\ however, FIGIs are provided for
free.\227\
---------------------------------------------------------------------------

    \226\ See, e.g., Fees for CUSIP Assignment, CUSIP Glob. Servs.,
available at https://www.cusip.com/pdf/FeesforCUSIPAssignment.pdf
(``For an offering requiring a single CUSIP identifier, the
assignment fee is $200.'').
    \227\ See, e.g., Unlock the Power of Efficiency with Open
Symbology, OpenFIGI, available at https://www.openfigi.com/.
---------------------------------------------------------------------------

    To aid in the identification of the issuers referenced in Form SHO
reports, the Commission is also adopting a requirement that Managers
report in Column 3 of each Form SHO Information Table, the LEI, if any,
of the issuer of the security about which information is reported on
Form SHO.\228\
---------------------------------------------------------------------------

    \228\ This practice is in keeping with current requirements of
other Commission forms. For example, the registrant filing Form N-
PORT need not report LEIs for counterparties that do not have one.
In addition, as noted above, to avoid any suggestion that a Manager
filing a Form SHO report has an obligation to monitor the status of
an issuer's LEI, Instructions 8.c and 9.c of Form SHO--``Column 3.
Issuer LEI. If the issuer has an LEI, enter the issuer's active
LEI--have been revised to remove the term ``active.'' See supra n.
36.
---------------------------------------------------------------------------

    With respect to the proposed requirement that a Manager provide its
own LEI, if it had one, and, if available to the Manager making the
Proposed Form SHO filing, the active LEI of each Manager listed on the
Form SHO Cover Page as an ``Other Manager Reporting for'' the Manager
making the Proposed Form SHO filing, the Commission sought comment on
whether it should require every Manager filing a Proposed Form SHO to
obtain an LEI.\229\ One commenter supporting the requirement to report
financial identifiers on Form SHO stated that all Managers should be
required to obtain and maintain a non-lapsed LEI, as opposed to the
proposal, which stated that Managers would be required to report their
LEI, if any.\230\ Another commenter, however, expressed uncertainty
regarding such a requirement, stating that registration or renewal of
an LEI is ``not monetarily costless.'' \231\
---------------------------------------------------------------------------

    \229\ See Proposing Release, at 14965. Because the Cover Page,
as proposed, would also present the name and, if available to the
Manager making the Proposed Form SHO filing, the active LEI of each
Manager listed on the Form SHO Cover Page as an ``Other Manager
Reporting for'' the Manager making the Proposed Form SHO filing, the
query covered those Managers as well.
    \230\ Anonymously Submitted Comment (Apr. 4, 2022), available at
https://www.sec.gov/comments/s7-08-22/s70822-20122297-278355.htm
(``Every manager that has a part of trading any form of security or
derivative on any market should be forced to have a Legal Entity
Identifier (LEI). That way, specific bad actors can be easily
identified.'').
    \231\ See Comment Letter from Aaron Franz, available at https://www.sec.gov/comments/s7-18-21/s71821-20120685-272855.pdf (``I'm
uncertain that Managers should be required to obtain an LEI.
Registration or renewal of an LEI is not monetarily costless. The
same information can be submitted by Managers without a tracking
number with a cost.'').
---------------------------------------------------------------------------

    The Commission acknowledges that LEIs do provide a precise and
consistent means of identification of legal entities. However, after
considering the comments received, and because LEIs would supplement
existing identifying information provided for Managers and issuers
listed in Form SHO filings, the Commission is not requiring Managers
subject to Rule 13f-2 to obtain (and maintain non-lapsed) LEIs to
provide on the Cover Page of Form SHO reports and, when appropriate for
the ``Other Manager(s) Reporting for this Manager'' section of the Form
SHO Cover Page to be completed, to provide a non-lapsed LEI for each
Manager listed in the ``Other Manager(s) Reporting for this Manager''
of the Form SHO Cover Page. However, the Commission may consider this
issue in the future.
ii. Cover Page
(A) Proposal
    As proposed, and pursuant to Special Instructions 2-5 of Proposed
Form SHO, a Manager would report on the Cover

Page: (i) certain basic information, including its name, mailing
address, business telephone and facsimile numbers, and active LEI, if
any, as well as the name, title, business telephone and facsimile
numbers of the Manager's contact employee for the Form SHO report, and
the date the report is filed; (ii) the period end date--i.e., the last
settlement date of the calendar month for which the Manager is
reporting; (iii) the type of Form SHO report being filed; \232\ and
(iv) whether the Form SHO is being filed as an amendment.\233\ The
Manager filing the report will include the representation that ``all
information contained herein is true, correct and complete, and that it
is understood that all required items, statements, schedules, lists,
and tables, are considered integral parts of this form.'' \234\
---------------------------------------------------------------------------

    \232\ The Commission proposed that the reporting Manager
designate the report type for the Form SHO by checking the
appropriate box in the ``Report Type'' section of the Cover Page and
include, where applicable, the name and active LEI of each other
Manager reporting for this Manager. If all of the information that a
Manager is required by proposed Rule 13f-2 to report on related Form
SHO is reported by another Manager (or Managers), the Manager shall
check the box for Report Type ``FORM SHO NOTICE,'' include on the
Cover Page the name and active LEI (if available) of each of the
other Managers reporting for this Manager, and omit the Information
Tables. If all of the information that a Manager is required by
proposed Rule 13f-2 to file on Form SHO is included in the report,
the Manager shall check the box for Report Type ``FORM SHO ENTRIES
REPORT,'' omit from the Cover Page the name and active LEI of each
other Manager reporting for this Manager, and include the
Information Tables. If only a part of the information that a Manager
is required by proposed Rule 13f-2 to file on Form SHO is included
in the report filed by the Manager, the Manager shall check the box
for Report Type ``FORM SHO COMBINATION REPORT,'' include on the
Cover Page the name and active LEI of each of the other Managers
reporting for this Manager, if available, and include the
Information Tables. See Proposing Release, at 14958.
    \233\ If the Manager is filing the Form SHO report as an
amendment, then the Manager must check the ``Amendment and
Restatement'' box on the Cover Page and enter the Amendment and
Restatement number. Each amendment must include a complete Cover
Page and Information Tables. Amendments must be filed sequentially.
See Proposing Release, at 14960-61.
    \234\ See Proposing Release, at 14958.
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(B) Comments and Final Rule
    Other than with respect to financial identifiers as discussed
above, the Commission did not receive any comments on the contents of
the Cover Page. As a result, the Commission is adopting Special
Instructions 2-5 of Form SHO as proposed, with minor technical
modifications. For greater precision (but no change in the meaning) in
the terminology used in Form SHO as adopted, an LEI that is currently
in effect is referred to as a ``non-lapsed LEI'' rather than an
``active LEI'' (the terminology used in Proposed Form SHO). Also, the
Cover Page contact information for the reporting Manager and its
``Contact Employee'' has been updated to require the use of email
rather than facsimile.\235\
---------------------------------------------------------------------------

    \235\ See supra n. 37 and accompanying text.
---------------------------------------------------------------------------

iii. Information Table 1: ``Manager's Monthly Gross Short Position''
(A) Proposal
    Under Proposed Rule 13f-2, Managers meeting a Reporting Threshold
would report certain information, including end of month gross short
position information regarding transactions that have settled during
the calendar month being reported, and certain hedging information that
would help to indicate whether the reported gross short position is
directional or non-directional in nature.\236\
---------------------------------------------------------------------------

    \236\ Id. at 14959.
---------------------------------------------------------------------------

    Specifically, as proposed, the Manager would report the following
information on Information Table 1:
     In Column 1, a Manager would enter the last day of the
calendar month being reported by the Manager on which a trade settles.
This information would identify the month being reported by the
Manager.
     In Column 2, a Manager would enter the name of the issuer
to identify the issuer of the equity security for which information is
being reported.
     In Column 3, a Manager would enter the issuer's active
LEI, if any. The LEI provides standardized information that would
enable the Commission and market participants to more precisely
identify the issuer of each equity security for which information is
being reported.
     In Column 4, consistent with section 13(f)(2), a Manager
would enter the title of the class of the equity security for which
information is being reported.
     In Column 5, consistent with section 13(f)(2), a Manager
would enter the nine (9) digit CUSIP number of the equity security for
which information is being reported, if applicable.
     In Column 6, a Manager would enter the twelve (12)
character, alphanumeric FIGI of the equity security for which
information is being reported, if a FIGI has been assigned. Like CUSIP,
FIGI provides a methodology for identifying securities.
     In Column 7, a Manager would enter the number of shares
that represent the Manager's gross short position in the equity
security for which information is being reported at the close of
regular trading hours on the last settlement date of the calendar month
of the reporting period. The term ``gross short position'' means the
number of shares of the security for which information is being
reported that are held short, without inclusion of any offsetting
economic positions (including shares of the equity security for which
information is being reported or derivatives of such security).
     In Column 8, a Manager would enter the U.S. dollar value
of the shares reported in Column 7, rounded to the nearest dollar. A
Manager would report the corresponding dollar value of the reported
gross short position by multiplying the number of shares of the
security for which information is being reported by the closing price
at the close of regular trading hours on the last settlement date of
the calendar month. In circumstances where such closing price is not
available, the Manager would use the price at which it last purchased
or sold any share of that security. This additional information
regarding the dollar value of the reported short position would provide
additional transparency and context to market participants and
regulators.
     In Column 9, a Manager would indicate whether the
identified gross short position in Column 7 is fully hedged (``F''),
partially hedged (``P''), or not hedged (``0'') at the close of the
last settlement date of the calendar month of the reporting
period.\237\
---------------------------------------------------------------------------

    \237\ As stated in the proposal, a Manager would indicate that a
reported gross short position in an equity security is ``fully
hedged'' if the Manager also holds an offsetting position that
reduces the risk of price fluctuations for its entire position in
that equity security, for example, through ``delta'' hedging (in
which the Manager's reported gross short position is offset 1-for-
1), or similar hedging strategies used by market participants. A
Manager would report that it is ``partially hedged'' if the Manager
holds an offsetting position that is less than the identified price
risk associated with the reported gross short position in that
equity security. This additional hedging information would help to
indicate whether the reported gross short position is directional or
non-directional in nature. More specifically, a short position that
is not hedged could be an indicator that the short seller has a
negative view of the security, believes that the price of the equity
security will decrease, and accepts the market risk related to its
short position. A short position that is fully hedged could be an
indicator that the short seller has a neutral or positive view of
the security and is engaged in hedging activity to protect against
potential market risk. A short position that is partially hedged
could be an indicator that the short seller has a negative, neutral,
or positive view of the security. Whether the hedge itself is full,
partial, or non-existent might provide further context to market
participants regarding the short seller's view of the equity
security. Hedging information also can assist with distinguishing
position trading, which typically has corresponding hedging
activity, from other strategies such as arbitrage.

---------------------------------------------------------------------------

(B) Comments and Final Rule
    Comments regarding the contents of Information Table 1 raised
concerns about the proposal to require hedging information in Column 9.
As discussed below, the Commission is adopting Information Table 1, as
proposed, except that the Commission will not require Managers to
report hedging information as originally proposed in Column 9 of the
table.
Comments Regarding Hedging Indicators
Implementation Challenges
    The proposal would have required Managers to report on Information
Table 1 whether they were ``fully hedged'' or ``partially hedged''
based on whether a Manager held an offsetting position that completely
or partially reduced the risk of price fluctuations for its position in
that equity security, respectively.\238\ Further, the proposal required
Managers to report on Information Table 1 that their short position was
``not hedged'' if the Manager did not hold any offsetting
positions.\239\ A number of commenters raised concerns about the costs
to implement this proposed requirement.\240\ One such commenter
expressed concerns that the requirement to report hedging status would
be ``operationally difficult to implement,'' as the reporting would be
produced by back-office systems that ``generally do not have any
linkage information to allow them to match a hedge to a short
position,'' necessitating the development of costly new systems.\241\
One industry group commenter expressed a concern about ``complications
that can arise from the hedging classification,'' particularly for
large portfolios for which it will not always be clear when a position
is intended to be a hedge for another position, or clear or obvious
whether a position acts as ``one-to-one offset'' of price risk for
another position.\242\
---------------------------------------------------------------------------

    \238\ Proposing Release, at 14959.
    \239\ Id.
    \240\ See, e.g., MFA Letter, at 4 (stating that inclusion of
hedging classification on Form SHO would be costly and time
consuming for reporting Managers to produce); Virtu Letter, at 3
(advocating that requirement to report short positions as fully,
partially, or not hedged would be ``operationally difficult to
implement'' and should be eliminated).
    \241\ Virtu Letter, at 3.
    \242\ AIMA Letter, at 13.
---------------------------------------------------------------------------

Non-Universal Terminology
    Some commenters expressed concerns about the meaning of ``fully
hedged'' and ``partially hedged'' under the proposed rule. These
commenters expressed the view that because there is no universal
definition of hedging in the marketplace, or clear guidance on this
matter from the Commission, Managers can reasonably come to different
conclusions regarding the extent to which similar positions are
hedged.\243\ Because the meanings of ``fully'' and ``partially'' hedged
are subject to interpretation, these commenters believed that the
reporting of hedging data would be inconsistent, imprecise, potentially
misleading, and subject to misinterpretation. Several such commenters
posited that due to what they described as the ambiguity of the hedging
definitions, the proposed hedging reporting could result in inaccurate
or misleading data--such as misleading market signals of Managers'
sentiments--as Managers may interpret the hedging indicators
differently.\244\ Similarly, a commenter stated that due to the lack of
detail surrounding the ``partially hedged'' designation in particular,
the data may be misleading as to the level of price risk associated
with certain positions.\245\ A commenter stated that there is no
universal definition of what constitutes a ``hedge'' and that the
Commission's guidance in the Proposing Release and the instructions in
Proposed Form SHO as to how a Manager determines whether or when a
position is fully or partially hedged, or not hedged, are insufficient
to create a universal understanding and consistent reporting.\246\ That
commenter further stated that the Commission provided only one example
(the use of delta hedging in a one-to-one offset between short and long
positions), even though Managers use a variety of other hedging
techniques, such as portfolio hedging, ETFs, baskets of securities, and
securities that have historic trading correlations, among others.\247\
Under these circumstances, several commenters predicted, Managers would
likely default to a ``partially hedged'' designation,\248\ resulting in
data of limited utility.\249\ These commenters stated that due to what
they viewed as the ambiguous and non-universal nature of the terms,
many Managers may simply default to marking transactions as ``partially
hedged'' when it is unclear to what extent the positions are hedged,
due to the wide range of positions encompassed by the proposed
partially hedged indicator.\250\ To mitigate this concern and to
improve transparency, some commenters critical of the hedging
indicators suggested reducing the qualitative nature of the proposed
terms by dividing the ``partially hedged'' term into smaller, well-
defined units or even percentage increments.\251\ More specifically,
these commenters expressed concern that the proposed hedging
classifications could prove challenging to apply consistently across
Managers and could result in significant

costs for data of limited value.\252\ One commenter stated that the act
of market participants reporting the proposed hedging classification
would create a chilling effect.\253\
---------------------------------------------------------------------------

    \243\ See, e.g., ICI Letter, at 10; see also Comment Letter from
Mehmet Kinak, Head of Equity Trading, T. Rowe Price, et al. (Apr.
26, 2022), at 4, available at https://www.sec.gov/comments/s7-08-22/s70822-20126777-287493.pdf (``T. Rowe Price Letter'') (stating that
hedging data may be ``especially vulnerable to lack of consistency
in terms of how various managers apply the classification.''); AIMA
Letter, at 13 (predicting that hedging classification will involve
``level of subjectivity that is unlikely to be applied uniformly
across Managers'' and that determining such classification will
``prove even more complicated for a large quantitative portfolio'').
    \244\ See, e.g., AIMA Letter, at 13; MFA Letter, at 16.
    \245\ See ICI Letter, at 10.
    \246\ See MFA Letter, at 16-17.
    \247\ See id.
    \248\ See, e.g., MFA Letter, at 17. The MFA Letter suggested
that ``almost all short positions held by a large manager will be
partially hedged--for example, if a manager has discretion over one
fund with a short position, and another unrelated fund with a long
position, the manager would be required to report the short position
as ``partially hedged'' when in fact, the short position is not
hedged at all.'' Depending on the facts and circumstances, the
commenter is correct that the positions in the two funds managed by
the same Manager may have to be aggregated under Rule 200(c) of
Regulation SHO for marking purposes.
    \249\ See, e.g., Ropes & Gray Letter, at 5 (stating that
difficulty in defining ``fully,'' ``partially,'' or ``not,'' hedged
would likely lead to inconsistent reporting that, in turn would
limit the ``meaningfulness'' of the reported information to
investors and the Commission); T. Rowe Price Letter, at 4 (raising
concern that lack of consistency in how reporting Managers would
apply the hedging classification could lead to ``weaknesses'' in the
hedging data reported that would make the Commission's publication
of aggregated hedging classifications across reporting Managers of
little value to, and potentially misinterpreted by, the public); MFA
Letter, at 4 (stating ``[b]ecause (i) there is no universal
definition of ``hedging'' in the industry, and (ii) the reported
gross short position must encompass short positions aggregated
across funds, clients and affiliated managers, any hedging-related
designation would be meaningless. Inclusion of this data would
result in inconsistent reporting and would be costly and time
consuming for managers to produce.''); SIFMA Letter at 21 (stating
information reported in Column 9 of Proposed Form SHO would be
``inherently inconsistent and precise and, therefore, of very little
value to regulators in that it could be highly misleading''); see
also AIMA Letter, at 13 (stating hedging classification will involve
``level of subjectivity that is unlikely to be applied uniformly
across Managers'').
    \250\ See, e.g., Ropes & Gray Letter (arguing that the possible
exaggerated use of the partially hedged indicator is ``unlikely to
elicit comparable reporting across managers'').
    \251\ See Comment from Peyton Bailey (Mar. 14, 2022) (``Peyton
Bailey Comment''), available at https://www.sec.gov/comments/s7-08-22/s70822-272291.htm (proposing to use percentage points or
``majority'' (<=50%) and ``minority'' (<=50%) hedging indicators
instead of partially hedged); Nick Dougherty Letter (proposing to
use percentage points); WTI Letter (proposing to use percentage
points); Comment from Alex Fleming (Oct. 31, 2022), available at
https://www.sec.gov/comments/s7-08-22/s70822-317348.htm (proposing
to use numerical or percentage scale).
    \252\ See MFA Letter, at 4, 16-17.
    \253\ See Comment Letter from Joshua Russell (Oct. 26, 2022),
available at https://www.sec.gov/comments/s7-08-22/s70822-20147825-314190.pdf.
---------------------------------------------------------------------------

    Another commenter stated that although a change in hedging status
may correspond with a change in manager sentiment, it is also possible
that such a change may simply be the result of other unrelated
objectives, such as rebalancing a portfolio.\254\ Similarly, another
commenter agreed that the purpose of defensive tactics that hedging
strategies often entail, such as hedging a long position, contrasts
with the purpose of unhedged short strategies.\255\ That commenter
expressed the view that such ``defensive'' hedging should not be
included in the reporting as it would provide limited utility to the
public. Some commenters took the position that reporting on ``bona
fide'' hedging activity would not align with the goals in the Proposing
Release and that such activity is unlikely to be abusive or
manipulative.\256\
---------------------------------------------------------------------------

    \254\ See T. Rowe Price Letter, at 4.
    \255\ See K&L Gates Letter, at 2.
    \256\ See K&L Gates Letter, at 2-3, T. Rowe Price Letter, at 2-
4, Anonymous Fund Manager Letter, at 1.
---------------------------------------------------------------------------

    Some commenters that supported requiring hedging indicators
generally rejected complaints about the costs and burdens related to
the proposed reporting of hedging status as part of Information Table
1, stating that with modern technology, the requirements are ``easily
automated and with minimal cost incurrence.'' \257\ Support for the
collection of hedging information generally came from commenters
favoring steps to enhance the transparency of short sale-related data
to facilitate a better understanding of short selling dynamics.\258\
One commenter stated that the hedging classification, if made public,
would illustrate market sentiment, and that it would help to uncover
``short and distort'' campaigns, particularly in sectors that have
higher than normal rates of short selling.\259\ The commenter further
explained that under the status quo, it is unclear whether short
positions are used for hedging long positions or whether they are being
used to speculate on perceived overvaluation in the market in recent
years.\260\ Another commenter stated that publishing hedging
information regarding the actions of hedge funds and other large market
participants would inform the decision making of retail investors.\261\
Other commenters posited that the proposed ``not hedged'' indicator
would provide the most useful information to the market because
unhedged short positions may be the most likely to be riskier or
manipulated.\262\
---------------------------------------------------------------------------

    \257\ Letter from Andrew Patrick White, CEO & Founder, FundApps
(Mar. 2, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20118368-271239.pdf.
    \258\ See, e.g., Comment Letter from Anonymous (March 14, 2022)
(positing that managers should report whether, and to what extent,
they are hedged, along with an explanation of what that means; such
information is valuable in determining a manager's position with
regard to the associated risks); see also Comment Letter from
Biotechnology Innovation Organization (Apr. 25, 2022) at 3,
available at https://www.sec.gov/comments/s7-08-22/s70822-20126539-287214.pdf (``BIO Letter'') (positing that transparency into hedging
data would facilitate understanding of price and behavior dynamics).
    \259\ BIO Letter, at 7.
    \260\ Id. at 2.
    \261\ Peyton Bailey Comment.
    \262\ See Comment from Max Knaus (Oct. 30, 2022), available at
https://www.sec.gov/comments/s7-08-22/s70822-316957.htm; Comment
Letter from Brendan Casey (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20149998-319181.pdf.
---------------------------------------------------------------------------

Final Rule
    After considering the comments received,\263\ the Commission is not
adopting the hedging reporting requirement as proposed. Specifically,
when filing Form SHO Information Table 1, a Manager will not be
required to indicate whether the identified gross short position in
Column 9 of Information Table 1 is fully hedged (``F''), partially
hedged (``P''), or not hedged (``0'') at the close of the last
settlement date of the calendar month of the reporting period; Column 9
will be removed from Information Table 1 of Form SHO as adopted.
---------------------------------------------------------------------------

    \263\ One commenter stated that the proposed hedging requirement
``fails to appreciate the difficulty--particularly for multi-service
broker-dealers that use aggregation units and investment funds with
multiple strategies--of calculating and determining such information
for reporting purposes.'' SIFMA Letter, at 20. Under Regulation SHO,
a person shall be deemed to own a security only to the extent it has
a net long position in that security. See Rule 200(c). See also Rule
200(g)(1) (an order shall be marked long only if the seller is
deemed to own the security and the security is in the physical
possession or control of the broker or dealer or it is reasonably
expected that the security will be in the physical possession or
control of the broker or dealer by settlement date). Under Rule
200(f), a broker must aggregate all of its positions in a security
to determine its net position, unless it qualifies for independent
trading unit aggregation. If the broker or dealer qualifies for
independent aggregation units, each independent trading unit shall
aggregate all of its positions in a security to determine its net
position. See Rule 200(f). Qualification requires that the
independent aggregation unit meet four conditions. See Rule
200(f)(1) through (4). For instance, all traders in an aggregation
unit must pursue only the particular trading objective(s) or
strategy(s) of that aggregation unit and may not coordinate that
strategy with any other aggregation unit. See Rule 200(f)(3). In
adopting Rule 200(f), the Commission stated that ``conditions are
necessary to prevent potential abuses associated with establishing
aggregation units within multi-service broker-dealers.'' Regulation
SHO Adopting Release, at 48011. Thus, to be eligible for the
aggregation unit exception, the broker or dealer's units must
operate independently, with defined trading strategies, and one
unit's trades or positions cannot be used to offset or hedge another
unit's trades or positions. See, e.g., Rule 200(f)(3); see also
Regulation SHO Adopting Release, at 48011 (each unit must be engaged
in separate trading strategies). While information barriers between
aggregation units may be useful, as the commenter suggests, such
barriers alone are not sufficient for eligibility for Rule 200(f).
See e.g., Rule 200(f)(3); see also Regulation SHO Adopting Release
at 48011 (conditions are intended to limit potential for abuse
associated with coordination among units and to maintain the
independence of the units). Thus, a broker or dealer that has
created multiple units with fungible trading strategies as a means
of affecting order marking may not be eligible for aggregation unit
treatment under Rule 200(f) of Regulation SHO. See e.g., In re
Morgan Stanley & Co., LLC, 34-90046 (Sept. 30, 2020) (settled case),
available at https://www.sec.gov/litigation/admin/2020/34-90046.pdf
(long-only and short-only aggregation units were not independent and
separate trading strategies, but were instead operated by the same
employees, managed by the same manager, and consisted of the same
trading strategies).
---------------------------------------------------------------------------

    While the Commission laid out the rationale behind the hedging
reporting requirement in the Proposing Release, comments received, as
discussed above, persuaded the Commission that such reported data may
not result in as consistent and accurate data as it originally
envisioned. In addition to the definitional challenges discussed above,
the Commission recognizes the challenges of applying the Rule 13f-2
reporting requirements in the scenario when a Manager has investment
discretion over multiple accounts. For example, purchases and sales in
different accounts may not be intended to hedge one another, but the
proposal would have required that the Manager indicate that it was
``partially-hedged'' nonetheless. Such information would not be an
accurate reflection of the Manager's hedging status, and thus would not
be useful. As another example, a Manager that has purchased a few
shares of a security (for example, 100 shares) for which it holds a
substantial short position (for example, 1 million shares) would have
had to report that it was ``partially hedged'' without regard for the
scale of such purchases in relation to the position for which it would
have had to report it was hedging. That said, the Commission continues
to believe, as did some commenters favoring the proposed requirement,
that if accurate data on hedging could be collected, such information
would be useful to regulators.

    The Commission considered whether, as suggested by a commenter, the
hedging indicator could be simplified so that Managers would be
required only to report whether a position is not hedged.\264\ While
short positions that are unhedged may involve greater risk, this
alternative could be too easily circumvented by, for example, simply
purchasing a nominal number of shares of the security and stating the
position is therefore hedged (or partially hedged under the rule as
proposed). The Commission also considered another commenter's
suggestion that hedged short positions should be exempted from
reporting.\265\ This alternative would create a similar circumvention
scenario to the one mentioned above (i.e., using a nominal long
position to create an exempt hedged position).
---------------------------------------------------------------------------

    \264\ See Comment from Max Knaus (Oct. 30, 2022), available at
https://www.sec.gov/comments/s7-08-22/s70822-316957.htm; Comment
Letter from Brendan Casey (Oct. 30, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20149998-319181.pdf.
    \265\ Perkins Coie Letter, at 6 (stating that ``[o]r,
alternatively, the SEC should consider exempting hedged short
positions from reporting on Form SHO'').
---------------------------------------------------------------------------

    Accordingly, the Commission is not adopting the hedging reporting
requirement as proposed.
iv. Information Table 2: ``Daily Activity Affecting Manager's Gross
Short Position During the Reporting Period''
(A) Proposal
    As proposed, Information Table 2 of Form SHO captures daily
activity that increases or decreases a Manager's short position for
each settlement date during the calendar month reporting period. More
specifically, on proposed Form SHO, a Manager would report the number
of shares of the equity security that: (i) were sold short; (ii) were
purchased to cover, in whole or in part, an existing short position in
the security; (iii) were acquired through the exercise or assignment of
an option, through a tendered conversion, or through a secondary
offering transaction,\266\ that reduces or closes a short position on
the (underlying) security; (iv) were sold through the exercise or
assignment of an option that creates or increases a short position on
the (underlying) security; (v) resulted from other activity not
previously reported in the Information Table that reduces or closes, or
creates or increases a Manager's short position on the security,
including, but not limited to, ETF creation or redemption activity.
Pursuant to Proposed Rule 13f-2, Managers would assemble, review, and
file the required information with the Commission on new Form SHO
within fourteen (14) calendar days after the end of the calendar month.
As noted above, the Commission would then publish aggregated
information derived from the data reported on new Form SHO, aggregated
across all reporting Managers, within one month after the end of the
reporting calendar month.
---------------------------------------------------------------------------

    \266\ The term ``sale'' under the Securities Act includes
contract of sale. See Securities Offering Reform, Exchange Act
Release No. 52056 (July 19, 2005), 70 FR 44722, 44765 (Aug. 3,
2005); Short Selling in Connection With a Public Offering, Exchange
Act Release No. 56206 (Aug. 6, 2007), 72 FR 45094, 45102 (Aug. 10,
2007). The Commission has previously stated that, in a short sale,
the sale of securities occurs at the time the short position is
established, rather than when shares are delivered to close out that
short position, for purposes of section 5 of the Securities Act of
1933 (``Securities Act''). See, e.g., Commission Guidance on the
Application of Certain Provisions of the Securities Act of 1933, the
Securities Exchange Act of 1934, and Rules Thereunder to Trading in
Security Futures Products, Exchange Act Release No. 46101 (June 21,
2022), 67 FR 43234, 43236 (June 27, 2002) (see Questions 3 and 5);
Short Selling in Connection With a Public Offering, 72 FR 45094.
---------------------------------------------------------------------------

    Specifically, as proposed, the Manager would report the following
information on Information Table 2 for each date during the reporting
period on which a trade settled (settlement date) during the calendar
month.
     In Column 1, a Manager would enter the date during the
reporting period on which a trade settled for the activity reported.
This would identify the settlement date activity being reported.
     In Column 2, consistent with section 13(f)(2), a Manager
would enter the name of the issuer, to identify the issuer of the
security for which information is being reported.
     In Column 3, a Manager would enter the issuer's active
LEI, if the issuer had an active LEI. The LEI provides standardized
information that would enable the Commission and market participants to
more precisely identify the issuer of each equity security for which
information is being reported.
     In Column 4, consistent with section 13(f)(2), a Manager
would enter the title of the class of the security for which
information is being reported.
     In Column 5, consistent with section 13(f)(2), a Manager
would enter the nine (9) digit CUSIP number of the equity security for
which information is being reported, if applicable.
     In Column 6, a Manager would enter the twelve (12)
character, alphanumeric FIGI of the equity security for which
information is being reported, if a FIGI has been assigned. Like CUSIP,
FIGI provides a methodology for identifying securities.
     In Column 7, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the equity security
for which information is being reported that resulted from short sales
and settled on that date.
     In Column 8, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that were purchased to cover, in whole or
in part, an existing short position in that security and settled on
that date. This activity information would allow the Commission and
other regulators to more quickly identify a potential ``short
squeeze,'' which could be evidenced by short sellers closing out short
positions by purchasing shares in the open market. If it appeared that
a short squeeze may have occurred through potential manipulative
behavior involving short selling, the Commission could perform further
analysis regarding the squeeze. Increased risk of detection could deter
some market participants seeking to orchestrate a short squeeze.
     In Column 9, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that are acquired in a call option
exercise that reduces or closes a short position on that security and
settled on that date. The exercise or assignment of an option position
can reduce or close a short position in the underlying equity security.
     In Column 10, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that were sold in a put option exercise
that created or increased a short position on that security and settled
on that date. Options can be used to create economic short exposure
such that an exercise or assignment of an option could create or
increase a short position in the underlying equity security.
     In Column 11, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that were sold in a call option
assignment that created or increased a short position on that security
and settled on that date. Options can be used to create economic short
exposure such that an exercise or assignment of an option could create
or increase a short position in the underlying equity security.
     In Column 12, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that were acquired in a put option
assignment that reduced or

closed a short position on that security and settled on that date. The
exercise or assignment of an option position can reduce or close a
short position in the underlying equity security.
     In Column 13, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that are acquired as a result of tendered
conversions that reduced or closed a short position on that security
and settled on that date. Holders of convertible debt often hold short
positions to hedge their convertible position. When the shares of the
convertible debt are converted, they can reduce or close a short
position in the equity security.
     In Column 14, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that were obtained through a secondary
offering transaction that reduces or closes a short position on that
security and settled on that date. Purchasing securities in a secondary
offering \267\ can reduce or close a short position in the equity
security.
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    \267\ Such offering purchases must be reported whether they
occurred outside or within the restricted period of 17 CFR 242.105,
Rule 105 of Regulation M, which makes it unlawful for a person who
sells short a security that is the subject of an offering to
purchase in the offering if the short sale occurred during the
restricted period. Rule 105 originally prohibited persons from
covering short sales with offering purchases but was amended to
prohibit any purchases of offering shares if the person sold short
during the restricted period (with limited exceptions) ``to end the
progression of schemes and structures engineered to camouflage
prohibited covering.'' Short Selling in Connection with a Public
Offering, Exchange Act Release No. 34-54888 (Dec. 6, 2006), 71 FR
75002 at 75005 (Dec. 13, 2006). The amendment was designed to
address a proliferation of trading strategies and structures
attempting to accomplish the economic equivalent of the activity
that the rule seeks to prevent, specifically, attempts to obfuscate
the prohibited ``covering'' of the short sale. See, e.g., Short
Selling in Connection with a Public Offering, Exchange Act Release
No. 34-56206 (Aug. 6, 2007), 72 FR 45094 (Aug. 10, 2007).
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     In Column 15, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that resulted from other activity not
previously reported in Information Table 2 that creates or increases a
short position on that security and settled on that date. Other
activity to be reported includes, but is not limited to, shares
resulting from ETF creation or redemption activity.
     In Column 16, for the settlement date set forth in Column
1, a Manager would enter the number of shares of the security for which
information is being reported that resulted from other activity not
previously reported on Information Table 2 that reduces or closes a
short position on that security and settled on that date. Other
activity to be reported includes, but is not limited to, shares
resulting from ETF creation or redemption activity.
    The Commission stated in the Proposing Release that it believes
that the information in Columns 9, 12, 13, 14, and 16 of proposed
Information Table 2 would be useful in providing the Commission
additional context and transparency into how and when short positions
in the reported equity security are being closed out or reduced.\268\
The Commission also stated that the information in Columns 10, 11, and
15 would be useful in providing the Commission additional context and
transparency into how and when short positions in the reported equity
security are being created or increased.\269\
---------------------------------------------------------------------------

    \268\ Proposing Release, at 14960.
    \269\ Id.
---------------------------------------------------------------------------

    Such daily activity information would provide market participants
and regulators with additional context and transparency into whether,
how, and when reported gross short positions in the reported equity
security are being closed out (or alternatively, increased) as a result
of the acquisition or sale of shares of the equity security resulting
from call options exercises or assignments; put options exercises or
assignments; tendered conversions; secondary offering transactions;
\270\ and other activity. The Commission stated that it believed that
such activity data would also assist the Commission in assessing
systemic risk and in reconstructing unusual market events, including
instances of extreme volatility.
---------------------------------------------------------------------------

    \270\ See supra n. 263.
---------------------------------------------------------------------------

(B) Comments and Final Rule
    The Commission solicited and received comment on the categories of
short sale activity data that a Manager would be required to report on
new Form SHO Information Table 2. Commenters differed on the
appropriate level of transparency of the short sale-related data
presented. Some commenters called for robust--if not complete--
transparency of short sale-related data, while other commenters
expressed concerns about the breadth of the activity information to be
reported, the related cost burdens to report such information, and data
security.
    Individual investor commenters, generally, were critical of the
opacity of current short position and short activity data disclosure. A
group consisting of retail investors stated there was a ``lack of
transparency around short positions, the inability to adequately
quantify short interest, and the ability for firms to skirt regulation
through derivative positions such as options and security-based
swaps.'' \271\ Some individual investor commenters viewed Proposed Rule
13f-2 and related Form SHO as a first step toward achieving the full
transparency in disclosure they perceived as necessary for a fair and
efficient market.\272\ To these commenters, greater transparency is a
means to level the playing field for retail investors.\273\
---------------------------------------------------------------------------

    \271\ WTI Letter.
    \272\ Id. See also Anonymously Submitted Comment (Mar. 11,
2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20119226-272030.htm (``any and all information'' should be
accessible by any investors); Anonymously Submitted Comments (Apr.
26, 2022, May 10, 2022, Oct. 9, 2022, Oct. 26, 2022); Comment from
Erin Ashford (Oct 9, 22), available at https://www.sec.gov/comments/s7-08-22/s70822-309605.htm (calling for ``robust and complete
transparency''); cf. Anonymously Submitted Comment (Mar. 17, 2022)
(raising concerns about data integrity when the reporting system is
based on reporting).
    \273\ See, e.g., Comment from Richards (Oct. 31, 2022),
available at https://www.sec.gov/comments/s7-08-22/s70822-317124.htm
(``Market fairness and transparency is an important part of this
democracy. It helps to level the playing field.''); Anonymously
Submitted Comment (Oct. 19, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20146713-312005.pdf (``In summary, I, like
many others, support the above proposal to increase transparency in
the markets, and to somewhat level the playing field for smaller,
independent investors and retail alike.''); Comment from Jonathan
Patterson (Mar. 14, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-272193.htm (``Shedding some light into the
transactions of short sellers would be very supportive for retail
investors and would help to level the playing field.'').
---------------------------------------------------------------------------

    Other commenters acknowledged the Commission's authority to
promulgate rules to capture short sale-related data but took the
position that Form SHO reporting should be limited to the bare minimum
necessary to satisfy the statutory mandate of DFA section 929X (i.e.,
Exchange Act section 13(f)(2)).\274\ These commenters expressed
concerns about requiring the reporting of anything beyond the data
elements expressly specified in section 13(f)(2) of

the Exchange Act.\275\ Expressing concerns that the data required in
Information Table 2 of Proposed Form SHO is too granular and contains
an excessive amount of commercially sensitive information that, if
misappropriated, would lead to commercial harm, these commenters
recommended that, at a minimum, the scope of information required to be
reported on Information Table 2 of Proposed Form SHO be substantially
limited, or that Information Table 2 be eliminated altogether.\276\
Some of these commenters suggested that the Commission rely instead on
existing sources of short-sale related data, such as CAT or short sale-
related data provided to FINRA and the exchanges.\277\ Other commenters
questioned the utility of the reported information proposed to be
required.\278\
---------------------------------------------------------------------------

    \274\ See T. Rowe Price Letter, at 2 (urging a measured approach
to meeting the 929X reporting obligation so that ``the public
reporting of short sale information only satisfies the specific data
elements and minimum frequency of dissemination referenced in
section 929X and goes no further.''); Comment Letter from Robert
Sloan, Managing Partner, S3 Partners, LLC (May 20, 2022), available
at https://www.sec.gov/comments/s7-08-22/s70822-20129426-295541.pdf
(recommending reporting be limited to public disclosure of ``only
those data elements required by Section 13(f)(2)'') (``S3 Letter'');
see also AIMA Letter (positing that Information Table 1 of Form SHO,
without the requirement to report hedging information, would alone
be sufficient for the Commission to carry out its statutory mandate
and achieve its goals).
    \275\ See, e.g., SIFMA Letter, at 2 (positing that ``expansive
reporting regime contemplated under the Proposed Rules would extend
significantly beyond what Congress intended in passing Section 929X
. . . .''); Comment Letter from James Toes, President & CEO, et al.,
Security Traders Association (Apr. 26, 2022), available at https://www.sec.gov/comments/s7-08-22/s70822-20126796-287509.pdf (``STA
Letter'') (criticizing rulemaking proposal as going far beyond
mandate of 929X of Dodd-Frank Act to prescribe rules providing for
public disclosure of short sales and recommending more alignment of
Proposed Rule 13f-2 reporting requirements with those of Form 13F);
T. Rowe Price Letter, at 2.
    \276\ See, e.g., Two Sigma Letter, at 3-4 (raising concerns
about potential data breaches and unintended public dissemination of
daily short position data); see also AIMA Letter, at 14 (citing
negative ramifications for Managers, markets and the Commission if
commercially sensitive and valuable data reported in Information
Table 2 were to be compromised). See also discussion in supra Part
II.A.4.a.ii.
    \277\ See, e.g., AIMA Letter, at 2 (calling for elimination of
Information Table 2 because it is ``too granular''); MFA Letter, at
4 (calling for elimination of Information Table 2 in favor of ``less
burdensome alternative''); see also Ropes & Gray Letter, at 2
(stating that much of the information to be reported under Proposed
Rule 13f-2 ``is, or soon should be'' available from existing
reporting regimes--e.g., CAT, and information reported by broker-
dealers to FINRA and the exchanges); SIFMA Letter, at 15-19
(recommending elimination of Information Table 2 altogether or
alternatively that reporting of short activity data be limited to
reporting only gross short positions at the end of each settlement
day when a reporting threshold is breached (excluding detailed
purchase and sale activity); cf. T. Rowe Price Letter, at 3
(recommending that Commission not use the permissive authority
granted in section 13(f)(2) of the Exchange Act to gather additional
information that would not be beneficial to the market and would be
challenging for Managers to compile). See also discussion in supra
Part II.A.4.a.i.
    \278\ See, e.g., Ropes & Gray Letter, at 3, 6 (stating that it
would be difficult to ``to discern market sentiment or levels of
activity from the net number published by the Commission, and the
utility of publishing daily net transactions data to market
participants will also likely be limited''); see also K&L Gates
Letter, at 2 (questioning the ``value and impact'' of the
information called for under Proposed Rule 13f-2, that would
supplement information currently available from other sources).
---------------------------------------------------------------------------

    Several commenters expressly or effectively questioning the need
for Information Table 2, also raised the concern that the short
activity monitoring necessary to comply with the reporting requirements
of Proposed Form SHO would require any Manager that engages in short
selling to expend significant time and resources to enhance or revamp
its systems to monitor activity continuously, without certainty as to
if or when its short selling activity would meet or exceed the
reporting thresholds.\279\ These commenters concluded that the costs to
operationalize Rule 13f-2 had not been adequately weighed against any
benefits to regulators or the public.\280\
---------------------------------------------------------------------------

    \279\ See, e.g., Two Sigma Letter, at 7 (commenting that the
``commercial risk and operational burdens created by daily reporting
of individual short positions'' was not adequately justified in the
Proposing Release); MFA Letter, at 9-10 (raising concern that costs
and consequences of Proposals would have a chilling effect on
institutional investment managers' pursuit of short strategies);
Perkins Coie Letter, at 2-3 (stating that the benefits of the
reported information would be outweighed by compliance costs for
Managers that do not regularly utilize short positions ``[F]or
institutional investment managers that only selectively utilize
short positions, or who only do so passively, these additional
compliance costs in relation to the institutional investment
manager's usage of short positions could in turn impose untended
risks to the manager's underlying investors if the institutional
investment manager must divert additional time and resources for
compliance and oversight. This appears to be yet another affirmative
reporting requirement that will increase compliance and overhead
cost, without a [commensurate] benefit.'').
    \280\ See, e.g., MFA Letter, at 14 (describing categories of
information required in Information Table 2 as ``unclear,
requir[ing] complicated judgments on the part of [M]anagers, and . .
. likely to yield inconsistencies in reporting and results that are
not accurate.''); Ropes & Gray Letter, at 3 (positing that reporting
under Proposed Rule 13f-2 would impose ``significant costs'' on
Managers, would not result in disclosure of ``actionable information
to market participants,'' and is not necessary to allow the
Commission to perform ``effective market surveillance''); see also
S3 Letter, at 2 (predicting that short activity monitoring required
by Information Table 2 of Form SHO will be a ``substantial lift''
for Managers' administrative systems); SBAI Letter, at 2 (positing
that proposed Form SHO data collection framework not justified from
a cost benefit perspective and provides ``very limited'' additional
insight in an untimely manner).
---------------------------------------------------------------------------

Final Rule
    The Commission continues to believe that publication of aggregated
short position data, on a delayed basis, is a reasonable means of
minimizing the potential negative impacts of short position and short
activity disclosures on short selling and allaying data security
concerns raised by commenters while at the same time increasing
transparency.\281\ This rationale applies to Information Table 2, which
is about daily activities. Eliminating Information Table 2 would not
further the goal of enhancing the transparency of short sale-related
data.\282\ And for reasons stated below, the data available from
existing sources of short sale-related information have limitations, so
they do not extinguish the need for additional transparency in the
short sale market.\283\
---------------------------------------------------------------------------

    \281\ Proposing Release, at 14955.
    \282\ See Proposing Release, at 14987-14988, 14991 (discussing
how existing sources of short sale-related data are not sufficiently
granular, for example, to provide sufficient insights to further
understanding of short selling strategies, to distinguish short sale
transactions that impact short positions and those that do not, or
into the timing with which short positions are established or
covered).
    \283\ See infra Part VIII.B.4.
---------------------------------------------------------------------------

    The data to be reported in the following columns of Information
Table 2 in Proposed Form SHO will provide regulators with additional
context and transparency into how and when reported gross short
positions were closed out or increased, which will help the Commission
assess systemic risk.\284\ These columns are as follows:
---------------------------------------------------------------------------

    \284\ Proposing Release, at 14959.

 Column 7: Number of Shares Sold Short
 Column 8: Number of Shares Purchased to Cover an Existing
Short Position
 Column 9: Number of Shares Purchased in Exercised Call Option
Contracts
 Column 10: Number of Shares Sold in Exercised Put Option
Contracts
 Column 11: Number of Shares Sold Short in Assigned Call Option
Contracts
 Column 12: Number of Shares Purchased in Assigned Put Option
Contracts
 Column 13: Number of Shares Resulting from Tendered
Conversions
 Column 14: Number of Shares Obtained Through Secondary
Offering Transaction \285\
---------------------------------------------------------------------------

    \285\ A secondary offering transaction for purposes of this
requirement means an offering, other than an initial public
offering, or ``IPO,'' for the same class of security that is the
subject of the short sale. Such an offering could be made by the
issuer and include newly created and or treasury shares and could
also include or be made exclusively by selling shareholders.
---------------------------------------------------------------------------

 Column 15: Other Activity that Creates or Increases Manager's
Short Position
 Column 16: Other Activity that Reduces or Closes Manager's
Short Position

    However, the Commission is modifying the design of Information
Table 2 of Proposed Form SHO to help reduce the costs and burdens of
complying with the reporting requirements of Proposed Rule 13f-2
without sacrificing the level of

transparency of short sale activity data made available to market
participants as prescribed in Proposed Rule 13f-2(a)(3).
    Under the reporting regime of Proposed Rule 13f-2, Managers would
have been required to report each category of short activity
information included in Columns 7-16 (above) of Information Table 2 of
Proposed Form SHO.\286\ The Commission, for each individual column,
would then tabulate the information reported to determine and publish
the net activity in each reported equity security, as aggregated across
all reporting Managers. That net activity would be expressed by a
single identified number of shares of the reported equity security and
be determined by offsetting the purchase and sale activity reported by
Managers in Columns 7-16 of Information Table 2 of Proposed Form SHO.
---------------------------------------------------------------------------

    \286\ See Special Instructions 9.g of Proposed Form SHO.
---------------------------------------------------------------------------

    Under the adopted version of Information Table 2, Columns 7-16 of
Information Table 2 of Proposed Form SHO are replaced by a single, new
Column 7, in which Managers will report net activity in the security
for which information is being reported (represented as a number of
shares). More specifically, Special Instruction 9.g of Form SHO, as
adopted, requires Managers to report net change in short position
reflecting how the gross short position in shares of the security for
which information is being reported are being closed out--or
alternatively, increased--as a result of the acquisition or sale of
share activity determined by offsetting prescribed types of purchase
and sale activity. Those prescribed types of purchase and sale
activities correspond to the purchase and sale activities identified in
Columns 7-16 of Proposed Form SHO. The net activity will be determined
by Managers--rather than by the Commission--and reported to the
Commission. The Commission will then aggregate the reported daily net
change numbers across Managers for public dissemination. Under the
adopted version of Information Table 2, the Commission will receive
less granular information from reporting Managers than was proposed.
The Commission, however, will receive net activity information from
reporting Managers for each settlement date during the calendar month
which will provide additional context and transparency into whether the
reported gross short positions in the reported equity security are
being closed out (or alternatively, increased) as a result of the
acquisition or sale of shares of the equity security resulting from
call options exercises or assignments; put options exercises or
assignments; tendered conversions; secondary offering transactions; and
other activity. The Commission believes that this is a reasonable
approach that considers both those comments that supported additional
transparency with regard to short sale-related information that would
result from Information Table 2 reporting, and also comments about cost
and data security concerns with regard to such reporting. This reported
net activity information will assist the Commission in assessing
systemic risk and in reconstructing unusual market events, including
instances of extreme volatility.\287\