The SEC has extended the compliance date for the amendments to Rules 201 and 200(g) of Regulation SHO to February 28, 2011 to give exchanges additional time to modify their procedures for conducting single-priced opening, reopening and closing transactions for covered securities that have triggered the circuit breaker under Rule 201 (Rel. No. 34-63247, November 4, 2010). The extension will also give industry participants additional time for programming and testing for compliance with the rule’s requirements.

The short sale-related circuit breaker in Rule 201 imposes a restriction on the prices at which securities may be sold short. The amendments to Rule 200(g) provide that a broker-dealer may mark certain qualifying short sale orders as “short exempt.” The original compliance date for both rules was November 10, 2010, but the staff has become aware that certain exchanges will need additional time to implement procedures required by Rule 201.

Rule 201 uses the national best bid as a reference point to certain exchanges’ single-priced transactions. The transactions involve queuing and the execution of multiple orders at a single price, according to the release, and the single equilibrium price is based on orders on the exchange without any reference to the national best bid at the time of execution. The release notes that a significant percentage of total trading volume can be executed in single-priced transactions. One exchange executes approximately 25% of its total trading volume in opening and closing transactions.

The staff has been informed that there have been some delays in the programming process. Some of the information that is necessary to program for compliance with Rule 201 was submitted later than expected. The exchanges have warned of an increased risk of technical or market problems if full implementation of the rule is required by November 10. The exchanges and other industry participants believe the delayed compliance date will provide sufficient time to resolve the issues relating to the implementation of Rule 201.

The SEC concluded that the extension is necessary and appropriate to give the exchanges time to modify their current procedures and to give industry participants additional time to program and test for compliance.