¹Final Rule: Short Position and Short Activity Reporting by Institutional Investment Managers, available at https://www.sec.gov/files/rules/final/2023/34-98738.pdf.

²The SEC also adopted an amendment to the consolidated audit trail (“CAT”) to require CAT reporting firms to report their reliance on the bona fide market making exception in the SEC’s short sale rules. The SEC published the text of that amendment in a separate release: https://www.sec.gov/files/rules/other/2023/34-98739.pdf.

³As defined in Section 13(f)(6)(A) of the Exchange Act, the term “institutional investment manager” includes any entity: (i) investing in or buying and selling securities for its own account; or (ii) exercising investment discretion with respect to the account of any other person (including any private or registered fund).  While this definition also applies to institutional investment managers required to make quarterly filings on Form 13F, the New Rule does not solely apply to institutional investment managers required to make those filings.

⁴The term “equity security” is defined in Rule 3a11-1 of the Exchange Act and includes any stock or similar security, certificate of interest or participation in any profit sharing agreement, preorganization certificate or subscription, transferable share, voting trust certificate or certificate of deposit for an equity security, limited partnership interest, interest in a joint venture, or certificate of interest in a business trust; any security future on any such security; or any security convertible, with or without consideration into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right; or any put, call, straddle, or other option or privilege of buying such a security from or selling such a security to another without being bound to do so.  While Managers do not have to account for economic exposure to an underlying equity security created through the use of equity derivatives when calculating the Reporting Thresholds for reporting short sales of the underlying equity security, once a Manager meets or exceeds a particular Reporting Threshold for an underlying equity security, the Manager will be required to report certain short activity for each settlement date during the reporting calendar month, and that disclosure must take into account activity in options, tendered conversions, secondary offering transactions and other equity derivatives or activity that might affect the reported short positions on Form SHO.

⁵In determining its gross short position in an equity security, however, a Manager is not required to consider short positions that the ETF holds in individual underlying equity securities that are part of an ETF basket.

⁶A person exercises “investment discretion” with respect to an account if, directly or indirectly, such person: (i) is authorized to determine what securities or other property will be purchased or sold by or for the account; or (ii) makes decisions as to what securities or other property will be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions.

⁷“EDGAR” is the SEC’s Electronic Data Gathering, Analysis and Retrieval system.

⁸If two or more Managers, each of which is required by Rule 13f-2 to file Form SHO for the reporting period, exercise investment discretion with respect to the same securities, only one such Manager will be required to report the information in its Form SHO.  However, if a Manager has information that is required to be reported on Form SHO and such information is reported by another Manager (or Managers), such Manager will be required to identify the other Manager(s) reporting on its behalf in Special Instruction 5 of Form SHO.

⁹The SEC will begin publishing the aggregated short sale-related data collected pursuant to the New Rule three months after the Compliance Date.

¹⁰Under the New Rule, the term “gross short position” means the number of shares of the equity security that are held short as a result of short sales, without inclusion of any offsetting economic positions, such as shares of the equity security or derivatives of such equity security.  Under Regulation SHO, the term “short sale” means: (i) any sale of a security that the seller does not own; or (ii) any sale that is consummated by the delivery of a security borrowed by, or for the account of, the seller.

¹¹The term “regular trading hours” means between 9:30 a.m. and 4:00 p.m. Eastern Time.

¹²To determine whether this dollar threshold is met, Form SHO provides that a Manager must determine its gross short position at the close of regular trading hours in the equity security 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 must 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.

¹³To determine whether this percentage threshold is met, Form SHO provides that a Manager must: (i) determine its gross short position at the close of regular trading hours in the equity security 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 (ii) add up the daily percentages during the calendar month as determined pursuant to clause (i) of this sentence 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 is the issuer’s most recent annual or quarterly report, and any subsequent update thereto, filed with the SEC.

¹⁴To determine whether this dollar threshold is met, Form SHO provides that a Manager must determine its gross short position at the close of regular trading hours in the equity security 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 must use the price at which it last purchased or sold any share of that security.