Should a broker or dealer mark a short sale order “short exempt” if the order involves an OTCBB stock?

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Should a broker or dealer mark a short sale order “short exempt” if the order involves an OTCBB stock?

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Mark Towers

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Rule 200(g)(2) provides that a short sale shall be marked “short exempt” if the seller is relying on an exception from the tick test of Rule 10a-1 or any short sale price test of any SRO. Securities traded on the over-the-counter bulletin board (“OTCBB”) are not subject to any short sale price tests and are therefore do not rely on an exception from such price tests. As such, they need not be marked “short exempt.” Short sales in such securities may continue to be marked “short.” Question 2.2: May market participants presume that an “S” designation on an order indicates that an order is “sell long” and an “SS” designation on an order indicates that an order is “sell short?” Do these designations satisfy the new marking requirements under Regulation SHO? Answer: Under Rule 200(g), brokers and dealers must mark all sell orders of any equity security as “long,” “short,” or “short exempt.” The primary objective is to make sure that orders are marked and executed properly and that accurate

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