Levelling the playing field in rapid fashion. Let’s summarize.

1. Extending a requirement for prompt delivery of borrowed shares (maximum of three days) to options market makers
2. Imposing penalties on brokers whose clients have failed to deliver shares three days after these are sold short
3. Making it a fraud for investors to lie (to their broker) about their ability to locate shares to borrow
4. Proposed disclosure rule forcing funds (larger than $100M) to disclose their short positions on a daily basis
5. Forced disclosure of past trading behaviour of shorting funds in certain securities
6. New York Attorney General Andrew Cuomo began an investigation into whether bears illegally drove down stock prices of financial firms
7. Some pension funds refusing to lend shares to short-sellers
8. In the UK an outright ban on short selling financials
9. A similar temporary ban in the making for the US.

In addition to that, a proposed buying of bad debts/illiquid assets tl clear the balance sheets of financial institutions and get illiquid markets going again.

What can the shorts do with heavily (and nakedly) shorted stocks like InterOil?

• Although high (top, in fact) on the reg. SHO list, it won’t be a priority for the SEC
• So there might not be immediate large scale unwinding of positions, but any triggered rally will be much more difficult to contain for the shorts
• Since locating shares for borrowing will be pretty hard, considering the number of outstanding shorted shares already, it will be both more costly (interest cost) and difficult to short InterOil
• They can nakedly short it for a couple of days, so we should get used to more, probably much more short-term volatility
• But the trend will be up (as long as there is no disappointing fundamental news) and there could easily come a breaking point for the shorts. When that comes is hard to say, but we think it’s a matter of time..