The rules appear to have had their intended effect of halting the slide in shares of financial companies such as Fannie Mae, Freddie Mac and Lehman Brothers Holdings Inc. Combined with falling oil prices and encouraging earnings reports from some banks, shares in some of these names have doubled.
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Two groups of investors appear to be most vulnerable to an extension and broadening of the rules, smaller firms where the added costs and capital requirements would be onerous and fast-trading funds that use computer programs to make thousands of trades a day.
So far, major Wall Street firms have been complying with the order manually, making phone calls to line up so-called pre-borrow arrangements for the 19 stocks. Expanding the rule to all stocks "would require an extensive delay" so the process could be automated, one brokerage executive said.
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