UPDATE 1-Short interest falls on Nasdaq, level on NYSE

(Adds investor comment, byline)

By Phil Wahba

NEW YORK, April 9 (Reuters) - Short interest held steady in late March on the New York Stock Exchange, edging up 0.1 percent, and fell 4.1 percent on the Nasdaq, the exchanges said on Thursday, suggesting that short sellers were gauging how the latest government initiatives would affect short selling.

"The upward trend in short selling in the past few months seems to have plateaued," said Richard Gates, founder of TFS Capital LLC, which runs a short-long market neutral fund.

"Maybe shorts are taking a wait and see approach about how the government's program would work," Gates said, referring to the "Public Private Investment Program," which he said affected their strategies by influencing market movements.

U.S. bank shares soared on March 23 after announcement of the program, which envisions the government offering financing for private investors to buy assets from banks and the government shouldering much of the risk.

Investors who sell securities "short" profit from betting stocks will fall. Short-sellers borrow shares and then sell them, waiting for the stock to fall so they can buy the shares back at the lower price, return them to the lender and pocket the difference.

As of March 31, short interest on the NYSE rose to about 16.181 billion shares, compared with 16.169 billion shares as of March 13.

Short interest as of March 31 was equal to 4.23 percent of the total shares outstanding on the NYSE.

As of March 31, short interest fell on Nasdaq to about 7.048 billion shares, compared to 7.348 billion shares as of March 13.

The Nasdaq's short ratio, or the average number of days it would take to cover the outstanding short positions, decreased to 3.00 days from 3.07 days over the same period. (Reporting by Phil Wahba)