The London-based Investment Management Association (IMA) today published its response to the Financial Services Authority (FSA) discussion paper on Short Selling (DP17).
The Association says it agrees with the emphasis on greater transparency of short selling in the market and welcomes the initiatives proposed by the FSA in this regard. However, the IMA says that as there will be operational difficulties in providing full information on short positions, it accepts that – for the short term only – stock lending data could be used as a proxy for short positions in the market.
However, the Association says it does have concerns about certain disclosure options under discussion. In particular, disclosing the names of houses that are shorting would increase the risk of taking short positions, which could in turn hinder the proper functioning of the market.
“We are pleased to note that the emphasis of the paper is on transparency of short selling rather than any limitations on short selling,” says Julie Patterson, Director, Regulation & Taxation, at the IMA. “Market transparency is of utmost concern to our members and we welcome initiatives by the FSA in this regard. But it is important that any information is timely, easily accessible, consistent and cost effective and that disclosure should not lead to a weakening of market structure. There needs to be a balance between the amount of information available and the need for a fully functioning stockmarket, where the acceptable uses of short selling do not become too risky.”