The Investment Management Association’s (IMA) response to the FSA Discussion Paper DP09/1 on short selling published on May 13, 2009 outlines the benefits which short selling can bring to both investors and markets and argues that, as a well-established investment activity, short selling can enhance performance and maximise returns for investors.
RBC Dexia Investor Services, one of the global securities lending agent, believes that short selling and securities lending in general are vitally important for the efficient functioning of capital markets. Securities lending, when conducted within well managed, transparent and properly controlled programmes, is a highly efficient and low risk method of generating incremental returns for beneficial owners and asset managers from otherwise idle assets.
“The IMA’s position is encouraging and reflects the importance of securities lending to all market participants,” says Susan Pike, global head of market products and services at RBC Dexia. “As well as earning incremental income for lenders, securities lending provides fundamental support for the effective functioning of capital markets, and contributes to trading strategies for a broad cross-section of the investment community. Short selling is just one component of securities lending and it is important that regulators acknowledge the benefits it can bring.”
But not all securities lending programmes are the same. The principles, procedures and structures that underpin each provider’s programme can and do vary significantly – most notably on the matter of revenue generation, counterparty risk and collateral management.
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