The FSA's new DP17 discussion paper into short selling has been published today, asking for submissi...
The FSA's new DP17 discussion paper into short selling has been published today, asking for submissions on how to improve the transparency of such share trades in the market and whether the regulatory regime needs to be tightened.
Short selling has been heavily blamed by some institutions this year for its effect on share prices already knocked by weakened markets.
The practice has been blamed for undermining the value of assets held under management for the long term, in turn forcing sales of shares held by institutions buffeted by regulatory requirements for free asset ratios.
Other institutions, such as hedge fund managers, argue that shorting performs an important role in making a market for shares.
The FSA says it will not ban short selling outright because it performs an important function in maintaining liquidity.
However, it does say that there is a case for more transparency in the way short selling is carried out.
It is proposing to upgrade the reporting rules for "all short positions in the derivatives or cash equity market" as well as require the publication of all "naked shorts", where the seller is not covered by any borrowed stock.
The deadline for submissions is the end of January.
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