Proposals included in the FSA's Discussion Paper 17 on problems associated with short selling would ...
Proposals included in the FSA's Discussion Paper 17 on problems associated with short selling would not necessarily create the best outcome for the stock market, the Investment Management Association says.
DP17 was the FSA's response to complaints from listed companies that share prices were being driven down for no reason simply because of the actions of short sellers - many of whom have made spectacular fortunes in the three-year bear market.
However, both the London Stock Exchange and the IMA have pointed out that short selling is an important function of the market, and done properly can actually benefit companies, for example, by solving liquidity problems.
The IMA further says that while the FSA's call for transparency is a proper motive, forcing firms that lend shares to publish the names of institutions doing the borrowing could undermine the market function that short selling provides.
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