SBAI Responds to European Commission CP on Short-Selling
The European Commission rightly points out that short selling plays an important role in global financial markets. In light of the volatility seen in Euro-denominated bonds in 2010, we highlight that the most important issue for the EU governments is restoring investor confidence and encouraging investors to buy risky sovereign bonds.
Restrictions on short selling can be counterproductive. The ability to manage risk via short selling and derivatives makes it far more attractive for investors to stay in the market during periods when the prices are volatile or declining. Without this ,investors are more likely to withdraw accentuating the market contraction during major crises like the present one.
EC Consultation on Regulation of Short Selling (1 June 2010)