SBAI Response to UK HM Treasury Call for Evidence on Short Selling Regulation
Short selling plays an important role in global financial markets and brings many benefits, including investor protection against market volatility, increased liquidity, more efficient price discovery, dampening of price bubbles, and ultimately more efficient capital allocation.
The SBAI supports regulation of short selling, including ban of uncovered shorting. There is no rationale for public disclosure of individual short sales at low thresholds from a from a financial stability, market integrity or investor protection perspective.
Short selling data can be more efficiently sourced from Broker Dealers, rather than requiring reporting of all positions (and variation thereof) above a certain threshold from all managers.
UK authorities should have tools to combat market abuse and maintain orderly markets, but it is important that the well-meant measures the authorities deploy do not become the source or amplifier of disorderly markets and thereby undermine confidence in markets. The SBAI has therefore cautioned HMT’s expectations with respect to the effectiveness of market interventions with the aim of restricting short selling.