Emerging Asian markets better prepared for the meltdown
Emerging Asian markets have not needed to ban short-selling during the financial meltdown, as has been the case in the US, UK and Australia, because they were better prepared to deal with the downturn following the Asian crisis.
Speaking in a panel discussion on the “new global financial architecture” at the Australian Securities and Investments Commission (ASIC) summer school in Sydney, Zarinah Anwar, chairman of Malaysia’s Securities Commission, said Asian emerging markets learnt lessons from the Asian crisis, during which short-selling had been banned.
Following the Asian crisis, short-selling was reintroduced to the markets but with heavier regulation, she said, including the imposition of the uptick rule and a ban on naked short-selling.
As a result, Anwar said, these markets were better equipped to deal with the current downturn in the market on the short-selling front and a ban was not necessary.
Anwar also discussed the notion of global regulation, arguing that implementation of global standards was an issue because laws and guidelines at a national level in individual jurisdictions would be impacted. She also noted the varying levels of development among different jurisdictions, asking to what extent jurisdictions can accept and impose standards in markets, “taking into account the level of maturity and sophistication” in those markets.
Anwar was critical of what she termed “regulatory capture”, whereby regulators trying to discharge their roles and responsibilities were being subject to political and institutional influence on decision making.
Regulators have to be more vigilant about influences on regulations, she told the conference, and avoid this kind of capture, particularly from politicians and large institutions.
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