Fund associations call for 'sensible' short selling disclosure rules

Fund associations in the US, UK and Australia are calling for a“sensible” approach to regulatory oversight of short selling, particularly with respect to public disclosure.

The Investment Company Institute (ICI), the Investment Management Association (IMA) and the Investment and Financial Services Association (IFSA) are liaising with the International Organisation of Securities Commissions (IOSCO) in relation to the development of a short selling regulatory regime.

The associations have jointly expressed their support for regulatory reform that will promote stability and investor confidence, and combat market manipulation, but are urging for the regulatory regime to protect the confidentiality of data provided to regulators.

“We are opposed to public disclosure of short selling information, which has the potential to increase downward selling pressure, facilitate the front-running of a fund’s security positions and reduce the incentive for proprietary research,” the joint statement from ICI, IMA and IFSA said.

The associations said that while market regulators should have access to trading information of individual market participants, public disclosure should not be used to “facilitate trading strategies”.

The associations said regulators should be able to monitor and investigate thoroughly market manipulation and support “timely disclosure directly to the chief market regulator or supervisor of short sale positions above a de minimis amount”.

“We believe that if any public disclosure regime is to be established effectively, this is best achieved by a market or regulator publishing a single aggregated net short-interest position for each stock on a periodic, but sufficiently delayed, basis,” the statement said.