Fund Groups Support Short-Selling Oversight

The Investment Company Institute, along with the UK's Investment Management Association and Australia's Investment and Financial Services Association, has released a combined statement in support of prudent regulatory oversight of short selling.

"Short selling plays a crucial role in legitimate active investment strategies and risk management activities designed to enhance performance and maximize returns to investors. It also contributes to market liquidity, reduces transaction costs and assists to ensure pricing efficiency," said the statement signed by the three CEOs of the associations. "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 three associations also recommend a global response to regulatory reform.

"The development of a practical short selling regulatory regime is a critical matter for securities markets around the world in order to promote confidence and stability," the statement said. "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."