02/02/2011 Author: Tony Griffiths

EU shorting plans are ineffective, says study

An independent study has labelled the EU’s plan to publicly disclose the net short positions of managers as ineffective.

The report by Oliver Wyman, the international management consulting firm, was commissioned by the Alternative Investment Management Association (Aima), and said the proposal was, “not effective in meeting the needs of the public, regulators or industry participants”.

Although acknowledging that market transparency on short positions was desirable, the report suggested that the current requirements could result in, among other things, lower market liquidity, and an increased likelihood of short squeezes.

Published last year, the European Commission’s draft short-selling regulations propose public disclosure of individual managers’ net short positions above 0.5% of outstanding share capital. European lawmakers are currently reviewing the proposals and have until 14 February, when a vote on possible amendments is scheduled to take place, to make a decision.   

Commenting on the findings, Aima CEO Andrew Baker said: “As the findings of this independent study highlight, there are serious unintended consequences of disclosing individual managers’ positions to the market.”