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The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

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AIMA statement on IOSCO short selling consultation report

“This consultation report from IOSCO’s Task Force on Short Selling is admirably sensible.

AIMA, as the global trade body for the world’s hedge fund industry, believes that short selling is a wholly legitimate market practice, is not abusive and helps capital markets function more effectively. We therefore particularly appreciate the positive comments from Kathleen Casey, Chairman of the Technical Committee, who said ‘IOSCO believes that short selling plays an important role in capital markets for a variety of reasons including more efficient price discovery, mitigating price bubbles, increasing market liquidity, facilitating hedging and other risk management activities.’

AIMA absolutely agrees with the Task Force that it would be desirable to establish a more consistent international approach to the regulation of short selling. At present the many discrepancies worldwide create unnecessary uncertainty.

We also agree that there should be appropriate reporting regimes for disclosing short positions to national regulators, although we believe that any reporting of short positions to the market should be in aggregate form only.

We support the Task Force’s suggestion that regulators worldwide should have an effective discipline for the settlement of short selling transactions, particularly the settlement of failed trades. Indeed in our new policy platform of 24th February we said we would support measures to reduce such settlement failures.

Finally, we think the conclusion by the Task Force that ‘it is necessary that there is flexibility in short selling regulation in order to allow market transactions that are desirable for efficient market functioning and development’ is a wise one, and we are glad that IOSCO has taken such a pragmatic approach.”

Andrew Baker, Chief Executive of AIMA

London, 23rd March 2009
 

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