Image by tanakawho via FlickrThe year is almost over and we should now be turning our attention to the upcoming holidays. As a final Christmas present for the securities lending industry, regulators in France, Germany, Switzerland and Belgium all announced that they will be extending their respective short selling bans. Norway also told us that they will be looking at their restrictions early next year, having a scout around what other regulators are doing and then deciding whether they will make any changes. I don’t know whether I am more excited to see what Santa has left for me under the tree, or to see what the Norwegian regulators will decide! I won’t be able to sleep until I know the answer to both!
I am assuming that the regulators have essentially said they don’t want to pre-empt the IOSCO report at the end of February by putting in changes that may not to be amended again subsequently. I’m not happy about any of this, but you could kind of guess something like this would be happen.
Well, you could guess that everywhere except the UK. The Telegraph reported last week that the FSA was looking at removing the short selling ban on schedule, but announcing a disclosure based system to replace it. Gordo (CC) Brown let everyone know that the government would be brining in new short selling rules before the ban, and so of course they will be doing something. It will be “interesting” to see what they bring in this time.
Of course, all of this is against the background of even more academic research on the short selling bans. There are two recent reports, SHACKLING SHORT SELLERS: THE 2008 SHORTING BAN and The Impact of Short Sales Restrictions. The findings show that the share prices of the restricted stocks continued to fall and more importantly the liquidity of the stocks as measured by wider bid-ask spreads was negatively impacted by the restrictions. Further, investors already suffering from wider spreads are inevitably impacted by not having the whistle-blowing effect of short sellers on poorly forming companies.
I spend a lot of time making comments on the net commenting on articles that slam research reports on the impact of short selling. These articles inevitably denounce these reports as industry-funded self-interested and self-serving documents that would of course extol the virtues of short selling. What I keep asking them is where is the research from the anti-short selling lobby? Other than anecdotal accounts, there is nothing I have ever seen that proves their case. Have you seen any? If so, please send it to me so I can see some informed dissent.
Anyway enough of my ranting, this will probably be the last post of the year, but you never know.
I hope you have a great Holiday Season, and I wish you and your loved ones Health and Prosperity for the New Year!
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