NEWS

The Financial Times reports (September 20, 2009) on a survey by RBC Dexia of institutional investors, who think there is a link between short selling and share price movements.

Editor Pauline Skypala reports that, “Over 90 per cent of respondents to a global survey by RBC Dexia on securities lending said short selling had an influence, with a third viewing the link as significant. This was despite empirical studies that had shown there was little connection, said RBC Dexia.

“The perceived link between short selling and share price movements has not stopped institutions lending their shares. The survey showed less than a fifth (17 per cent) had suspended securities lending programmes in response to the liquidity and counterparty issues triggered by the financial crisis.

“ ‘Lenders are customising programmes to match their risk/reward tolerance rather than withdrawing from the market,” said Susan Pike, global head of market products at RBC Dexia.

“Nearly two-thirds (60 per cent) of respondents made no change to their programmes. Those that did make adjustments commonly changed counterparties (38 per cent) or the type of collateral they accepted (35 per cent). A fifth switched from cash to non-cash collateral.

“Few respondents (10 per cent) reported securities lending was an important source of revenue. Most said it was of average or less importance to their overall performance.”