NEWS

“GETTING PERSONAL: Fund Providers Warily Eye Uptick Proposal.”

By Daisy Maxey.  The Wall Street Journal.  April 16, 2009. “NEW YORK (Dow Jones)–The return of a rule that limits short-selling, now being considered by the Securities and Exchange Commission, could constrain some mutual funds that short stocks or impact volatility in the broader markets where mutual funds buy and sell.

“‘We think we’ll see slightly higher volatility and slightly higher trading costs as a result of the uptick rule,’ says Harindra de Silva, president and portfolio manager at Analytic Investors, which manages a long/short fund and employs an option strategy.
He says he believes such rules make stocks harder to trade and generally decrease market efficiency, but sees a strong possibility they will be enacted because ‘it seems like there’s a lot of political will behind it.’ Some countries, including Japan, already limit short-selling, he notes.

“‘It’s not an insurmountable problem in terms of managing the portfolios; it’s just a hassle,’ he says. ‘You can’t short on a downtick, but you can sell what you have, so it’s almost like saying, ‘Let the people who have stock get out before letting the people who want to short it, because they think it’s overvalued, short it.”