NEWS

The International Securities Lending Association said “European Union-wide proposals to restrict hedge funds and other stock traders from taking short positions in stocks could lead to less liquidity and wouldn’t necessarily create safer markets,” Dow Jones reports (“EU Short Selling Rules Could Hinder Markets,” June 23).

“The European Commission earlier this month opened a consultation that is expected to lead to new legislation to unify rules on short selling in the 27-nation EU. Right now, 11 EU countries, including the U.K., require some disclosure on short selling, while short sales in some financial shares are banned in Denmark, France and Ireland, and Greece has banned short selling entirely.” The EU paper is available at: http://ec.europa.eu/internal_market/consultations/docs/2010/short_selling/consultation_paper_en.pdf .

Kevin McNulty, the ISLA CEO, said, “There is not a lot of evidence to support the notion that short selling is bad, [or] that naked short selling is relevant in Europe.”

“We would support some public transparency but only at much higher thresholds, probably at least 1%. There is evidence that low levels are damaging to markets, and that investors are reluctant to sell short beyond those thresholds because they will be publicly singled out,” he said.