Aima responds to Iosco's short selling proposals

Date: Tuesday, March 24, 2009

The Alternative Investment Management Association has published its response to the proposals on short selling by the Iosco Task Force on Short Selling.

Andrew Baker, chief executive of Aima (pictured), says short selling is a wholly legitimate market practice, is not abusive and helps capital markets function more effectively.

As such, Aima says it appreciates 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 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.

It also agrees that there should be appropriate reporting regimes for disclosing short positions to national regulators, although it believes 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 24 February we said we would support measures to reduce such settlement failures,' says Baker.

'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.'