OVER-ZEALOUS disclosure requirements for short-sellers are driving trades away from Europe and eroding liquidity, according to a report by Oliver Wyman commissioned by the Alternative Investment Management Association (AIMA), a hedge fund industry group.
The study comes as Steve Maijoor, the newly appointed chair of the European Securities and Markets Authority (ESMA) said: “Shortselling in itself is not a negative thing. It results in liquidity.”
The AIMA report looks into the potential effect of forcing short-sellers to publish the details of any position they take amounting to over 0.5 per cent of a company’s oustanding shares, regulations proposed recently by the European Commission (EC).
It finds that most investors expect the rules to cause an exodus of trades: “We have seen the beginning... of investors voting more with their ‘feet’,” it says.
In place of the EC proposals, AIMA recommends publishing aggregate short positions, with the potential for more detailed disclosure to regulators, measures it says are sufficient to supervise macro-economic risk.