UK - Pension funds are opposing the Financial Services Authority's moves to increase disclosure on short selling activity.
The FSA believes greater transparency could “benefit market users” and “improve market confidence”.
But National Association of Pension Funds’ investment director David Gould said that while he acknowledged the risk that short selling posed to investors, he believed added transparency would be counterproductive.
He said: “The provision of additional information inevi-tably involves additional costs for those obliged to provide it, and it is difficult to see the usefulness of the data.
“Data on short positions is potentially sensitive commercially.
“If short sellers feel that other market participants can identify their positions – or even guess the existence of short positions – they will hesitate before taking short positions for fear that prices will be moved against them when they come to cover their positions.”
Instead Gould endorsed the existing legislation affecting short selling which, he said, was sufficient to deal with market manipulation.
He added, however, that the NAPF was “concerned” that the FSA’s review did not tackle the issue of voting on stock borrowing and lending, which it said was frequently associated with short selling.
“Regrettably, because of the UK’s antiquated and inefficient share voting system, it is easy to come to the wrong conclusions about institutions’ willingness to vote their shares.
“One particular area of concern is the impact of stock lending on the amount of stock available for voting and the fact that errors can lead to the whole holding being disqualified from voting.”
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