Britain is currently reviewing its short selling regulations.
The MFA letter, shared with Reuters, suggests that when hedge funds short a company, it is disclosed to regulators and not the public. This would prevent a herd-like mentality when a short position of one firm comes out and others then jump onto the position to copy-cat it, the letter said. This would make hedge funds less "susceptible to short squeezes", the MFA said in the letter.
A short position is essentially a bet on an asset price moving lower. U.S. regulators, the letter said, are considering a similar update to its short-selling rules, adopting an "aggregated public disclosure" where short positions are just given to regulators rather than, as currently done in the United Kingdom, on a public website.
Short sellers are in the spotlight. Allegations made by a U.S. short seller against India's Adani Group in late January knocked over $100 billion of the market value of seven of the group's listed firms. The hedge fund lobby group would also like to see an increase on the threshold of when a shortseller needs to report their position.
Currently it is 0.1% of a company's shares, but the MFA
suggests a hedge fund should need to report their bearish
position at 0.2% of issued shares.
(Reporting by Nell Mackenzie; editing by Dhara Ranasinghe and
Emelia Sithole-Matarise)
