DOCSLIB.ORG

Pan-European Short Selling Regulation – the Implications for US Market Participants

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Pan-European Short Selling Regulation – the Implications for US Market Participants Number 1418 October 15, 2012 Client Alert Latham & Watkins Corporate Department Update: Pan-European Short Selling Regulation – The Implications for US Market Participants Overview This edition1 of our update on the pan-European short selling Regulation2 focuses on the implications of the Regulation for market participants in the United States (US). In particular, we focus on market participants whose trading activities are conducted in the US in financial instruments that have a nexus with the European In this Client Union (EU), such as a parallel EU listing of a financial instrument or an EU listing of “ the underlying financial instrument. Such activities, which may subject the market Alert we discuss participant not only to the US short selling regime, but also to the Regulation,3 the application of include short sales of (i) certain American Depositary Receipts (ADRs) of EU-listed the Regulation to issuers, and (ii) dual listed securities of issuers that are concurrently listed on one of the EU and US trading venues. ADRs and dual- The Regulation applies only to those financial instruments (i) that are admitted listed securities to trading on a trading venue in the EU, and (ii) whose principal trading venue that are traded (defined below) is determined to be in the EU. The Regulation applies regardless in the US, and of whether the financial instrument is traded on or off-exchange (i.e., over-the- counter). The Regulation defines “financial instrument” broadly4 and includes all compare certain of transferable securities and derivative contracts relating to securities that are traded the key concepts on an EU trading venue.5 and definitions In this Client Alert, we discuss the application of some of the key provisions of the in the Regulation Regulation as they relate to (i) ADRs, and (ii) dual-listed securities that are traded in the US. We have also compared certain fundamental concepts and definitions with those in the Regulation with those found in the US regulatory regime in Regulation found in the US SHO (Reg SHO)6 under the US Securities Exchange Act of 1934, as amended (the regulatory regime Exchange Act). in Regulation Application of Articles 3, 5 and 12 of the Regulation to ADRs SHO.” and Dual-Listed Securities Traded in the US The Regulation’s definition of a “financial instrument” includes all transferable securities. Transferable securities, in turn, are defined as those classes of securities which are negotiable on the capital markets (with the exception of instruments of payment), such as shares in companies, partnerships or other entities, as well as Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United Kingdom, France, Italy and Singapore and as affiliated partnerships conducting the practice in Hong Kong and Japan. Latham & Watkins practices in Saudi Arabia in association with the Law Office of Salman M. Al-Sudairi. In Qatar, Latham & Watkins LLP is licensed by the Qatar Financial Centre Authority. Under New York’s Code of Professional Responsibility, portions of this communication contain attorney advertising. Prior results do not guarantee a similar outcome. Results depend upon a variety of factors unique to each representation. Please direct all inquiries regarding our conduct under New York’s Disciplinary Rules to Latham & Watkins LLP, 885 Third Avenue, New York, NY 10022-4834, Phone: +1.212.906.1200. © Copyright 2012 Latham & Watkins. All Rights Reserved. Latham & Watkins | Client Alert depositary receipts in respect of shares, bonds or other forms of securitized debt, including depositary receipts in respect of such securities, and any other securities giving the right to acquire or sell any such transferable securities.7 Central to the Regulation is the concept of the “principal trading venue” for a financial instrument. This is determined based on the trading volume for the financial instrument on the relevant trading venues,8 calculated in accordance with the provisions of the Delegated Regulation.9 The Regulation requires the European Securities and Markets Authority (ESMA) to publish a list of shares whose principal trading venue is determined to be outside the EU (List of Exempted Shares).10 Thus, shares included on the List of Exempted Shares will not be subject to the Regulation when it becomes applicable on November 1, 2012.11 There are currently 10,087 issuers included on the List of Exempted Shares published on October 4, 2012.12 We understand that this List of Exempted Shares is a consolidation of the information provided by Member State competent authorities to ESMA.13 Each Member State competent authority was required to compile a list of shares admitted to trading in its respective jurisdiction, whose principal trading venue the competent authority determined to be located outside the EU. In compiling and providing their respective lists of exempted shares, it appears that several competent authorities included ADRs.14 ADRs We have compared the List of Exempted Shares to a list of European issuers that have ADRs admitted to trading in the US, based on their International Securities Identification Number (ISIN). There are currently over a thousand European issuers listed on one or more of the EU trading venues whose ADRs are admitted to trading on either the New York Stock Exchange, NASDAQ or the American Stock Exchange. Our comparison of the two lists reflects at least 78 common issuers whose shares would be exempt from the Regulation. Article 3 of the Regulation prescribes the manner in which short, net short and long positions are to be calculated, in respect of both “shares” and “financial instruments” other than shares. Article 5 of the Regulation addresses the transparency or reporting requirements, including the private and public notification thresholds further described in “Transparency Obligations” (below), in respect of net short positions in relation to the issued share capital of a company that has shares admitted to trading on an EU trading venue. The Delegated Regulation provides guidance on “in relation to” and states that a holding of shares, or any exposure through a financial instrument other than a share which confers a financial advantage in the event of an increase or decrease in the price or value of the share, must be taken into account when calculating the short and net short position in a relevant financial instrument.15 The financial instruments to be considered include options, futures, covered warrants, contracts for difference, units in ETFs, complex derivatives and global depositary receipts.16 The inclusion of global depositary receipts within the list of financial instruments that should be considered in calculating a short position suggests, by analogy, that ADRs may also be included in such calculations. Based on the analysis above and the information provided by ESMA at this time, it thus appears possible that the ADRs that are not included in the List of Exempted Shares17 will be subject to the reporting obligations under the Regulation. We have included details in respect of the reporting obligations in the section on “Transparency Obligations” (below). 2 Number 1418 | October 15, 2012 Latham & Watkins | Client Alert In contrast to the language of Articles 3 and 5 of the Regulation, Article 12, which addresses uncovered short sales and in particular restricts “uncovered short sales in shares,” makes no corresponding reference to financial instruments. Instead, the provisions of Article 12 appear to be limited to shares. We note that the List of Exempted Shares is not limited to “shares” whose principal trading venue is outside the EU, as a number of Member State competent authorities have also included ADRs. This suggests that at least some Member State competent authorities might view shares and ADRs as essentially fungible for these purposes. If this were the case, ADRs would also be subject to the Regulation’s ban on uncovered short sales. In the absence of clarification from ESMA, we believe it cannot be ruled out that ESMA might take the position that the ban on naked short sales also applies to ADRs. Dual-Listed Securities We have also compared the List of Exempted Shares with a list of EU issuers whose ordinary shares are concurrently admitted to trading on an EU trading venue and on one of the New York Stock Exchange, NASDAQ or the American Stock Exchange, on a name-by-name basis (as a comparison on an ISIN basis was not possible). Our comparison of the two lists identifies at least 31 issuers in common. Based on our understanding of the Regulation and absent further clarification from ESMA, we believe that US short selling activity in the shares of the remaining issuers admitted to trading in the US, but not included in the List of Exempted Shares, will be subject to the transparency requirements and the prohibition on naked short sales under the Regulation. Analysis of Certain Key Concepts and Definitions of Reg SHO and the Regulation Both the Regulation and Reg SHO seek to eliminate abusive short selling while preserving the ability to engage in legitimate short sales. However, as further described below, the EU and US regulatory regimes differ in the scope of activities and financial instruments subject to regulation and the availability of exemptions. Perhaps most significantly, the Regulation and Reg SHO place the obligation to locate the security sold short on different market participants. Under Reg SHO, the broker-dealer has to perform the locate. Under the Regulation, the locate obligation falls on the short seller. The discussion below focuses on (A) the definitions of “short sale” and “ownership,” (B) the “locate” requirement, including the treatment of naked short sales, and (C) net short positions. For each of these topics, we briefly compare the treatment of these matters under each of the EU and the US regulatory regimes.
Load more

Recommended publications
  • Japan to Normalize Short-Selling Regulations
    lakyara vol.164 Japan to normalize short-selling regulations Sadakazu Osaki 10. May. 2013 Japan to normalize short-selling regulations vol.164 Executive Summary Japan's Financial Services Agency has unveiled plans to rescind the emergency short-selling restrictions imposed during the 2008 financial crisis and replace them with revised permanent regulations. Its proposed revisions are timely and sensible. They should help to improve market liquidity and price formation. Sadakazu Osaki Head of Research Center for Strategic Management and Innovation Emergency short-selling restrictions have remained in effect in Japan In March 2013, Japan's Financial Services Agency (FSA) released a draft of revised short-selling regulations. In Japan, short-selling restrictions were tightened as an emergency measure in response to the market turmoil triggered by Lehman Brothers' September 2008 collapse. These emergency restrictions are still in effect, having been extended 12 times. With the recently released revised regulations slated to take effect in November, regulation of short-selling in Japanese markets is set to finally return to normal. Short selling is an investment technique whereby an investor borrows from a third party securities that he does not currently own and sells them in the aim of repurchasing them later at a lower price. When a security is sold short, its market price reflects the investment opinion of investors that do not own the security in the cash market. Short selling also enhances market liquidity by increasing sell orders. It thus fulfills a legitimate economic function but it can also trigger steep price declines if certain stocks are heavily sold short within a short timeframe.
    [Show full text]
  • Characteristics Which Predict Naked Short Selling
    Journal of Finance and Accountancy Volume 21 Over-the-counter delivery failures: Characteristics which predict naked short selling Paul Ziegler University of Mary Hardin-Baylor Chris Neuenschwander Anderson University ABSTRACT This research deals with the impact of naked short selling on small firms whose stock is traded “over the counter”. Virtually all research into naked short selling has been conducted using data taken exclusively from the major exchanges. Existing research continues to focus on major exchanges even as regulators stress that small firms, in particular those trading over-the- counter, are the most vulnerable to manipulation. Using publically available information, this study has found that several variables including the average daily trading volume, the number of shares in float, and a firm’s market capitalization can be used to identify firms which might be subject to a higher level of naked short selling as identified by post-trade delivery failures. Keywords: Naked short selling, delivery failure, Over-the-Counter Copyright statement: Authors retain the copyright to the manuscripts published in AABRI journals. Please see the AABRI Copyright Policy at http://www.aabri.com/copyright.html Over the counter, Page 1 Journal of Finance and Accountancy Volume 21 INTRODUCTION This research was conducted to discover if directly observable firm characteristics for stocks which trade over-the-counter can be used to predict the level of naked short selling. Generally speaking, stock traded directly between broker/dealers rather than via a formal exchange are termed “over-the-counter” or OTC. Often these firms are small and do not meet the listing requirements of a formal exchange, such as trading volume, market capitalization, or meeting required reporting standards.
    [Show full text]
  • The Global Dilemma in Short Selling Regulation: IOSCO's Information Disclosure Proposals and the Potential for Regulatory Arbitrage Eleanora Zlotnikova
    Brooklyn Journal of International Law Volume 35 Issue 3 SYMPOSIUM: New Paradigms for Financial Article 12 Regulation in the United States and the European Union 2010 The Global Dilemma in Short Selling Regulation: IOSCO's Information Disclosure Proposals and the Potential for Regulatory Arbitrage Eleanora Zlotnikova Follow this and additional works at: https://brooklynworks.brooklaw.edu/bjil Recommended Citation Eleanora Zlotnikova, The Global Dilemma in Short Selling Regulation: IOSCO's Information Disclosure Proposals and the Potential for Regulatory Arbitrage, 35 Brook. J. Int'l L. (2010). Available at: https://brooklynworks.brooklaw.edu/bjil/vol35/iss3/12 This Note is brought to you for free and open access by the Law Journals at BrooklynWorks. It has been accepted for inclusion in Brooklyn Journal of International Law by an authorized editor of BrooklynWorks. THE GLOBAL DILEMMA IN SHORT SELLING REGULATION: IOSCO’S INFORMATION DISCLOSURE PROPOSALS AND THE POTENTIAL FOR REGULATORY ARBITRAGE INTRODUCTION he tumultuous events leading up to the financial crisis in the fall of T2008 resulted in the rapid enactment of global securities rules and regulations that were designed to limit, curb, or outright ban short selling activity. Undoubtedly, Credit Default Swaps1 played a critical role in corroding the global economy by providing insurance on risky mortgage bonds and encouraging reckless behavior during the housing bubble.2 However, according to many regulatory authorities, short sellers greatly exacerbated global economic turmoil, driving
    [Show full text]
  • The Naked Truth: Examining Prevailing Practices in Short Sales and the Resultant Voter Disenfranchisement
    The Naked Truth: Examining Prevailing Practices in Short Sales and the Resultant Voter Disenfranchisement ROBE R T BR OOKS AND CLAY M. MOFFETT FORMAT ANY ROBE R T BR OOKS iterature on short-selling activity due to the costs associated with shorting is Wallace D. Malone, Jr. is a common topic for financial, stocks, thusIN leaving only optimistic investors Endowed Chair of Finan- economic, accounting, and legal and the resulting inflated asset prices; and cial Management in the Department of Finance, authors and has been since the very second, that there are a number of short sales Lfirst journals were established (De la Vega constraints that reduce or limit the number of University of Alabama in Tuscaloosa, AL. [1688]). Short sales occur when a shareholder short sellers. These constraints include: [email protected] sells a share of stock he does not own (by bor-ARTICLE rowing shares), and only later acquires them, • Borrowing costs. The shorter has to be CLAY M. MOFFETT which then closes out the transaction. In so able to borrow and provide securities to is an assistant professor in the Department of doing, there may be various borrowingTHIS costs the purchaser of shares. The proceeds Finance, University of associated with the transaction. The short are then retained by the broker serving North Carolina, seller profits from the transaction if the share as collateral for the securities lender. Wilmington, NC. price declines more than the all-in costs of The interest that is paid is theoreti- [email protected] the transaction by the time he closes out the cally paid to the lender, who then must transaction.
    [Show full text]
  • Short Sale Position and Transaction Reporting
    Short Sale Position and Transaction Reporting As Required by Section 417 of the Dodd‐Frank Wall Street Reform and Consumer Protection Act This is a report of a study by the Staff of the Division of Economic and Risk Analysis of the U.S. Securities and Exchange Commission. The Commission has expressed no view regarding the analysis, findings, or conclusions contained herein. June 5, 2014 Executive Summary Congressional Mandate The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or “Act”) was signed into law on July 21, 2010.1 Section 417(a)(2) of the Act directs the Division of Risk, Strategy, and Financial Innovation (the “Division” and now called the Division of Economic and Risk Analysis) of the Securities and Exchange Commission (the “Commission”) to conduct a study of the feasibility, benefits, and costs of: (A) requiring the reporting of short sale positions in publicly listed securities in real time, (i) publicly or, in the alternative, (ii) only to the Commission and the Financial Industry Regulatory Authority (“FINRA”), and of the feasibility, benefits, and costs of: (B) conducting a voluntary pilot program in which public companies will agree to have all trades of their shares marked (i) “short” (ii) “market maker short” (iii) “buy” (iv) “buy-to-cover” or (v) “long” and reported as such in real time through the Consolidated Tape.2 This is the report of that study made to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives specified in Section 417(b)(2) of the Act.
    [Show full text]
  • Testimony Concerning the State of the Financial Crisis by Chairman Mary L
    Testimony Concerning the State of the Financial Crisis by Chairman Mary L. Schapiro U.S. Securities and Exchange Commission Before the Financial Crisis Inquiry Commission January 14, 2010 I. INTRODUCTION Chairman Angelides, Vice Chairman Thomas, Members of the Commission: Thank you for the invitation to share my personal insights as the Chairman of the Securities and Exchange Commission into the causes of the recent financial crisis.1 I believe the work of the Financial Crisis Inquiry Commission (FCIC) is essential to helping policymakers and the public better understand the causes of the recent financial crisis and build a better regulatory structure. Indeed, just over seventy-five years ago, a similar Congressional committee was tasked with investigating the causes of the stock market crash of 1929. The hearings of that committee led by Ferdinand Pecora uncovered widespread fraud and abuse on Wall Street, including self-dealing and market manipulation among investment banks and their securities affiliates. The public airing of this abuse galvanized support for legislation that created the Securities and Exchange Commission in July 1934. Based on lessons learned from the Pecora investigation, Congress passed laws premised on the need to protect investors by requiring disclosure of material information and outlawing deceptive practices in the sale of securities. When I became Chairman of the SEC in late January 2009, the agency and financial markets were still reeling from the events of the fall of 2008. Since that time, the SEC has worked tirelessly to review its policies, improve its operations and address the legal and regulatory gaps – and in some cases, chasms – that came to light during the crisis.
    [Show full text]
  • Naked Short Selling and Market Returns
    Naked Short Selling and Market Returns * Thomas J. Boulton Farmer School of Business, Miami University, Oxford, OH 45056, USA Marcus V. Braga-Alves College of Business Administration, Marquette University, Milwaukee, WI 53201, USA Initial Draft: March, 2009 Current Draft: July, 2009 Running Head: Naked short selling and market returns JEL classification: D02; G14; G28 Keywords: Failures to deliver; naked short selling; stock returns The authors thank Brandon Carl, Terry Nixon, Sarah Peck, Steve Wyatt, and Chad Zutter for valuable comments. Any remaining errors or omissions remain the responsibility of the authors. * Corresponding author. Tel.: + 1-513-529-1563; fax: + 1-513-529-8598. E-mail address: [email protected] (T. Boulton). Naked Short Selling and Market Returns Abstract We examine stock market returns around periods of increased naked short selling with two objectives in mind. First, we study persistent failures to deliver (FTDs) for insight into naked short sellers’ trading strategies and their ability to identify overpriced stocks. We find that naked short sellers are contrarians who target stocks that experience positive abnormal returns. Returns following transactions that result in persistent FTDs provide no evidence that naked short sellers are informed traders. Second, we study the market’s reaction to announcements indicating increased levels of naked short selling. We find that abnormal returns are generally positive following such announcements. JEL classification: D02; G14; G28 Keywords: Failures to deliver; naked short selling; stock returns 2 Naked Short Selling and Market Returns 1. Introduction Critics describe naked short selling (i.e., selling a stock short without first borrowing or arranging to borrow it) as abusive and manipulative, suggesting that naked short selling has negative consequences for the security being sold short.
    [Show full text]
  • Corporations Amendment (Short Selling) Bill 2008
    Parliament of Australia Department of Parliamentary Services Parliamentary Library Information, analysis and advice for the Parliament BILLS DIGEST www.aph.gov.au/library 25 November 2008, no. 65, 2008–09, ISSN 1328-8091 Corporations Amendment (Short Selling) Bill 2008 Kali Sanyal Economics Section PaoYi Tan Law and Bills Digest Section Contents Purpose .............................................................. 2 Background ........................................................... 2 Global financial crisis ................................................. 2 What is short selling? ................................................. 4 Why Short? ....................................................... 6 For speculation .................................................... 6 For hedging ...................................................... 6 Why does short selling reduce share prices? ................................ 6 Current regulation .................................................... 7 Australia’s Response to Short Selling ..................................... 7 Recent Global Regulatory Response ...................................... 8 Committee consideration .............................................. 10 Financial implications .................................................. 10 Key issues ........................................................... 11 Impact of ban on short selling in Australia ................................ 11 Position of significant interest groups/press commentary ...................... 11 Main provisions
    [Show full text]
  • Overstock CEO Comments on SEC's New Rules Against Naked Short Selling
    Overstock CEO Comments on SEC's New Rules Against Naked Short Selling September 17, 2008 'Nerf penalties for financial rapists' declares Byrne SALT LAKE CITY, Sept. 17 /PRNewswire-FirstCall/ -- Overstock.com, Inc. (Nasdaq: OSTK) chairman and CEO Patrick M. Byrne comments on the SEC's September 17, 2008 press release (see http://www.sec.gov/news/press/2008/2008-204.htm) that purports to protect investors against naked short selling. Dr. Byrne commented, "At the core of the SEC announcement is a decision that if a hedge fund naked shorts a stock, its broker isn't supposed to let them naked short again. But guess what: they were not supposed to naked short in the first place. Instead of giving the buyer who receives the fail the right to put it back to the naked short selling participant, the SEC once again opts for nerf penalties for financial rapists. "If the SEC were anything but a hedge fund bootlick," continued Byrne, "it would not have taken the half-measure of a pre-borrow requirement applied only as a penalty for those failing to deliver within T+3, but would have instituted a market-wide pre-borrow requirement (as it did in its July 15, 2008 Emergency Order protecting Upper Caste financial firms), and mandatory buy-ins at T+3. "Some questions for the SEC: 1. How will the SEC determine whether an institution is in compliance with this rule? The only way to determine compliance is through an SEC audit, something that could only occur months after the fact. In the case of a bear raid, that will be too late.
    [Show full text]
  • Credit Default Swaps and Short Selling Written Evidence
    Credit Default Swaps and Short Selling Written evidence Memorandum by Bank of America Merrill Lynch (CDS 1) ................................................................... 1 Memorandum by Mr John Chapman, former Civil Servant and Journalist (CDS 2) ............................ 4 Letter from the Investment Management Association (CDS 3) ........................................................ 10 Letter from the Association for Financial Markets in Europe (AFME), International Securities and Lending Association (ISLA) and International Swaps and Derivatives Association (ISDA) (CDS 4) .... 13 Memorandum by Bank of America Merrill Lynch (CDS 1) 1. How much short selling is there in the sovereign bonds markets? Does this have a significant influence on sovereign bonds? 2. There is no way to measure how much naked short selling occurs in the market. We as market makers and primary dealers in the sovereign bond market are committed to providing bid and offer prices in which counterparties may purchase or sell against us. When accepting a sale trade we have no way of knowing if this takes the client short. From a proprietary perspective we may find ourselves taking a short position but for settlement purposes these are covered by reverse repo after the fact. 3. The ability to trade into a short position is integral to providing liquidity and is a hedging tool to manage risk. 4. What are the risks of naked short sales of sovereign bonds? 5. Naked short selling on the sovereign bond market does not increase risk. Short positions are generally easily covered for settlement as a result of a highly liquid repo market in sovereign bonds. 6. Do credit default swaps (CDSs), both covered and naked, have a significant impact on the price of the underlying sovereign bonds? 7.
    [Show full text]
  • Naked Short Selling: Is It Information-Based Trading?
    Naked Short Selling: Is it Information-Based Trading? Harrison Liu University of Texas at San Antonio [email protected] Sean T. McGuire Texas A&M University [email protected] Edward P. Swanson Texas A&M University [email protected] June 21, 2013 Abstract: Citing a widely held belief that naked short selling is not based on company fundamentals, the SEC (2008) has substantially tightened Reg. SHO close-out regulations in an effort to eliminate naked short selling. Contrary to accepted belief, we find that accounting fundamentals are highly significant in explaining naked short sales. Further, naked short sales contain incremental information about future stock prices: Abnormal returns from a long/short trading strategy that buys (sells short) shares with low (high) short interest are more than seven times larger using naked and covered short interest, compared to returns using only covered short interest (15.2 percent vs. 2.1 percent annualized). Our findings show that recent actions by regulators to eliminate naked short sales are likely to impede informed arbitrage and reduce market efficiency. Keywords: short selling; accounting fundamentals; arbitrage; trading strategies; naked short selling We appreciate helpful comments from Anwer Ahmed, and from participants at the 2013 LoneStar Accounting Conference and the Securities Financing Forum in NYC (sponsored by DataExplorers, a Markit Company, May 22, 2012). We thank DataExplorers for providing the quantity of shares available for lending. Naked Short Selling: Is it Information-Based Trading? 1. Introduction Naked short selling is widely alleged to cause price declines that are not supported by company fundamentals. This belief is held by the SEC (2008) and even by many Wall Street professionals involved in short selling.
    [Show full text]
  • Plainly Stated, I Do Not Support Any Reimplementation of an Uptick Rule
    Plainly stated, I do not support any reimplementation of an uptick rule, but do support enforcement of current regulations that shorted shares not exceed available shares (i.e. no naked shorting except for reasonable exceptions). I am not strongly opposed to the proposed circuit breaker modified uptick rule, but am strongly opposed to a market wide and permanent price test. My stance stems in good part from my agreement with many of the statements in the Proposed Rule Release No. 34- 59748 discussing the benefits and importance of short selling when striving for an efficient market. This sentence on page 9 of the Release in particular states my sentiments well: “The Commission has long held the view that short selling provides the market with important benefits, including market liquidity and pricing efficiency.15” The tone of the proposal suggests that its authors recognize the vital role short selling plays in the equity markets and even suggests a good dose of hesitancy on their part to pass any regulations that might interfere with efficient short selling. Given this, I will not expound on these here, but will rather take it as a given that we all recognize the vital role that short selling plays in our equity markets. After the horrendous decline and loss of wealth that occurred in the equity markets recently, it is only natural for us to scrutinize the events surrounding the decline in order to better understand the various players and mechanisms involved in the hopes of avoiding similar episodes in the future. Unfortunately, it is also human nature to look outside of ourselves as individuals for places to place blame in order to alleviate our own pain.
    [Show full text]