MFA Comments on Consultation on Increasing Short Position Transparency

October 09, 2009

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Topics: Securities and Futures Commission SFC, short positions, Hong Kong, manipulative conduct, short selling, efficiency, liquidity, public disclosure of short positions, price discovery, risk management, financial stocks, net long position, financial services sector, non-public disclosure, confidentiality, market participants, anonymised disclosure, short selling bans, global equity markets, bid-ask spreads, short sellers, short selling disclosure regime, transparency, cash markets, close out indicators, on-market transactions, derivatives, exchange trading, off-exchange transaction, hedging strategies, stocks, delta adjusted, designated securities, listed corporations, non-designated securities, OTC transaction, dual-listed securities, CESR, pan-European short selling disclosure regime, primary market, Hong Kong market, net short positions, transitory short position, reporting threshold, FSA, Financial Services Authority, Securities and Exchange Commission, SEC, turnover ratio, price volatility, capital raising, settlement, SEHK, market volatility, investment managers, private reporting, chilling effect, market efficiency, price formation, short squeeze, herding, volatility, institutional investors, retail investors, transaction costs, alternative investment classes, pensions, endowments, foundations, market liquidity, capital formation, convertible arbitrage, convertible bonds, copycat behavior, proprietary research, market making, Journal of Finance,
From: MFA, Richard Baker, John G. Gaine

To:

Martin Wheatley, Hong Kong Securities and Futures Commission

MFA submitted a letter to the Hong Kong Securities and Futures Commission (SFC) today in response to its Consultation Paper on increasing short position transparency. In our letter, we recommend that: (i) any disclosure to the SFC should be non-public and fully protect the confidentiality of the information; (ii) reporting should be based on a de minimis reporting threshold for private reporting to the SFC of at least 0.5%; (iii) if there is evidence available that public disclosure is necessary and beneficial, the SFC should only make available to the public aggregated anonymised data on short selling using the information privately reported to it; and (iv) if the cost of producing aggregate anonymised data is too high, the SFC should consider publicly disclosing anonymised versions of individual private reports of short positions, but at a higher threshold (such as 2%).

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