MFA Comments on Consultation on Increasing Short Position Transparency

October 09, 2009

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


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%).