Short selling is an integral part of a carefully regulated, well-functioning market. Regulators have long recognized the vital role short selling plays in helping markets to function efficiently.

Existing securities laws give the SEC the authority to gain access to trading information and to prevent market manipulation. Permitting short selling, particularly with the current robust regulatory framework, means that investors can manage risks better and markets can factor in the broadest possible views about a particular stock, bond, or index – reducing the likelihood of bubbles forming.

Short selling allows investors to say when they believe an asset is overvalued, which contributes to price discovery. The more efficient a market is at determining prices, the better it will function for investors. When long buyers and short sellers counterbalance each other, prices are more likely to reflect the actual value of the assets. Legislative proposals to require the individual disclosure of short positions would skew this balance.