MFA Recommends Alternative Reporting Regime for SEC’s Proposed Short Position and Short Activity Reporting Rule and Highlights the Significant Implementation Challenges of the Proposal

Alternative regime builds on FINRA’s current aggregate short sale data reporting framework


WASHINGTON, DC– Managed Funds Association (MFA) recommends the U.S. Securities and Exchange Commission (SEC) leverage FINRA’s current aggregate short sale data reporting framework instead of implementing the framework in the Commission’s proposed short position and short activity rule. Using the FINRA framework will improve the usefulness of the data. MFA shared its recommendations on the SEC’s proposed short position and short activity rule in a supplemental comment letter. MFA first commented on the proposal in April 2022.

MFA’s letter also reiterated its support of the SEC’s policy goal of ensuring the publication of high-quality, aggregated, anonymized short position data.

MFA recommends that the SEC leverage FINRA’s existing short interest reporting framework and enhance it as necessary. Adopting FINRA’s framework will achieve the SEC’s policy goal of providing high-quality short interest data without imposing an unnecessarily complex and costly reporting framework. While FINRA initially only published short interest in over-the-counter (OTC) equities when the SEC proposal was introduced, FINRA has since improved its reporting regime to include all equity securities. The letter asks the SEC to revise the cost-benefit analysis given the updates to FINRA’s regime. 

“MFA supports the SEC’s goal of short position reporting that is aggregated by issuer, and believes that leveraging and enhancing FINRA’s reporting framework is a more efficient way to collect and publish the data. Building upon FINRA’s short interest disclosure framework will provide regulators and market participants with robust, unified data that has accurate and timely information,” said Bryan Corbett, MFA President and CEO. “Having dueling data sets with different definitions and methodologies will create confusion, increase costs, and be less useful for investors relying on the data.”  

MFA’s letter also highlights the significant operational burdens of the proposed rules that could diminish price efficiency and market liquidity. From the letter:

For example, providing the daily activity information in Table 2 would require extensive manager resources to obtain, prepare, and confirm the required information.  Not only would Table 2 be extremely burdensome for managers, but it is unnecessarily complex and includes several categories of information that are unclear and/or provide no meaningful information [to regulators] …  We are concerned that such requirements could deter short selling activity to such a degree that they would diminish price efficiency and overall market liquidity.

 Read MFA’s supplemental comment letter here.


About the Global Alternative Asset Management Industry

The global alternative asset management industry, including hedge funds, credit funds, and crossover funds, has assets under management of $4 trillion (Q4 2022). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.

About Managed Funds Association

Managed Funds Association (MFA), based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 170 member firms, including traditional hedge funds, credit funds, and crossover funds, that collectively manage nearly $2.2 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.