The International Organization of Securities Commissions’ (IOSCO) Technical Committee has published a consultation report on the regulation of short selling. The report recommends that effective regulation of short selling be based on four general principles:
- Short selling activities should be subject to appropriate controls to reduce or minimise the potential risks that could affect the orderly and efficient functioning and stability of financial markets.
- Short selling should be subject to a reporting regime that provides timely information to the market or to market authorities.
- Short selling should be subject to an effective compliance and enforcement system.
- Short selling regulation should allow appropriate exceptions for certain types of transactions for efficient market functioning and development.
The Technical Committee recommends that the four general principles should serve as a framework for market authorities to develop their own short selling regime, depending on their domestic requirements. The Technical Committee is of the view that abiding by these four general principles will allow a more consistent international regulatory approach to short selling.
Comments on the report are due by 4 May 2009.
View IOSCO consultation on short selling, (PDF 333KB), 23 March 2009