IOSCO's Technical Committee set up a task force to develop high-level principles for the effective regulation of short selling. The Technical Committee has recommended that effective regulation of short selling is comprised in four principles which are that short selling should be:

  • subject to the appropriate controls to minimise any potential risks that could adversely effect the functioning and stability of financial markets;
  • subject to a reporting regime providing timely information to the market or market authorities;
  • subject to an effective compliance and enforcement system; and
  • should allow appropriate exceptions for certain types of transactions which are necessary for efficient market functioning and development.  

The Technical Committee is of the opinion that "short selling should operate in a well- structured regulatory framework in the interests of maintaining a fair, orderly and efficient market."