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Retirement Planning > Social Security

Deal with CRESTCO Concludes Short-Selling Rev

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LONDON (–The U.K. Financial Services Authority announced the conclusions of its consultation on short selling, offering a package of measures designed to improve the information on this subject available to the market and to resolve settlement bottlenecks.

CRESTCo Ltd., the subsidiary of Euroclear that operates the settlement system for U.K. securities and Irish equities, has agreed to publish aggregate stock lending data for FTSE 350 securities on a monthly basis starting in the summer. Feedback from respondents after the FSA published a discussion paper Previous HedgeWorld Story, indicated that this was the most favored way of improving transparency.

As part of the same package, the FSA sought to address the illiquidity issues and settlement delays that often accompany short selling. It announced that the London Stock Exchange and virt-x, a cross border exchange for European blue chip stocks based in London, have agreed to notify their members of those securities subject to a significant proportion of settlement delays. The FSA said that it is still discussing with the exchanges and relevant trade associations how customers seeking to trade in the securities in question might best be warned about possible settlement delays.

Also, the LSE said that it would consider shortening the buy-in time frame for illiquid securities experiencing a significant build up in settlement delays.

Gay Huey Evans, the FSA’s director of markets and exchanges, said in a statement Wednesday that the consultation set off by discussion paper 17 confirmed the FSA’s view that on the one hand there is no need to impose additional controls on short selling but that on the other hand greater transparency is valuable.

“We therefore welcome CRESTCo’s initiative to publish securities lending data,” he added, “This proposal meets all the criteria we set out in our consultation.”

The FSA acknowledged that securities lending is not an ideal proxy for short selling but took the view based on its consultation with the industry that the cost/benefit payoff is greater for this approach than for any alternative.

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