Short Selling Reporting Rules: A Greenfield Area

Abstract

Short selling reporting obligations can be helpful to regulators, particularly in relation to deterring abusive behaviour. Following the crisis, the European Short Selling Regulation introduced a common framework for short selling reporting requirements. Some of these rules can be broadly welcomed, particularly the notification obligations of individual short positions. However other rules, specifically those requiring public disclosure raise concerns. Such issues also become evident when considering a recent evaluation conducted by the European Securities and Markets Authority.

Turning to the US, it has paid far less attention to short selling reporting obligations. Further, those rules currently in place stem from many sources and do not enable the efficient investigation of potential cases of abuse. However, the Securities and Exchange Commission recently submitted a report to Congress concerning the short sale reporting proposals set out in the Dodd-Frank legislation.

This paper examines the approach taken to short selling reporting in both jurisdictions and discusses the recent reports. It suggests that neither the EU nor the US has currently found the correct balance in relation to its reporting regime, and that lessons should be learned on both sides of the Atlantic to ensure reporting rules can be helpful rather than a hindrance.

Keywords: short selling reporting rules, European Union, USA