IMA defends shorting

Short selling is essential to the success of the investment sector, one industry organisation has argued.

The Investment Management Association (IMA) has defended the practice, suggesting that it can help to boost returns.

Any benefits associated with the tactic could be reduced if wider market disclosure is enforced, the organisation said.

Market disclosure of short positions could potentially mislead investors or have a negative impact on competition.

Richard Saunders, chief executive of the IMA, said: ’Short selling is central to the capital markets and plays an important role in investment strategies and risk management.

’It also contributes to market liquidity - critical in today’s climate - reduces transaction costs and ensures pricing efficiency. We also agree that there should be disclosure of significant short positions to the regulator in order that it has the information required to allow it to police the markets effectively.’

The IMA was defending shorting in response to the Financial Services Authority’s recent discussion paper on short selling which called for the introduction of regulatory changes.ADNFCR-2318-ID-19169354-ADNFCR