Summit News

Watchdog mulls new curb on short selling

LONDON (Reuters) - Cutting the time it takes to settle a trade would largely curb short-selling, a top European Union market regulator said on Tuesday.

Traders work on the floor of the New York Stock Exchange, April 28, 2009. REUTERS/Brendan McDermid

Short selling, a practice favored by some hedge funds, has been criticized for accelerating slides in bank shares and EU states have introduced some curbs.

Share trades in the European Union are typically settled within three days, or T+3, but a top regulator said technology should allow near instantaneous settlement.

“It would reduce the possibility to trade within the settlement cycle,” said Eddy Wymeersch, chairman of the Committee of European Securities Regulators.

“I am amazed that with all the technology that we have today that we could not settle in T+0 and that would largely enable us to eliminate short selling,” Wymeersch said speaking at the Reuters Financial Regulation Summit.

“Are there sufficient technical arguments not to move to real time settlement? Can we not move to a little bit more efficiency. I want to launch a discussion,” Wymeersch said.

CESR groups all the national securities regulators from the 27 European Union member states and is set to play an increasingly influential role in supervising EU markets.

Wymeersch said there were signs of improvement in securities markets in the 27-nation bloc.

“It’s very dangerous to say that we are out of the problems but we see some positive signs. The most important one is that the interest rates in the interbank market have come down to absolutely normal conditions and it seems the interbank market has started again,” Wymeersch.

“We also see new inflows into UCITS (pan-EU mutual funds), it’s quite significant,” Wymeersh said.

Reporting by Huw Jones; editing by Simon Jessop