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AIMA Calls For Clarification Regarding Short Selling Rules

In the light of the ongoing crisis in the UK financial sector the Financial Services Authority (FSA) recently released new guidelines to counter what they see as the growing threat of short selling – the sale of shares not already owned with the intention of buying back at a lower price. The Alternative Investment Management Association (AIMA) has asked the FSA for clarification of the situation after failing in a legal bid to have the regulations delayed.

Now that the new rules have been introduced, introducing a greater onus on the larger short sellers to confirm their positions, the AIMA is talking to members about how best to approach the issue. The AIMA is not the only association to call for clarification of the new rules, many of which appear to be almost unworkable in practice. Exactly what can and cannot be done, who needs to report and when, are just a number of the issues outstanding.

Love it or hate it, short selling is a natural attribute to a healthy financial market where buyer and sellers with differing views come to the table. The fact that short sellers may be able to force a share price lower by selling large amounts of shares they do not own may highlight the fact that there are few natural buyers in the market place at the time.

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