ISLA sustainable finance council calls for short selling ban evidence, policy involvement as pandemic impacts markets

ISLA’s (International Securities Lending Association) Council for Sustainable Finance (ICSF) released its first position paper, referring to the severity of the current situation caused by the COVID-19 pandemic. ICSF’s position is that both securities lending and short selling are positive mechanisms in this context, as long as they conform with the overarching Principles for Sustainable Securities Lending (PSSL).

“As recent decisions to ban short selling were made to inhibit the decline in equity markets, we would like to learn more about the evidence base behind them by working together with regulators,” ICSF wrote. “In particular, we are interested in learning how regulators may wish to avoid the difficulties that beneficial owners and other market participants face as a result of the ad hoc and temporary short selling bans.”

The Council stressed that regulators’ roles are to make appropriate decisions to ensure the stability of financial markets. However, there is a regulatory divergence with several states imposing temporary bans on short selling, whilst others actively opposing such decisions. The ICSF position is that an inconsistent approach by global regulators is counterproductive and that further positive guidance on best practice is required.

Read the full position paper

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