'Short Shrift' - Short selling regulation can impede market activities

The recent article "Short Shrift," written by Thayer Moeller in concert with Corporate & Institutional Banking Partner Bradley Ziff, suggests that severe policy interventions in short selling can impede market activities and produce unintended consequences.

According to the article, published in the Autumn 2010 Issue of The Markit Magazine, recent short selling regulation in the wake of the 2008 financial crisis has proven to disproportionately impair market function and failed to provide material benefits.  The negative consequences have included:

  • Decreased market liquidity
  • Increased transaction costs via wider bid-ask spreads for market participants
  • Increased cost of investing, imposing additional burdens on institutional investors

The benefits sought from short selling regulation, including lower volatility and greater price stability, have not resulted.  Given this, policymakers and regulators will need to carefully assess their goals going forward.

Please see pages 16-21 of the Autumn 2010 Issue of The Markit Magazine to read the full article, "Short Shrift."

Article Summary: "Short Shrift" by Thayer Moeller and Bradley Ziff, as published in the Autumn 2010 Issue of The Markit Magazine.