EUROPE - Eumedion, the Nethelands-based corporate governance forum for institutional investors, has called on European governments and supervisors to lift the remaining short-selling bans.
Rients Abma, executive director at Eumedion, has acknowledged the body had backed the measure when it was introduced, but has now concluded "there is no evidence that the ban on short-selling has enhanced stability on the financial markets".
Academic research has raised doubt about the effectiveness of the restrictions on short-selling, cites the lobby organisation as the main reason for its recommendation to European consultation body CESR.
"Several studies show that spreads have widened to some extent and liquidity has declined as a consequence of this measure, which of course has had a negative impact on the functioning of the capital markets", explained Abma, who added this view is shared by Eumedion-members at large.
The Dutch financial regulator AFM renewed the ban on short-selling on 14 January - a move which Abma said sparked surprise given their motivation to do so.
"The regulator referred to other European authorities that choose to extend the measure. But at the time the rule was introduced in October 2008, the British guidelines served as a model for the Dutch regulator. And while the [UK's] FSA lifted the ban last month, the AFM took the opposite stance," said Abma.
Eumedion shares the opinion of the British financial regulator that disclosure of substantial short positions could help minimising the potential for market abuse and disorderly markets.
"On significant positions in all shares not just financial stocks, we would welcome a common approach on this issue in the European Union," added Abma.
Wouter Bos, the Dutch minister of finance, will today raise the subject of short-selling at the Ecofin Council meeting in Brussels. The minister is hoping to achieve further harmonisation in European regulation on short-selling as EU states are currently maintaining widely differing restrictions and exceptions.
Eumedion represents 65 Dutch and foreign institutional investors managing over €1trn in assets under management.
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