Several Hedge Funds and their industry representative today make thinly-veiled threats that they might consider to move their business away from London if the ban on short-selling the shares of financial service companies is not lifted soon. We had quite a lively reaction from a number of readers and business partners. They argue that this may mean that national regulators would let themselves be pushed into a 'race to the bottom' in terms of regulatory standards. The consequence might then be that international regulations will be introduced to avoid this. In addition, one correspondent pointed out that the argument about the pros and cons of short selling could only be resolved by a detailed forensic analysis of all the transactions involving the shares of banks during the past 14 months. This would have to include equity and credit derivatives and all related off-balance sheet instruments.
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