Thursday, March 7, 2013
DJ: FSA To Review Short-Selling Regulations
TOKYO--Japanese financial regulators said Thursday they plan to make permanent a ban on so-called "naked" short selling that was implemented after the global financial crisis in 2008.
In short selling, investors sell borrowed securities or currencies in the hopes of profiting by buying back the shares later at a lower price. Naked short selling removes the need to first borrow the stock, which means larger volumes of shares can be dumped on the market.
Under the proposal compiled by the Financial Services Agency, the ban on naked short selling will also be extended to trades on proprietary trading systems that can be carried out without going through traditional stock exchanges.
Regulators also plan to relax the uptick rule---which allows short sales only at a price above the last sale price--and obligations for information disclosure on short sales.
Under the new rules, the ban on short sales will be triggered only when the price of securities falls more than 10% from the closing price of the previous trading session.
Investors will also only need to disclose their positions to exchanges of short-selling positions of more than 0.5% of the outstanding shares of a stock, instead of more than 0.25%.
The proposed revisions on short-selling regulations are expected to be carried out in November.