One Step Toward Transparency in U.K. Short Selling

Earlier this month, the U.K.'s Financial Services Authority published a discussion paper about the range of policies it might pursue to increase the short side's transparency. It considered the use of stock borrowing as a proxy for short-selling activity but warned that such figures would be less helpful that direct information.

"In its raw form this data involves considerable double counting because of the significant involvement of intermediation in this market."

But the statement of welcome on the newly launched web site's homepage strikes a more upbeat note about the value of these figures. "The Service is based upon settlement instructions which carry a specific securities financing flag, relating to trades which are executed through specific CREST settlement messages," it said. "These may include a whole range of securities financing transactions such as securities loans and repo's in both equity and debt products. Except in some special technical circumstances, the sum of these deal types can serve as a proxy for short-selling data."

In mid-September, CRESTCo completed a merger with Euroclear, the Brussels-based settlement system.