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May 5, 2009

Split over Short-Sale Rules

By Peter Chapman

Buyside traders disagree over the need for new short sale rules. In a survey conducted by Traders Magazine 80 percent of the traders from traditional money managers voted in favor of new short sale regulations.

Only 39 percent of traders from hedge funds did so. Traders Magazine conducted the poll in advance of a new proposal by the Securities and Exchange Commission to update Regulation SHO with a rule that would put the brakes on short selling.

The proposal offered five possibilities including price test rules and circuit breakers. Eighty buyside traders responded to the survey: 46 from traditional money management shops; 28 from hedge funds; and 6 from quantitative shops.

The majority of the hedge fund traders also said they did not favor a price test. Most of the hedge fund traders also predicted a price test would impact them negatively. The reaction from hedge funds reflects the fact that many use short selling as part of their trading strategies.

Please use the link below to see the survey results.

 

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