Is Fear of Short-Selling Bans Driving Hedge Funds to Limit Exposures?
Hedge funds have been reigning in their short-selling in anticipation of new rules on short-selling, according to the Wall Street Journal. Today, the SEC voted to restrict short-selling on stocks that have declined by more than 10% in a single day. Insiders also believe their will be a new uptick rule preventing hedge funds and other investors from short-selling stocks that declined on their last price movement.
According to Bob Sloan, founder of S3 Partners, there is no question that hedge funds have backed of short-selling for fear of regulatory changes.
Since last April when short-selling bans were first seriously discussed, the ration of long positions to short/borrowed positions has increased 30%, according to the WSJ. The article fails to mention whether some of this shift can be attributed to market performance and expectations rather than fear of new short-selling bans.