Short-selling: how should it be viewed?

SHORT-sellers have always been viewed with suspicion and dislike, born of a perception that they exist solely to destroy wealth and ignorance of what they really do.

Yet, despite this lurking fear, and notwithstanding periodic calls for regulators to curb their activities, specialist short-selling firms continue to exist and, in some cases, thrive. The reason is that these players are an important component of the market eco-system, often providing insights that may have escaped the rest of the market.

The challenge, then, is not how to rein them in, but to accept that the activity is as legitimate as any other in the market and to focus on how to integrate short-selling into the governance framework as seamlessly as possible.