South Africa: Rules to Manage Short-Selling Still Being 'Discussed'

analysis

Short sellers are not allowed to keep secrets from the market. Well, overseas, that is. Global regulators insist traders reveal all their bets all the time. This keeps the market educated and policymakers vigilant. In South Africa, legislation is still lenient. Short-sellers can still operate outside the public eye. But this has left the market with bad press and misconceptions. Policy has been proposed to break the secrecy. But implementation is taking time.

There is much misconception around the practice of short-selling in South Africa.

With only the wrongdoers making headlines, and the regular Joes operating behind the scenes, no one should be surprised.

Short-seller Viceroy, for example, captured headlines when it published an expose on Steinhoff shortly after the share crashed. Thereafter just the rumour that it was examining a company was enough to send the share into free fall. Subsequently, it released reports on property company Nepi Rockcastle and Capitec, which were ultimately discredited, but the share prices both fell initially.

This serves the purpose of a short seller. While most investors buy shares expecting that the price will rise and they will profit (going long), shorting entails the opposite. Investors - usually hedge funds or investment banks...

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