The ripple effect of Adani-Hindenburg row is being felt among hedge funds with the Managed Funds Association (MFA), the global hedge fund industry trade body, suggested in a letter to Britain’s HM Treasury that it should dispense with how firms must disclose their short positions to the public.
Britain is currently reviewing its short selling regulations, reported Reuters on Thursday.
The MFA letter suggests that when hedge funds short a company, it is disclosed to regulators and not the public. “This would prevent a herd-like mentality when a short position of one firm comes out and others then jump onto the position to copy-cat it,” the letter stated.
This would make hedge funds less “susceptible to short squeezes”, the MFA said in the letter. A short position is essentially a bet on an asset price moving lower.
Seven listed Adani Group companies have lost more than $140 billion in market value combined since a Jan. 24 report by Hindenburg Research alleged stock manipulation and improper use of tax havens, and flagged concerns over debt levels.
Adani, led by billionaire Gautam Adani, has rejected the allegations and denied any wrongdoing.
It’s not yet clear as to what sort of positions Hindenburg took on Adani’s overseas bonds. US regulators, the letter said, are considering a similar update to its short-selling rules, adopting an “aggregated public disclosure” where short positions are just given to regulators rather than, as currently done in the United Kingdom, on a public website.
The hedge fund lobby group would also like to see an increase on the threshold of when a shortseller needs to report their position.
Currently it is 0.1% of a company’s shares, but the MFA suggests a hedge fund should need to report their bearish position at 0.2% of issued shares.
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