Politics & Regulation

Japan Financial Services Agency plans curb on short selling


Christopher Wells

Japan’s Financial Services Agency plans to enact a new rule later this year that would ban investors from using newly issued shares to cover short positions.

The law, expected to be enacted between April and September, is aimed at investors who use insider trading tips

to short-sell stocks of listed companies prior to the official announcement of a new share offering. Instead of borrowing stock, the investors buy shares from the new issue – at a discount – to cover their position. Hedge funds are among the investors believed to have used the strategy.

Modelled on US