Unlock additional liquidity and generate market activity
Enable efficient price discovery and price stability
Support investor trading strategies like arbitrage and hedging
✓Promotes price stability
✓Increases trading liquidity
✓Supports development of other products (i.e. short selling, ETF, derivatives)
✓To avoid settlement failure
✓To facilitate short selling
✓To support derivative/arbitrage strategies
✓To facilitate market making
✓Enhance return on portfolio of assets
✓Offset management/custody fee
Short selling is any sale of a security that will be settled by the delivery of borrowed securities. It is a trading strategy which allows the investor to benefit from an expected future decline in price. This trading strategy is carried out by selling borrowed securities at a higher price and buying the same securities at a lower price in the future to return to its lender.
Short selling is a key component within the equity markets ecosystem and is an important tool in fostering liquidity and maintaining market efficiency. It provides a channel for investors to communicate their contrarian views of current valuations, which leads to more efficient price discovery and the mitigation of price bubbles. On the other hand, it enables investors to hedge their positions and alleviate losses during a downturn.
Short selling is available and integral in many markets across the globe, including ASEAN, as it continues to be utilized by a wide array of investors. Locally, a short selling facility is expected to play a significant role in developing a robust securities lending environment, generating more trading activity in the market, and unlocking more products.