NYSE Tries to Pull a "Roger Goodell" on Hedge Fund industry
Was curious to see what you hedge fund guys thought about the NYSE trying to make HF reveal short positions? (link to Bloomberg article at bottom)
"The New York Stock Exchange is prodding its regulator to make hedge funds reveal which stocks they’re shorting, an area where the U.S. lags far behind Europe.
NYSE wants the Securities and Exchange Commission to compel investors to identify the stocks they are betting will fall. The U.S. lacks such rules, leaving it behind the European Union, which obliges funds to publish short positions once they reach 0.5 percent of a company’s share capital.
In a letter dated Oct. 7, NYSE, a division of Intercontinental Exchange Inc., calls for the SEC to “bring light to a less transparent and increasingly consequential corner of the securities market.”
http://www.bloomberg.com/news/articles/2015-10-21/nyse-pleads-for-rules…
seems like a sensible suggestion to me... long position trades, prices and ownership above a certain limit are public knowledge... I don't see why the world should not know the same for short positions..
Yeah we'll see how it goes. I kinda like the idea of not giving out all of your secrets though.
maybe PUBLIC markets are not for you then..
I could see this getting VERY ugly with some of the large egos at the big HFs... The Ackman & Icahn spiff comes to mind:
I love it.
http://reactiongifs.us/wp-content/uploads/2013/02/popcorn_stephen_colbe…
I was going through the HF guide today on my way home. "Be humble" was one of the bullet points of advice. Not too widely accepted I guess for these guys.
This could be a problem for some quant funds. We don't want to make it easy to reverse engineer out strategies.
I'd be in favor of disclosures designed to prevent abusive shorting. IE if you enter a position and the trading rate exceeds a certain amount (eg X% ADV per day), you should be required to report that a few days after the trade is completed.
I'd be in favor of a short disclosure if your position exceeds 5%. But 0.5% is just a tad small, especially on the small and mid cap names. I don't think reporting net positions on occasion will deter market manipulation either- which is what the NYSE ought to be concerned about after 2008 and the flash crash. I'm sure there will also be any number of workarounds.
I'm sure there are some scummy people out there trying to make money off of panics and short squeezes, but the way your typical stat arb fund is run, you are always desperately trying to avoid market impact.
I get their sentiment, but I think the NYSE ought to be more concerned about dH/dt rather than just H. I also think 0.5% is a little bit low when IIRC the threshold on the long side is 5%.
LOL, reverse engineer a quant fund's strategies through QUARTERLY filings? Talk about barking up the wrong tree.
On the main topic, seems like many L/S heavy hitters already choose to publicly disclose their big shorts. Of course, only after they have established a large position.
You give me 20 samples of several thousand positions over 5 years, I can give you a good sense of what strategies haven't been decaying for them assuming I have some idea of what I'm looking for.
Look, if we do this, strategies are going to decay faster and there will be less capital and effort devoted to curing long-term systematic imbalances in the market. These strategies do eventually wind up in the public record, and our trade secrets hit the public domain a whole lot faster than coke recipe or the 17 years that pharmaceuticals firms get in a patent.
If the goal is simply to prevent market abuses, there are ways to do that without tipping your hand.
you have a very convoluted approach to this ... It looks like in your mind the HFs secrets come before anything else... whereas in the real world the right of every participant to have access to fair information comes first..
Meh, I disagree.
Any conclusions drawn from such a small sample wouldn't be even moderately rigorous. Besides, a ridiculous amount of assumptions about a fund's number of strategies, holding periods, etc, would have to be made to even cobble together a theory.
It sounds like the NYSE just wants a COT report for individual equities, there's plenty of leeway within that reporting to obscure your actual trading strategy and maintain transparency (or some semblance of transparency).
0.5% is just too small for small / mid cap names. Sure you can file eventually... but you do realize that you lose out on a lot of corporate access / IR if the team knows you are short, which I don't think is right. I have personally been barred from attending a lunch meeting w/ mgmt because they THOUGHT we were short. I mean, they were right... but it's not like we were waging public war on them like HLF. It was such a small, inconsequential thematic short.
CEP it's not just the time series but the cross section. If you're running a spot commodities strategy it would be 20x 1 data point, but an equities strategy might have 20x 50 or more data points. You can run stats on 1000 samples. Although to be fair you have to know what you're looking for.
Look a multistrategy firm like Bridgewater would probably be OK but a Kepos or Two Sigma would be spilling all of their beans by disclosing holdings.
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