European rules on shorting could harm hedge fund strategies and investors

Legislation by European Union could have a negative impact on the shorting strategies used by a large number of hedge funds. Excessive rules could make fund managers exit strategies and the EU.

The nightmares hedge fund managers were having about potential regulations emanating from Brussels may have lessened but the danger is not over yet. Rules covering shorting of sovereign debt and European equities are still boiling away although some of the more extreme measures have fallen by the wayside.

For example, provisions that could have forced short sellers to identify themselves publicly when a short position on any European Union (EU) company hit 0.5% of share capital have been ditched