Blog article
See all stories »

The Bear Game

In the UK, the history of stock borrowing and lending has veered from being a well regulated, secure winner for all parts of the finance industry into an open season that is almost a free-for-all for regulated business. This has been instrumental in the creation of a much greater risk in short selling.

I will be presenting a potted history of stock Lending and borrowing from 1985 to today at the next Post Trade Forum debate, ‘Should Short Selling be banned?’ on the 22nd February at the London Stock Exchange. The benefits of short selling in part are supported by the stock lending/borrowing business but are not driven by it. That’s important to realise!

Stock borrowing provides important revenues to Institutional investors who lend and significant revenue to the treasury via manufactured dividends. This should be acknowledged when any ban on short selling is discussed. So short selling is not a simple business where all the market troubles and impacts on the economy can be blamed.

Stock borrowing also has an important role to play in trade financing that if prevented would have a knock on impact on spreads in the market and the price of investment.

In 1985 as Manager of the stock borrowing business, in a Jobbing Firm (now known as a Market Maker) I was actively involved in the creation of revenues that financed the trading positions of the Jobbing book. Today it’s quite different, with all firms able to take a role in stock borrowing and lending, but without the central control that the Bank of England had back then.

Many other differences will be outlined, which should be considered when debating whether or not short selling should be banned or more highly regulated. This emotive topic should make for a stimulating and enlightening debate, which is sure to also increase everyone’s understanding of this very important feature for stock markets.


Comments: (0)

Gary Wright

Gary Wright


BISS Research

Member since

19 Sep 2007



Blog posts




More from Gary

This post is from a series of posts in the group:

Post-Trade Forum

The Post Trade Forum's aim is to propagate debate and discussion between senior practitioners in Post Trade Operations in the global securities market; to bring about increased awareness and knowledge across both buy-side and sell-side financial institutions in financial products and be a focal point for firms and practitioners to air views.

See all

Now hiring