Banning MPF Securities Lending Wouldn’t Stop Short Selling, Industry Warned in 2011

In late November 2011, the MPFA’s consultation on MPF securities lending triggered a reform debate: should funds keep being allowed to lend their stocks to short sellers? Early industry reactions were split — and the securities industry’s verdict was the bluntest: simply banning MPF lending would do little to restrain the bears.

Why wouldn’t banning MPF stock lending curb short selling?

The fund industry broadly opposed any ban because investors could still short through over-the-counter trades — no reporting required, and more convenient; AMTD executive 鄧聲興 said banning MPF lending alone would achieve little, and that any ban should be comprehensive, such as prohibiting short selling entirely or barring shorts in hard-hit mainland bank shares. He saw no need for bans in normal markets, but argued that in volatile times, heavyweight shorting that shrinks retail holdings — or shakes retail investors out — is unfair to the small investor.

Where each side stood

Notably, as of 24 October 2011, no MPF fund had ever lent securities — the whole debate was over a right nobody had used. The MPFA said it would review the securities-lending guidelines to strengthen member protection.

A central lending system: the alternative fairness fix

Tang offered another idea beyond bans: set up a central stock-lending system to lower the bar for retail shorting, making markets fairer. His point: rather than trying to disarm the big players with prohibitions, give retail investors the same weapons and let everyone compete under the same rules.

MPF investment rules are explained at the MPF education hub.