Opinion | Playing by Hong Kong's new rulebook on short selling

Short sellers of Hong Kong-listed securities are now required to report their short positions to the Securities and Futures Commission, which publishes the data. To discourage free-riding and herding, where investors blindly follow a big-name short position holder, names of the short sellers are not revealed and the data is aggregated for each stock.
 

Short selling is when you sell an asset you don't own, with the intention of buying it to transfer to the purchaser at a later date. If the price of the asset falls, the seller can make a profit.

Short selling can make the market more efficient and aid with price discovery, helping ensure shares are accurately priced, considering all available information. But it can also exacerbate market instability, so most countries regulate it.

In Hong Kong, short selling of certain listed shares is allowed, provided the seller has an exercisable right to vest the shares in the purchaser. In other words, the seller must have "borrowed" the shares, typically from a bank that holds them in custody for other investors. This is called "covered" short selling. "Naked" short selling is banned.