Reuters Summit-Regulatory heat turned up on hedge funds

By Huw Jones

LONDON (Reuters) - Slashing the time it takes to settle a trade would largely curb short-selling, a top European Union market regulator said on Tuesday as supervisors turn up the heat on the $1.4 trillion (959 billion pounds) hedge fund sector.

Short selling has been blamed for accelerating slides in bank shares and the practice, a favourite strategy for many hedge funds, has already been curbed in some EU states.

Share trades in the European Union are typically settled within three days, or T+3, but a top regulator said technology should allow near instantaneous settlement.

"It would reduce the possibility to trade within the settlement cycle," said Eddy Wymeersch, chairman of the Committee of European Securities Regulators.

"I am amazed that with all the technology that we have today that we could not settle in T+0 and that would largely enable us to eliminate short selling," Wymeersch said speaking at the Reuters Financial Regulation Summit.

"Are there sufficient technical arguments not to move to real time settlement? Can we not move to a little bit more efficiency. I want to launch a discussion," Wymeersch said.

The United States considered a very short settlement time a few years ago but gave up as banks said it would be too costly.

CESR was criticised last September when national regulators introduced curbs on short-selling in an uncoordinated way.