Chase Cooper - Creating Corporate Value Chase Cooper - Creating Corporate Value

Regulation – UK short selling ban to continue

23 October 2008
Accelerate your Basel II Operational Risk Management programme
Chase Cooper Consultancy
Related News
Regulation – tomorrow’s G-7 meeting critical
Sub-prime crisis – so everything is all right now!
Regulation – Credit Suisse fined £5.6 million by FSA
Financial Services Authority logo
On September 18th, the UK regulator, the FSA, banned the short selling of many UK-listed financial shares until the 16th January 2009. However they agreed to review these after 30 days. Yesterday, with one small change, the FSA announced that these restrictions would continue.

Short selling is the forward selling of shares which one has borrowed, or, in some cases, does not have at all, in the expectation of buying them back at a later date once they had fallen below the original contract price. This was banned, for certain financial shares, by the FSA who believed short sellers were a contributory factor to market instability.

In the original announcement the FSA said the ban would remain in place until mid January when a comprehensive review of short selling would be released. However they said that they would review these rule changes after 30 days – presumably to evaluate their effectiveness. Yesterday the FSA decided to proceed with the ban unchanged expect for removing the necessity for short sellers to continue to publicly disclose an unchanging short position daily.

There has been strong market opposition to these rules as well as major criticism of the list of 34 institutions – some are seen as irrelevant small companies, other firms are furious that they have been left off the list and therefore in isolated positions.

It is also relevant that this ban does not appear to have had any noticeable beneficial impact on financial shares – the FTSE 250 fell 26.3% in the past 30 days and financial stocks have fallen by more, despite recent improvements. Yet one of the biggest improvements has come at MAN Group, the world’s biggest listed hedge fund and illogically left off the FSA’s list, which rose 4% yesterday – and has only lost 6.5% in the past 30 days despite presumably being a target for short sellers.

Why does the FSA persist?

If you would like to comment on this or any other Chase Cooper news story, please contact us at .

Cookie Information
Privacy Policy
© Chase Cooper 2005-2013