FSA/PN/102/2008

18 September 2008

FSA statement on short positions in financial stocks

The Board of the Financial Services Authority (FSA) today (Thursday 18 September) agreed to introduce new provisions to the Code of Market Conduct to prohibit the active creation or increase of net short positions in publicly quoted financial companies from midnight tonight.

In addition, the FSA will require from Tuesday 23 September daily disclosure of all net short positions in excess of 0.25 per cent of the ordinary share capital of the relevant companies held at market close on the previous working day. Disclosure of such positions held at close on Friday 19 September will also be required on Tuesday 23 September.

The FSA stands ready to extend this approach to other sectors if it judges it to be necessary.

These provisions will remain in force until 16 January 2009, although they will be reviewed after 30 days. A comprehensive review of the rules on short selling will be published in January.

Hector Sants, chief executive of the FSA, said:

While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector.

The detailed changes to the Code of Market Conduct, and a schedule of the companies whose securities are covered by them, will be published before the market opens tomorrow (Friday 19 September).

NOTES FOR EDITORS

1. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.

2. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

ENQUIRIES

Press: Kirsty Clay 020 7066 3232

Outside office hours 07795 351 956

Public: FSA Consumer Helpline 0845 606 1234 (call rates may vary)

Website: www.fsa.gov.uk

"people wreck the fianancial system"

were bear sterns attacked by shorters? was northern rock? was lehman brohters? erm no...

the governments who allowed this to happen and the directors of the said financial institutions are solely to blame......so the governement are now telling me I cannot hedge a pension position if i wanted to.

we are meant to live in a free market economy......only when it suits the government it seems

deardealer...thanks for your feedback

lol choc

And dealerdear - your analogy of a vicious circle is way off the mark - it has been and still remains a vortex. And it was all of their own doing. It's going to take years to realise the true extent of their idiocy.

As ever, the real winners have long since run off with the spoils.
Pyramid selling, take a bow.

go on Mick give us a cuddle :-)

Treble,
You just concentrate on looking after your Gold trades...............

aye thanks for the reminder pal :-)

np

While I'm in the mood :-)

Lets take Teblewide and MDW:

He has stated that he has shorted them successfully 3 out of 4 times and posts comments like:

"in short 3p by chrimbo and a real chance if they do not get rid of management they will go into receivership.....when they bough the MDT business I said at the time it must have been a bag of shite as they only paid buttons for it.......looks like that was fairly correct......i feel sorry for shareholders"

He has probably used my shares to enable his short positions and then can freely go about telling lies and basically scaremongering,is this right?

Then again he could be just talking bollocks and using the threat of 'shorting' to drop the SP to buy more shares!

The above is just an example (sorry Treble) of how powerful just the shorting word can be!

The idiots who invented this shorting system have said this aids liquidity in the market place have been proven correct,so can't fault them there!

If we take HBOS as an example would the old regime of buy,sell or hold have staved off what has happened?

The rules for shorting were put down and agreed that it was a fair system,it has been proved wrong when it effects the big players but how many young AIM companies whether they have gone down or struggled by this form of trading and just been ignored as they must have been a bad company? So,were HBOS a bad company?Why protect the rest of the financial sector from a trading system that is thought to have merit?Are they all bad too?

I hate,oh yes hate,the BB lies that are told and can get away with but it's part and parcel unless you are a major ot course!

Lets short the UK into destruction as it's legal!-lol

Sorry for above but just gets my mad up-lol

Hector Sants, chief executive of the FSA, said:

While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector.

Hector Sants wants sacking for that comment for a start!

Shorting happens in the AIM market where small volumes can have a detrimental effect or let us say hampering a company going forward so every trade could be classed as "extreme circumstances have given rise to disorderly markets" as the SP can swing widely and end up in a false view of a company all be it in the short term!

I don't like the shortening of companies but it's a legal way of making money or was unless it effects the UK economy!Double standards or what! It's either OK to short a company or not!

chololat. No. I'm not defending the idiots who are paid millions who run great companies into the ground. I'd put them up against the wall and shoot them. However, if you really believe that short selling these markets will not bring the financial system down then you are very much mistaken.

short selling has been in available in the stock market for 100 years...why is it such a bad idea now?

re MDW....Mick i think you tell more lies than anyone on that stock so wind yer neck in pal

Now now Treble,keep taking the tablets :-)

RE post 26 of 27- "short selling has been in available in the stock market for 100 years...why is it such a bad idea now?"

While I'm in discussion mode,could the reason be that over the last decade or so with the invention of the internet and how it has quickly progressed that the 'shorting' of companies can now be enhanced to the logical conclusion of this method much quicker as seen by recent events............just a thought.

A hundred years ago you could argue that a single negative line in a newspaper would have had the same effect as seen recently but then again with all the information that is available today and the speed that news and views can be expressed then has the logical conclusion of the art of 'shorting' been realised?

And as it's effected everyone or will do in some way,is this the reason it's been stopped for the financial sector or is it just the case that this practice has been made a short term scapegoat?

Just interested,no axe to grind..............well I have in garage as a matter of fact!

Anyone remember this:

http://www.youtube.com/watch?v=c7M1Se-p7uk&NR=1

Sorry,meant this one:

Neil Young - Harvest Moon

http://www.youtube.com/watch?v=XQXnvNwGTAY

Privately I make a simplistic connection between Short-Selling and Pension Deficit woes for many stocks on the Main Market - and probably several on AIM.
That this information is not openly available makes one suspicious that it is not in the Public-at-Large's interest -
+So, this one wonders: why it is so secret?
Why aren't companies required to state their Pension provision positions?
-after all, it represents Profits that won't be available to new buyers of shares...
This Thread...Ten years ago ... "Short Selling" - was it banned,
+Today as I read, some High-Street names are on a 2018 list ( which may be an error, granted)....
-yet many on the 2008 list above, were in trouble and subsequent events have proved the SS were right.

I don't really understand when Buying a stock is perfectly legal, but there is no facility to do the opposite when a share is obviously ( to some), overvalued.... a Market Whim one might say.... yet SS is illegal ( is it? ), and there seems no mechanism to purchase anything other than CFD - which I fear are just too complicated and risky.


Any thoughts on Short-Selling . . . ?
-ditto- on Pension Deficits . . . . ?

Short selling is not banned.
Short positions over 0.5% have to be declared. www.shorttracker.co.uk
Pension deficit information can be found in the annual accounts.

Short selling with CFD's is easy enough. You simply press the sell button. The software doesn't in general care whether you are closing a long position or opening a short position - it's the same button. The trade ticket gives you all the info. before you place the trade. Value, margin requirement, interest and financing costs for overnight positions.

However, in practice it is difficult to short certain shares at low cost e.g. Purple Bricks and becomes more and more difficult the lower the market cap. IG will usually find a way but they will charge you bundles for the privilege.