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

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.