Short selling ban to end

5 January 2009

The regulator banned the active creation or increase of net short positions on September 18 in the wake of dramatic falls in the value of UK banking stocks.

But the FSA warns that it wont hesitate to reinstate the ban if it feels traders shorting stocks are threatening the wider market.

It will continue disclosure obligations for those shorting shares until June 30 2009 as it looks to reduce the potential for abusive behavious and disorderly markets.

Currently a disclosure must be made if a net short position exceeds 0.25% of a relevant firm’s issued shared capital, with further disclosures required if there are any changes in the position.

Under the FSA’s proposals further disclosures would only be required at 0.1% bands (e.g. as a net short position reached 0.35%, 0.45% and so on). The scope of the disclosure obligations continues to apply only to stocks in UK financial sector companies.

Sally Dewar, managing director of wholesale and institutional markets at the FSA, says: “We believe that these proposals are the right measures for maintaining orderly markets."