UK Bans Short Selling On Financials Through January

LONDON — Britain's financial regulator said Thursday it was temporarily banning the short-selling of shares in financial companies that are listed on the London Stock Exchange.

Short-selling, in which investors sell borrowed shares in hopes of buying them back later at a lower price, has been blamed for sending bank share prices plummeting and exacerbating turmoil in financial markets. U.S. regulators tightened rules on the practice Wednesday.

Hector Sants, chief executive of Britain's Financial Services Authority, said in a statement that while the agency still regards short-selling as "a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets."

London's ban goes into effect at midnight Thursday local time and will remain in place through Jan. 16, 2009. Sants said the ban was intended to "protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector."

The FSA said it would review the ban after 30 days and may extend it to other sectors.

Aggressive forms of short-selling were being blamed in part for the rapid downfall of Lehman Brothers Holdings Inc., the No. 4 U.S. investment bank, which filed for bankruptcy protection on Monday.

Some British politicians claimed that Britain's biggest mortgage lender HBOS PLC also fell victim to speculators. HBOS's share price plummeted Wednesday before it was snapped up by banking rival Lloyds TSB PLC.

On Wednesday, opposition lawmaker Vince Cable accused hedge fund managers of "hunting in packs" to undermine the bank. Alex Salmond, the first minister of Scotland, where some 17,000 HBOS jobs are based, said Thursday he wished the clampdown on short-selling had taken place earlier.

The FSA said it would also require investors to publicly disclose existing large bets made against financial companies. Any short position whose value exceeded 0.25 percent of the targeted company's ordinary share base would have to be disclosed on a daily basis, the FSA said.

The FSA said the disclosure requirement would come into effect Tuesday.

Comments

[yuppy70]

the British are my heroes!! to aBr1t and iambusto - i'm not laughing - if Cox did his job intelligent hardworking people's lives and jobs in the US wouldn't be at stake as it has been since last Wed.... but then Cox also has the IQ of a postal clerk - apologies to all postal clerks.

[aBr1t]

yeaaa great idea....lol

[iambusto]

ya the govt. trying to prop up the stock market artificially. seems like making of another bubble to me.
let the shorts punish stupid companies that put too much leverage on balance sheet.

you think shorts are busy trying to bring down Berkshire Hathaway, Google, Apple. Not really. those companies are well run and well capitalized.

its the stupid management of some companies that leave their company vulnerable. see shorts bring the value of the company close to what they are worth. without them, there would be an upward bias in the stocks from their true value.

[T Pol]

No, but naked short sellers did significant damage to companies like Taser, Overstock.com, etc. There was nothing wrong with the fundamentals of these companies.

Stop with the "shorting" maintains balance in the marketplace argument. Legal shorting is one thing, but when combined with defamation campaigns and illegal shorting, it is a deadly game for companies, investors, and tax revenues (uncollected due to failures to settle trades).

[JSquercia]

Seems like a good idea to me