UK NEWS READ ALL ABOUT IT BANNING SHORTING HAHa
UK bans short-selling of financial stocks
By Katherine Griffiths, Financial Services Editor
Last Updated: 7:40pm BST 18/09/2008
The City watchdog has banned short selling of banking shares from midnight in a dramatic attempt to shore up confidence in the battered sector.
The Financial Services Authority (FSA) made the sweeping ban after growing fears that other high street banks could follow HBOS in being targeted by short sellers. HBOS today announced it was selling itself to Lloyds TBS.
Its shares have slumped in recent days, after traders have short-sold the stock amidst speculation that the British banking giant faced serious funding and bad debt problems.
The FSA is banning all new short selling of financial stocks. It also said that investors must disclose short positions of more than 0.25pc taken out by the end of tomorrow by Tuesday next week.
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."
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Chancellor Alistair Darling welcomed the FSA's move. "I have discussed this with the FSA, and welcome their decisive action on short-selling," he said.
"I believe it is the right thing to do in the current market conditions and in the interests of financial stability."
Short selling is when an investor sells a stock before buying it, in the hope of making money as the share price falls. The US yesterday attempted to bring stability to its market by banning “naked” shorting. Normally an investor borrows a stock in order to short sell it.
Naked shorting is when is the practice of selling a stock short without first borrowing the shares or ensuring that the shares can be borrowed. The FSA said its provisions would remain in force until January 16 2009, but will be reviewed in a month's time.
A comprehensive review of the rules on short selling will be published in January
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