The regulator has snapped. With the government having torn up the competition rulebook earlier in the day, the FSA has now abandoned the free market in financial stocks.
Hector Sants:
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 details:
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.
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).
Related links:
FSA to ban short-selling of financial stocks - Peter Thal Larsen
