… but the disclosure regime extended until the end of June.
Here’s the statement from the FSA, which was released after the market closed on Monday. And don’t you just love the way the Citywatchdog has buried the news on the financials ban? It is as if they are embarrassed.
Just in case you miss it, we have highlighted the relevant paragraph.
The Financial Services Authority (FSA) is today proposing to extend its temporary disclosure regime for significant net short positions in the stocks of UK financial sector companies until 30 June 2009. Continuing to require disclosure will reduce the potential for abusive behaviour and disorderly markets. The FSA is not proposing to renew its ban on short selling of these stocks but is prepared to reintroduce the ban without consultation if necessary.
Under the proposals issued today, the FSA will extend the disclosure regime until 30 June 2009. The FSA is proposing to make one change to the regime. 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.
In addition, the FSA proposes that the ban on the short selling of stocks in UK financial sector companies will expire on 16 January.
Sally Dewar, managing director of wholesale and institutional markets at the FSA, said: “We believe that these proposals are the right measures for maintaining orderly markets. Continuing the disclosure obligations as we propose will reduce the potential for abusive behaviour and disorderly markets. “In addition, we will not hesitate to reinstate the ban if necessary”.
The FSA intends to publish a separate consultation paper within a month, setting out its proposals for the longer-term short selling regime.
Update:
Some reaction from the banks team at RBS. And note the par on HBOS/Lloyds. Event driven specialists will now be able to “arb” this deal.
Surprisingly for us, the FSA is proposing to lift its ban on UK financial sector company shorts from 16th January; though the temporary disclosure regime for significant short positions would be extended to 30th June. The closing date for feedback on this proposal is 9th January.
A full consultation paper will be published within a month which sets out the FSA’s proposals for the longer term short selling regime. The statement also sets out that the FSA will not hesitate to reinstate the short selling ban “if necessary without consultation”.
Should be good news for bank sector volumes & liquidity & so hopefully commissions; bad news for bank share prices for those who believe our view that the domestic UK banks have further to fall. Reiterate sell Lloyds/HBOS.
Also, worth noting that HBOS is trading at a 16% discount to the implied Lloyds offer price (0.605x Lloyds at £1.26 implies £0.76 for HBOS vs close £0.66) – there is a useful risk arbitrage opportunity here, though our risk arb desk tells us that 16% is not out of line with recent transactions in other sectors.
Related Links:
Consultation paper - FSA website
Save our shorts - FT Alphaville
