FSA brings in short-selling ban

News Article - Friday, September 19, 2008

filed under: Regulatory

Traders have been banned from short-selling by the Financial Services Authority (FSA) in a bid to stabilise the market.

However, the ban only applies to 29 leading financial stocks, rather than shares in every listed firm and will last until January 16th.

Short-selling occurs when investors borrow shares or another kind of asset from a fellow investor and sell it in the hope that the price will then fall.

If it does, they buy it back cheaper and give it back to the owner, with the difference in prices the profit.

Hector Sants, the FSA chief executive, 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."

Along with news of the proposed US government buy-out of bad mortgage-related loans, the ban on short-selling has helped a stock market recovery, with the FTSE 100 index of biggest sharing adding 8.6 per cent.

Add to del.icio.us | Digg this story