Bringing you live news and features since 2006 

Comment: FSA proposals offer cold comfort to short sellers

RELATED TOPICS​

One would have thought that the Financial Services Authority’s proposal yesterday not to renew its ban on the short selling of UK financial sector stocks would be welcomed by hedge fund ma

One would have thought that the Financial Services Authority’s proposal yesterday not to renew its ban on the short selling of UK financial sector stocks would be welcomed by hedge fund managers, who have campaigned vigorously against the measure since it was introduced last September.

But the regulator’s statement doused any euphoria it might have generated – the lifting of the ban was considered far from a foregone conclusion – when the FSA added that it was prepared to reintroduce the ban, which is now set to expire on January 16, without consultation if need be.

The FSA also plans to extend its disclosure regime for significant net short positions in UK financial sector stocks until June 30, in the hope of reducing the potential for ‘abusive behaviour and disorderly markets’.

One concession to short sellers is that whereas up to now disclosure has been required once a net short position exceeds 0.25 per cent of a relevant firm’s issued shared capital and at every subsequent change in that position, the new proposals limit further disclosures to when net short positions pass thresholds of an additional 10 basis points.

Do the FSA’s proposals mean that if a particular financial stock – like a high-street bank, for instance? – slumps in the market, short selling (and hedge funds) will be blamed and the ban will come into force again? This is the issue that fund managers and other short-sellers must consider when deciding whether to take advantage of their newly-regained freedom.

The FSA plans to publish a separate consultation paper within a month, setting out its proposals for a longer-term short selling regime. Hopefully it will contain concrete and pragmatic measures, but the suspicion must be that the sword of Damocles will hang over short-sellers for quite a while yet.

Latest News

ETF data consultant ETFGI reports that assets invested in the global ETF industry reached a new record of USD12.71 trillion..
Calastone has published an ETF white paper which examines several of the processes that take place across the lifecycle of..
Adapting product lines to fit into changing methodologies and meet shifting demand is essential to remaining relevant in the industry..
Investors urgently need greater access to diversified investment strategies aligned with the Paris Agreement on climate change if the world..

Related Articles

Taylor Krystkowiak, Themes ETFs
Themes ETFs opened its doors in December 2023, with an introductory suite of 11 ETFs – seven thematic and four...
Konrad Sippel, Solactive
At the end of March, financial index specialist, Solactive, published its 2024 annual report on future trends.  ...
Lorraine Sereyjol-Garros, BNP Paribas
Following changes to the French Monetary and Financial Code and of the French market authority AMF’s General Regulation, it is...
Ed Rosenberg, Texas Capital
Texas Capital Bank first opened its doors back in December 1998 and nowadays offers wealth-management services, as well as commercial,...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by