You are here: Home - Saving & Banking - News -

FSA announces measures to limit short selling

Written by:

The Financial Services Authority (FSA) has imposed a new rule designed to have a “calming effect” on the market for shares in financial firms.  

Speaking at the Lord Mayor’s City Banquet last night, Callum McCarthy, chairman of the FSA, announced the regulator would require traders to disclose short positions on financial institutions on a daily basis. It will also prohibit any active increase in net short positions on shares in financial services firms. The measures will initially be imposed for 120 days, during which time the FSA will review its overall policy on short selling.

Short-selling involves borrowing the shares of a certain firm from one party to sell to another in the hope that the share price of the firm in question will fall. This will then result in a profit for the short seller when the shares are bought back to return to the original party.

The FSA is concerned that such activities can translate into a drop in confidence among the customers of the banks targeted by short seller. This could then prompt bank customers to withdraw any money they have placed in savings or current accounts, causing a run on the bank, such as was the case for Northern Rock last September.

McCarthy explained: “We have been much concerned – as have many – at the volatility and what I would describe as incoherence in the trading of equities, particularly for financial institutions.

“There is a danger in a trading system which allows financial institutions to be targeted and subject to extreme short selling pressures, because movements in equity prices can be translated into uncertainty in the minds of those who place deposits with those institutions with consequent financial stability issues. We have seen acute examples of this phenomenon in both London and New York this week.”


Related Posts


Tag Box




Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co... Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Pension deficit soars to £70bn

Turmoil in the equity markets this week has pushed the UK pension deficit up by £20 billion to £70 billion.