U.K. Plans to End Ban on Shorting

The Wall Street Journal – The U.K.’s markets regulator plans to end its ban on short selling of financial stocks.

The Financial Services Authority said Monday that it would continue to ask hedge funds, which said the ban had hurt markets and failed in its objectives, to disclose short positions in banks and other financial stocks, and it would reinstate the ban if necessary. The ban is set to expire Jan. 16.

The FSA introduced the ban Sept. 18, after a tumultuous week that saw share prices of some U.K. banks plummet, partly on what was believed to have been short-selling activity. In short selling, investors borrow shares and sell them, hoping they can buy the shares later at a lower price and replace them, turning a profit.

The FSA wanted to stymie the potential for market abuse in which funds may spread rumors in companies in which they had short positions. The decision to remove the ban is an acknowledgment that market conditions have changed since that time, the FSA said.

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