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| Version 11 | Version 12 |
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| FSA introduces short-selling ban | FSA introduces short-selling ban |
| (20 minutes later) | |
| The City regulator has announced a ban on short-selling - in which traders bet on share prices falling - in a bid to tackle market instability. | The City regulator has announced a ban on short-selling - in which traders bet on share prices falling - in a bid to tackle market instability. |
| The Financial Services Authority (FSA) is clamping down on what some think contributed to the sharp falls in HBOS shares before Lloyds TSB rescued it. | The Financial Services Authority (FSA) is clamping down on what some think contributed to the sharp falls in HBOS shares before Lloyds TSB rescued it. |
| The rule came into force at midnight and is due to last until 16 January. | The rule came into force at midnight and is due to last until 16 January. |
| The FSA's clampdown applies only to 29 leading financial stocks, and not to shares in all listed firms. | |
| The restrictions will be reviewed after 30 days. | The restrictions will be reviewed after 30 days. |
| "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," said FSA chief executive Hector Sants. | "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," said FSA chief executive Hector Sants. |
| 'Financial stability' | 'Financial stability' |
| Short-selling is a technique that sees investors borrow an asset, such as shares, currencies or oil contracts, from another investor and then sell that asset in the relevant market hoping the price will fall. | Short-selling is a technique that sees investors borrow an asset, such as shares, currencies or oil contracts, from another investor and then sell that asset in the relevant market hoping the price will fall. |
| There is a danger in a trading system which allows financial institutions to be targeted and subject to extreme short-selling pressures Callum McCarthyFinancial Services Authority chairman | There is a danger in a trading system which allows financial institutions to be targeted and subject to extreme short-selling pressures Callum McCarthyFinancial Services Authority chairman |
| The aim is to buy back the asset at a lower price and return it to its owner, pocketing the difference. | The aim is to buy back the asset at a lower price and return it to its owner, pocketing the difference. |
| Anyone can short a position in a company's shares, but typically hedge funds are the main players. | Anyone can short a position in a company's shares, but typically hedge funds are the main players. |
| Chancellor Alistair Darling welcomed the move by the FSA. | Chancellor Alistair Darling welcomed the move by the FSA. |
| "I believe it is the right thing to do in the current market conditions and in the interests of financial stability," he said. | "I believe it is the right thing to do in the current market conditions and in the interests of financial stability," he said. |
| Markets have fluctuated hugely in recent days, with fundamental changes occurring in the financial landscape. | Markets have fluctuated hugely in recent days, with fundamental changes occurring in the financial landscape. |
| There are fears that several firms, including Lehman Brothers, which filed for bankruptcy at the start of the week, and insurance giant AIG, which was rescued by the Federal Reserve, were targeted by those short-selling. | There are fears that several firms, including Lehman Brothers, which filed for bankruptcy at the start of the week, and insurance giant AIG, which was rescued by the Federal Reserve, were targeted by those short-selling. |
| Chancellor Alistair Darling says short-selling wasn't the sole cause of falling global stock markets | Chancellor Alistair Darling says short-selling wasn't the sole cause of falling global stock markets |
| Speaking to the BBC, Mr Darling underlined that short-selling was not wrong in itself. | Speaking to the BBC, Mr Darling underlined that short-selling was not wrong in itself. |
| "It can help actually in providing funds, liquidity, for companies." | "It can help actually in providing funds, liquidity, for companies." |
| But he added that it could become a problem where people "deliberately" manipulate a market, making "a difficult situation even worse". | But he added that it could become a problem where people "deliberately" manipulate a market, making "a difficult situation even worse". |
| Callum McCarthy, chairman of the Financial Services Authority, expressed concerns over recent volatility. | Callum McCarthy, chairman of the Financial Services Authority, expressed concerns over recent volatility. |
| "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." | "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." |
| Broader moves | Broader moves |
| It was not only in the UK that attempts were being made to address short-shelling. | It was not only in the UK that attempts were being made to address short-shelling. |
| The US financial regulator, the Securities and Exchange Commission (SEC), also announced restrictions on short-selling on Wednesday. | The US financial regulator, the Securities and Exchange Commission (SEC), also announced restrictions on short-selling on Wednesday. |
| And on Thursday, New York attorney general Andrew Cuomo said he would start a probe into short-selling. | And on Thursday, New York attorney general Andrew Cuomo said he would start a probe into short-selling. |
| At issue is whether certain traders exploited short-selling to push down stock prices, breaching market rules. | At issue is whether certain traders exploited short-selling to push down stock prices, breaching market rules. |
| New York's state pension funds said it would cease lending stocks in 19 firms to short-sellers on a temporary basis. | New York's state pension funds said it would cease lending stocks in 19 firms to short-sellers on a temporary basis. |