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FSA pushes for short selling disclosure on all equities

The FSA will pursue enhanced transparency of short selling through disclosure of significant short positions in all equities.

The regulator issued a feedback statement today which also says it will work towards agreement on future requirements at an international level, rather than introducing a separate domestic regime.

It adds in the interim it has no plans for immediate changes to its current short selling requirements.

Currently the FSA requires disclosure to the market of net short positions of 0.25 per cent or more of the issued share capital of UK financial sector companies or companies carrying out a rights issue.

In July the Committee of European Securities Regulators issued proposals for a short selling disclosure regime, which included calls for private disclosures to regulators at 0.1 per cent.

The FSA says it is “open to the possibility of requiring private disclosures at the lower threshold”.

FSA director of markets Alexander Justham says: “The consultation exercise has confirmed our support for enhanced disclosure requirements for significant short positions rather than any direct restrictions on short selling, other than on a temporary basis in exceptional market conditions.

“But we remain committed to securing agreement on as wide an international basis as possible and, in particular, to achieving a harmonised regime within Europe.”

CMS Cameron McKenna’s Simon Morris says: “FSA is right not to restrict short selling activities – last year’s panic measures achieved virtually nothing. The FSA’s recognition, late in the game, that it must work towards international consensus on short selling is telling. By introducing UK-only measures not only distorts the international securities markets, but also makes the UK a less attractive place to do business.”

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  1. FSA pushes for short selling disclosure on all equities
    I’m not a stockbroker, though I think the real problem with short selling is what a seller may do to influence market perception of the stock he’s just sold. He wants to buy it back for less than the price at which he sold it and if he can spread the idea that everyone else in the market should do what he’s just done, then down will go the price. That’s a very difficult practice to police (even for a competent regulator) and yet, if it’s as commonplace as I suspect, it’s also quite damaging to the natural ebb and flow of the market. It does no one any good except for investors in that particular manager’s fund and what do they care if the rest of the market suffers?

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