Blog
FSA stamps on short-selling
19th September 2008
The news tonight is that the Financial Services Authority (FSA) headed up by Hector Sants has introduced a temporary ban on the practice of short-selling which Wikipedia defines as “the practice of selling securities the seller does not own, in the hope of repurchasing them later at a lower price.”
To many short selling is immoral - a dangerous practice that can destroy shareholder value in the flash of an eye - just ask the millions of shareholders in HBoS. The Hedge Funds clustered in Mayfair are in the eye of the storm accused of profiteering from their practice of shorting the stocks of the major banks.
The FSA says
“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. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector.”
I will link to some news reports on short selling as they become available on the BBC website.
Robert Peston on the ban on short selling
Sky News - short selling is banned for 4 months
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.