The UK’s Financial Services Authority (FSA) has confirmed its plans to lift a ban on the short-selling of UK financial stocks on 16 January – the expiry date originally given when restrictions were imposed on 18 September last year. The regulator has also proposed extending the requirements to disclose “significant” net short positions in UK financial stocks to 30 June.
However, the disclosure regime will be relaxed slightly. The existing rules require firms to report net short positions exceeding 0.25% of the relevant company’s issued share capital, as well as any subsequent changes to the position. Under the rules for the extended period, further disclosures would only be required at 0.1% bands, i.e. additional disclosure would only be needed when short positions reach 0.35%, 0.45% and so on.
The UK financial regulator has sent out a consultation paper on the proposals to the market. The deadline for responses is 9 January to allow the new measures to be implemented from 16 January.
“We believe that these proposals are the right measures for maintaining orderly markets,” said Sally Dewar, managing director of wholesale and institutional markets at the FSA, in a statement. “Continuing the disclosure obligations as we propose will reduce the potential for abusive behaviour and disorderly markets.”
The regulator wants to lift the short-selling ban because it believes market conditions have changed since the restrictions were first imposed last September. “Market conditions have become less extreme and, in the intervening period, various policy measures have also been taken to strengthen the position of the financial sector,” the FSA said in its consultation paper. “We therefore believe the risks posed by short-selling in terms of the potential for market abuse and creating disorderly markets have declined.”
The FSA added, however, that it is prepared to reintroduce the ban without consultation if necessary.