01 Jun 2009, David Benyon , Operational Risk & Regulation
LONDON - The Financial Services Authority (FSA) is seeking to extend its disclosure regime for short selling in the stocks of UK financial sector firms.
The disclosure rules, due to expire on June 30, were first introduced on September 18, 2008 and then extended in amended form by the regulator on January 16 this year.
The FSA says extending the shorting transparency regime will continue to stifle "abusive behaviour" of key stocks and promote market stability.
The ban was conceived after panic sown by plummeting HBOS share prices was seen to have endangered the bank and market stability.
The regulator says the transitionary regime will be replaced by broader short-selling rules for all UK stocks, as outlined in a February discussion paper and due for a conclusive feedback statement in the third quarter this year.
"Like it or not, soon short sellers will probably be obliged to live with a permanent disclosure regime across all stocks in the UK," Jeremy Jennings-Mares, capital markets partner at law firm Morrison & Foerster.
"Of course, there will be complaints about the additional administration required. But that shouldn't get in the way of ensuring full transparency on the significant short positions associated with each stock," he says.
The current regime demands disclosure for short positions of more than 0.25% of a company's issued shared capital, with further disclosure announcements for increases in 0.1% bands above that.
"Keeping the disclosure requirements will continue to enhance transparency and limit the potential for market abuse, while details of a long-term regime for short selling are being drawn up," said Sally Dewar, managing director of wholesale and markets at the FSA.
"We remain committed to achieving an international consensus that is as wide as possible on our broader short-selling regime," said Dewar, in response to criticisms of national regulators for going their own way last September - resulting in a diaspora of measures across the EU.
The FSA's consultation period for the formulation of its Q3 document for a long-term disclosure regime ends on June 12.
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