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Short selling ban 'not working'

The ban on short selling from the Financial Services Authority (FSA) has not worked, the Centre for Economic and Business Research (CEBR) has claimed.According to the economists' group, instability on the financial markets has continued following the ban - which was aimed at shoring up sentiment among investors in financial firms.Their point was proved on the FTSE 100 today, as the index plunged by up to six per cent.The losses were led by banking stocks.Short selling is effectively a negative bet on the price of a certain share from an investor.The FSA hoped that, with such bets no longer affecting bank shares, values would rise and markets would stabilise.At the time of the ban Hector Sants, chief executive of the FSA, said: "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 sectorCharles Davis, senior economist at CEBR, commented: "[The ban] is a measure to try and quell some of the recent instability, [but] in terms of a solution to the structural problems in the sector it is clearly not a solution to that. "It is not something that is going to solve the causes of the credit crunch at the moment. It is essentially clamping down on speculators...there has been a feeling that they have just been driving down prices and adding to the sense of general panic."

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