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FSA extends short selling regulations

The Financial Services Authority (FSA) has today extended the reporting regulations with regards to short selling which were introduced some months ago. Despite originally suggesting that the rules were short-term, ensuring that any short position above 0.25% of a target share capital was reported to the market, it appears this particular rule will continue indefinitely.

At the height of the collapse of the UK banking industry the FSA banned short selling outright although it is actually a vital element of the UK investment market place and one which has been around for many years. While the authorities are obviously concerned about the potential for people to abuse the system it does have a valid role to play. How many times have we seen share prices move higher and move lower despite public denials of any concerns or even good news on the way?

In many ways short selling has brought much more information into the marketplace as companies look to make themselves as transparent as possible, with good news and with bad news, in order to offset the potential damage that short selling can have. Even though it is obvious that the UK authorities would rather instigate a much tougher regime against short selling their hands are pretty much tied and forcing investors to announce significant short selling positions is the best way forward at the moment.

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