FSA announces ban on short selling
The practice of "short selling" stocks has now been partially banned by the Financial Services Authority (FSA).Concerns over powerful investors using the technique to falsely drive down bank stocks have led to the watchdog's move.The near-collapse of HBOS earlier this week, prior to its £12.2 billion takeover by Lloyds TSB, has also been blamed on the practice by some analysts.Short selling involves an investor borrowing a certain stock for a fee, and then selling it on immediately.He or she then buys it back later and returns it to its owner, pocketing a profit if the stock's value has dropped in the intervening period.Therefore, "shorting" a stock is effectively a bet on its value falling - and large numbers of investors holding a "short position" in a certain firm can erode market confidence in it.FSA chairman Callum McCarthy said: "This is a measure which reflects the present turbulence in markets. It is designed to have a calming effect - something which the equity markets for financial firms badly need."
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