Jonathan Herbst: A new era in financial market regulation

Last week saw the Financial Services Authority (FSA) react to volatile markets by imposing a ban on the short-selling of financial sector stocks until 16 January, 2009. Short-selling is a technique whereby investors bet on the price of a stock falling. It involves selling borrowed stock on the assumption that it will be able to be bought back at a cheaper price and returned to the lender. This is one way in which it is possible for investors to profit from falling share prices.The action taken by the FSA, which came into force on 19 September, was twofold. The first element was the outright ban on creating or increasing any net short position in relation to a UK bank, insurer or its incorporated parent company. According to Hector Sants, chief executive of the FSA, the decision was taken "to protect the fundamental integrity and quality of markets, and to guard against further instability in the financial sector".

October 01, 2008 at 08:03 PM

4 minute read

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Last week saw the Financial Services Authority (FSA) react to volatile markets by imposing a ban on the short-selling of financial sector stocks until 16 January, 2009.

Short-selling is a technique whereby investors bet on the price of a stock falling. It involves selling borrowed stock on the assumption that it will be able to be bought back at a cheaper price and returned to the lender. This is one way in which it is possible for investors to profit from falling share prices.

The action taken by the FSA, which came into force on 19 September, was twofold. The first element was the outright ban on creating or increasing any net short position in relation to a UK bank, insurer or its incorporated parent company. According to Hector Sants, chief executive of the FSA, the decision was taken "to protect the fundamental integrity and quality of markets, and to guard against further instability in the financial sector".

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