Watchdog cracks down on 'short-selling'

The City's financial watchdog today launched its latest crackdown on speculators profiting from falling share prices in the current market turmoil.

From midnight tonight, the Financial Services Authority (FSA) is banning new "short" positions in listed financial companies.

Related articles

• Lloyds boss tries to calm job fears
• Central banks pump billions into money markets
• Could Morgan Stanley be next?
• 'Mega-bank' will face fair trade scrutiny
• We're cleaning up finance, says Brown
• 'Superbank' deal confirms job and branch cuts
• The Mayfair mafia who helped to bring down a banking giant
• How will the bank merger affect the consumer?
• The lavish party where the fate of HBOS was sealed
• Simon Carr: A month of Black Wednesdays
• Market Update: HBOS up by 50 per cent
• Hamish McRae: Easy money won't help economies weather this global banking crisis
• Footsie holds on after rough night in Asia
• Unemployment rate rising at fastest rate for 16 years
• Grandees behind the marriage of two banking giants
• Morgan Stanley chief considers merger as markets dive again
• Bank of England surprises City by extending Special Liquidity Scheme
• Agency offers career in teaching to sacked bankers
• 'Business as usual' at United despite AIG collapse
• Sean O'Grady: Banking relies on confidence – and there isn't any
• Adrian Hamilton: Forget the banks – it's the economy that matters now
• Leading article: Amid global meltdown, our ministers bicker and backbite
• Jeremy Warner's Outlook: Lloyds holds all the cards as HBOS seeks shelter from financial hurricane
• Letters: The next financial bubble
• Credit crisis diary
• 'Superbank' puts 40,000 jobs at risk
• Rival banks cry foul at Lloyds' dominance after £12bn HBOS deal
• The Big Question: What do supermarkets' claimed price cuts really amount to?
• Search the news archive for more stories

"Short-selling" is when investors borrow stocks in company to sell it - hoping to buy it back at a cheaper price later on and return it, pocketing the difference as profit.

FSA chief executive Hector Sants said: "While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets.

"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 sector."

Scottish First Minister Alex Salmond yesterday hit out at "spivs and speculators" for driving down the share price of Halifax Bank of Scotland, forcing it into a merger with Lloyds TSB.

The ban on the "active creation or increase of net short positions" in publicly-listed financial companies will remain in force until 16 January next year, although the rules will be reviewed after 30 days.

The watchdog will also require all investors "shorting" more than 0.25% of a financial company's shares to reveal their positions next Tuesday.

The move follows a similar crackdown on short-selling by the US Securities and Exchange Commission announced yesterday.