FSA Bans Short-Selling of Financials

The FSA has just announced a ban on short-selling financial stocks starting midnight tonight. The ban , which affects all public financial companies, is expected to last until 16th January 2009.

This move raises a number of questions. How soon before the housebuilders ask to be included? Their shares have been hit just as badly as some of the banks. What about other sectors? Are they not entitled to this protection?

Back in March, the FSA accused short-sellers of spreading false rumours about HBOS in order to trash the shares and make a nice profit from Howard & Co's misery. It had to abandon the subsequent enquiry due to insufficient evidence but maintained that the rumours were false, and spread deliberately. However, if the rumours were false, why did the Government have to ask Lloyds TSB to take over HBOS this week? Surely if the shares were suffering from a temporary short-selling attack it is the Government's duty to stop Lloyds from snapping up HBOS at a bargain price, slashing jobs (not in Scotland or anywhere else with a by-election) and making a huge profit.

Unless, that is, the short sellers' suspicions were right. It seems there's one thing everyone hates more than the average short seller - a short seller who is right.

Short-selling helps the market get as near as you can get to a democracy. Without it, the stock market is less like the analytical, responsible machine it should be and more like a religious cult.