The Financial Services Authority published a feedback statement yesterday in which it set out its policy stance on short selling. The FSA explained that it wishes to see the disclosure of significant short positions in all equities. There are, however, no immediate plans to introduce such a regime because the FSA's preferred course is to work towards agreeing such a framework at an international level. The FSA continues to believe that short selling is desirable; to quote from the feedback statement:
We continue to hold the view that short selling plays an important and positive role in normal market conditions and we are convinced that a blanket ban, other than in emergency circumstances, would have an undesirable negative impact on market efficiency .... We do not consider naked short selling to be illegitimate activity in itself: it can provide valuable liquidity to the markets and is necessary as part of market making activity ... we would be concerned about any naked short selling carried out with no intent or reasonable plan for delivery of the shares on the intended settlement date, and would be prepared to pursue action against such conduct".
Note: for a summary of the actions taken by regulators and/or Governments across Europe in respect of short selling, see the summary produced by the Committee of European Securities Regulators.
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