UK and Australia Extend Bans on Short Selling

After a review of its emergency short selling ban, the UK Financial Services Authority decided to keep the ban in place until January 16, 2009, with one change. The FSA prohibits the active creation or increase of net short positions in publicly quoted financial companies. In addition, the original rule required the daily disclosure of all net short positions in excess of 0.25 per cent of the ordinary share capital of the relevant companies held at market close on the previous working day.

The one change relates to the requirements for disclosing significant net short positions in UK financial sector stocks. The FSA accepts that it is not proportionate to require daily disclosures of short positions where there has been no change in a short position. Consequently, going forward, once disclosure of a short position has been made, additional disclosures will only be required when that short position changes. In January 2009, the FSA will publish a Consultation Paper on short selling.

At the same time, the Australian Securities and Investment Commission extended the ban on covered short selling for non-financial securities for a further 28 days until 18 November 2008, when it expects to lift the ban. The ban on financial stocks will continue until 27 January 2009. As part of lifting the ban on non-financials, the Commission will implement disclosure and reporting arrangements that will apply from the time the ban is lifted. These disclosure rules will be announced in the near future.