FSA’s new rules are short of the mark – and will do more harm than good

The FSA's new regulations on short-selling mean disclosure rules are far more onerous for shorts than longs. And that amounts to manipulation of the market, argues Simon Nixon.

Short-sellers always get blamed in a financial crisis. At best, they're a nuisance. At worse, they're evil speculators, profiting from others' misery, often by spreading false rumours. Shorts are the market's misfits oddballs, contrarians, who refuse to subscribe to the conventional wisdom. They are therefore resented by the rich and powerful, the stupid and the gullible whose pretensions they prick, whose mistakes they expose and whose attempts to order events to suit themselves they mock. When you hear the authorities blaming short-sellers, you know they are seriously rattled.

We seemed to have reached that point in Britain last week. Without warning or consultation, the Financial Services Authority (FSA) introduced new rules on short-selling during a rights issue with almost immediate effect. Anyone who has a short position equal to 0.25% of a firm's shares must now disclose it to the stock exchange. Long holders only have to disclose their position when they own 3% of the shares.

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Simon Nixon

Simon is the chief leader writer and columnist at The Times and previous to that, he was at The Wall Street Journal for 9 years as the chief European commentator. Simon also wrote for Reuters Breakingviews as the Executive Editor earlier in his career. Simon covers personal finance topics such as property, the economy and other areas for example stockmarkets and funds.