The senseless ban on short selling 34 financial companies put in place by the UK’s financial regulators in September will be allowed to expire later this month, according to regulators. The short selling bans put in place by authorities around the world in response to sell off of financial equities last fall has been widely criticised as a panic response that was arguably ineffective.
Especially in the UK, the ban does seem to have been ineffective at best. Bloomberg produced a Chart of the Day showing that the 32 financial stocks protected by the short selling ban (see the blue line) declined 28 per cent since the ban was put in place. The broader FTSE index (the purple line) fell just 8.4 per cent in the period. (The green line is RBS, which had an even worse go of it).
Oddly, as our friends over at FT Alphaville point out, the ban seems to have worked better in the US:
“Still, a previous Chart of the Day from the newswire showed shares of the 19 financial companies on the SEC’s “no naked-short selling” list (which ran from July 15 to Aug. 12 last year) gaining something like 26 per cent in the period. So go figure.”
While the ban is being lifted, the FSA will continue the short selling disclosure requiredments at least until June 30.