Regulators move to uncover short-selling speculators

Hopefully, we’re reaching the end of the road in terms of stories about wild swings in the shares of Johnston Press.

The City’s hedge funds have been mewling and puking about new regulations designed to restrain the kind of short selling that has hit the company’s shares so hard in recent weeks (and months).

From next Friday, the Financial Services Authority will temporarily require all speculators borrowing more than 0.25% of a company’s stock for the purpose of short selling during a rights issue to identify themselves.

In other words: we’re about to see a little bit of sunlight let into into one of the City’s darker corners.

In what could almost qualify as satire, Phillip Inman of the Guardian summarises the response from hedge funds:

The City firms said they were. . . disappointed at the lack of consultation before the announcement, which they said undermined their usually close relationship with the watchdog.


As the FT pointed out on Friday, the FSA’s new rules aren’t likely to be very effective in the long term. But they should hit some speculators with a decent-sized chilling effect in the short term.

And it’s the short term that matters.

Aside from Johnston Press, the biggest targets for short sellers have been financials and housebuilders.

If the Square Mile’s resident locusts think that the most unpopular Labour government in history is going to let them get in the way of recapitalizing the banking system, they’ve got another thing coming.

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