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UK shares up after short-sell ban UK shares up after short-sell ban
(20 minutes later)
Leading UK shares rose in early Friday trading as investors appeared to welcome the City regulator's ban on short-selling in financial stocks.Leading UK shares rose in early Friday trading as investors appeared to welcome the City regulator's ban on short-selling in financial stocks.
The FTSE 100 index was up as much as 338 points or 7% to 5,218 in early exchanges, with banking stocks among the biggest risers. RBS was up 42%.The FTSE 100 index was up as much as 338 points or 7% to 5,218 in early exchanges, with banking stocks among the biggest risers. RBS was up 42%.
The gains come after the Financial Services Authority (FSA) announced its temporary move on Thursday night.The gains come after the Financial Services Authority (FSA) announced its temporary move on Thursday night.
Shares were also lifted by US plans to rid American banks of their bad debt.
Other banking stocks that were up sharply included HBOS, up 36%, Lloyds TSB, up 33%, and Barclays, up 27%.
Short-selling in layman's terms
Short-selling involves traders profiting from falling share prices.Short-selling involves traders profiting from falling share prices.
The technique works when investors borrow shares from another investor, and then sell them hoping the price will fall.The technique works when investors borrow shares from another investor, and then sell them hoping the price will fall.
Short-selling in layman's terms
The aim is then to buy back the asset at a lower price and return it to its owner, pocketing the difference.The aim is then to buy back the asset at a lower price and return it to its owner, pocketing the difference.
Previously anyone could short a position in a company's shares, but typically hedge funds were the main players.Previously anyone could short a position in a company's shares, but typically hedge funds were the main players.
Other banking stocks that were up sharply included HBOS, up 36%, Lloyds TSB, up 33%, and Barclays, up 27%.
The temporary ban on short-selling applies to 29 financial stocks.The temporary ban on short-selling applies to 29 financial stocks.
It was introduced by the FSA due to concerns that short-selling had been a contributory factor in the sharp falls in HBOS shares before it was rescued by Lloyds TSB.It was introduced by the FSA due to concerns that short-selling had been a contributory factor in the sharp falls in HBOS shares before it was rescued by Lloyds TSB.
The breathtaking rises in the price of bank shares this morning are symptomatic of a stock market that is bereft of reason and is being driven almost purely by fear and momentum. BBC Business Editor Robert Peston Read Robert Peston's latest blogWhat is short-selling?The breathtaking rises in the price of bank shares this morning are symptomatic of a stock market that is bereft of reason and is being driven almost purely by fear and momentum. BBC Business Editor Robert Peston Read Robert Peston's latest blogWhat is short-selling?
The ban, which came into force at midnight on Thursday, will last until 16 January but the FSA will review its operation in 30 days.The ban, which came into force at midnight on Thursday, will last until 16 January but the FSA will review its operation in 30 days.
"While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets," said FSA chief executive Hector Sants."While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets," said FSA chief executive Hector Sants.
The ban applies to shares in the following companies - Admiral, Alliance & Leicester, Alliance Trust, Arbuthnot, Aviva, Barclays, Bradford & Bingley, Brit Insurance, Chesnara, European Islamic Investment Bank, Friends Provident, HBOS, Highway Insurance, HSBC, Islamic Bank of Britain, Just Retirement Holdings, Legal & General, Lloyds TSB, London Scottish, Novae, Old Mutual, Prudential, Resolution, Royal Bank of Scotland Group, RSA Insurance, St James's Place, Standard Chartered, Standard Life, and Tawa.The ban applies to shares in the following companies - Admiral, Alliance & Leicester, Alliance Trust, Arbuthnot, Aviva, Barclays, Bradford & Bingley, Brit Insurance, Chesnara, European Islamic Investment Bank, Friends Provident, HBOS, Highway Insurance, HSBC, Islamic Bank of Britain, Just Retirement Holdings, Legal & General, Lloyds TSB, London Scottish, Novae, Old Mutual, Prudential, Resolution, Royal Bank of Scotland Group, RSA Insurance, St James's Place, Standard Chartered, Standard Life, and Tawa.