by Simon Quicke25 September 2008
The move to ban short-selling, the practice of trading
shares on the presumption that a company will drop in value, has been the focus
of moves made by the government to shore up the markets.
IBM has been added to the list, along with various financial
institutions, by financial regulators because it has a finance arm, which is
used to help customers pay for orders, that could be vulnerable to
short-selling activities.
Since the announcement was made that short-selling would be
clamped down on there have been numerous requests according to sources to gain
protected status from the Financial Services Authority.
But the FSA has indicated that it will not extend the ban to
cover companies that do not have a financial side to their operations.
Short-selling, the gambling of buying shares on a down and selling them on the rebound, has been pointed to as one of the major causes of the banks losing millions of pounds worth of value in the last few weeks. The response of the chancellor Alistair Darling has been to move to prevent the practice having any more impact on the financial sector.
In a statement issued when the announcement of the clampdown on short-selling was announced,Hector Sants, chief executive of the FSA, said that was was acceptable in normal market conditions was no longer good for the markets.
"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. As a result, we have taken this decisive
action, after careful consideration, to protect the fundamental
integrity and quality of markets and to guard against further
instability in the financial sector."
