FSA to end shorting ban

The watchdog said it was not proposing to renew the restrictions when they expire on January 16 but said it was prepared to reintroduce the ban without consultation if necessary.

The FSA said it would extend its temporary disclosure regime until June 30 in order to "reduce the potential for abusive behaviour and disorderly markets" - but proposed to make one change to the regime.

Currently a disclosure must be made if a net short position exceeds 0.25pc of a relevant firm's issued shared capital, with further disclosures required if there are any changes in the position.

Under the FSA's proposals further disclosures would only be required at 0.1pc bands - as a net short position reached 0.35%, 0.45% and so on.

FSA managing director of wholesale and institutional markets Sally Dewar said: "We believe that these proposals are the right measures for maintaining orderly markets.

"Continuing the disclosure obligations as we propose will reduce the potential for abusive behaviour and disorderly markets. In addition, we will not hesitate to reinstate the ban if necessary."

The consultation on the proposed changes will close on January 9 to enable the new measures to be in place at the expiry of the existing ones on 16 January.

The FSA said it intends to publish a separate consultation paper within a month, setting out its proposals for the longer-term short selling regime.