In a discussion paper issued Friday, Feb. 3, the Financial Services Authority (FSA) recommended a general disclosure requirement for the short-selling of any stock listed in the UK. The paper also rejects other regulatory options, including restricting naked short-selling, instituting an uptick rule and requiring the disclosure of aggregate short-selling positions.

Last September the FSA banned the short-selling of shares in 34 financial companies. The ban expired last month, but short-sellers of financial stocks are still required to disclose positions exceeding 0.25 per cent of the share capital of the company in question. The paper calls for expanding this disclosure requirement to all UK-traded stock, but with an initial threshold of 0.5 per cent of a company's share capital.

The paper examines the arguments for and against short-selling, examines regulatory limitations in the area, and offers options for increasing transparency. The paper also calls for directed comments on each of its conclusions, providing a list of questions that the FSA seeks to answer.

Comment: Time for Comment on the FSA's Short Selling Proposal, HedgeWeek (Feb. 9, 2009)

Discussion Paper: Available here (PDF)