1:11 Short sale rule change...

Follow up on earlier headline on FSA to ban short selling on financial cos
DJ reports the U.K.'s Financial Services Authority said Thursday it will temporarily ban the creation or increase of net short positions in publicly-quoted financial companies from 2300 GMT. The regulator also said it will require, from Sept. 23, daily disclosure of all net short positions in excess of 0.25% of the ordinary share capital of financial companies at the end of trading the previous day. The FSA said these provisions will remain in force until Jan. 16, 2009 although they will be reviewed after 30 days. It said there will also be a full review of the rules on short selling published in January.

The market rallies quickly on the news that the short selling rules have changed in the UK. The big question remains; will this help or hurt the markets over the next few weeks? The knee jerk reaction is to rally the market as less selling can come into the financial stocks in the UK through the shorts. However, this will also create a lack of liquidity during a time when liquidity is sorely needed.