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The FSA introduced provisions in its Code of Market Conduct which will require the disclosure of significant short positions in stocks admitted to trading on prescribed markets which are undertaking rights issues. The new provisions come into effect from
FSA now defines a significant short position as 0.25% of the issued shares achieved via short selling or by any instruments giving rise to an equivalent economic interest. These provisions and, in particular, the threshold triggering a disclosure of a short position, will be kept under review and may be subject to change in the light of experience.
The FSA also considers taking further measures in this area, including restricting the lending of stock of securities in rights issues for the purposes of enabling short selling; and restricting short sellers from covering their positions by acquiring the rights to the newly issued shares.
In current market conditions, there is increased potential for market abuse through short selling during rights issues, FSA says. As a result, there has been severe volatility in the shares of companies conducting rights issues.