Short selling and the development of anti-shorting laws in the UK

Purpose - – The aim of this paper is to provide a review of the literature on short selling. In particular, it seeks to describe the history of short selling and anti-shorting laws. With respect to short-selling regulation, the main emphasis will be placed on the UK FSA’s regulatory action. Design/methodology/approach - – This paper reviews the history of short selling and the development of anti-shorting laws, particularly with regard to the UK market. It also analyses the distinct literature on short selling. Findings - – The paper argues that the development of anti-shorting laws shows that regulators are instituting a policy unfavourable to short sellers. The opposers of short selling may be seen as lacking ideas and having the tendency to ban anything they do not like. Short sellers, on the other hand, may be seen as the elite bodyguards of the financial market whose job is to get rid of overvalued stocks, and ultimately keep the market safe and efficient. For this reason, short sellers deserve our praise and thanks, not our hatred and opprobrium. Originality/value - – To the authors’ knowledge, this paper is the first to review the history of short selling and the development of anti-shorting laws, particularly with regard to the UK market.