Covid-19: Financial Markets

Lord Collins of Highbury Excerpts

Wednesday 25th March 2020 Lords Chamber

[Lord Callanan]

I know of the close interest that my noble friend takes in pension funds, so she will be aware that many of them also take advantage of taking both short and long positions to allow for the hedging of risk. However, I can certainly assure her that we continue to closely monitor market activity, including short selling activity, and we are constantly evaluating our approach to ensure that it is the right one for consumers. Further, if it is required, we will not hesitate to take action.

[Lord Collins of Highbury (Lab)]

My Lords, as the Minister and other noble Lords have said, these are exceptional circumstances and matters are moving very fast. However, the noble Lord seems to be unaware of the figures indicated by the noble Lord, Lord Bates. I know that it is the responsibility of the FCA to consider any measures that are necessary on short selling, but it is also a matter for the Treasury to consult. Can he advise us on just how frequently, in this fast-changing situation, we are liaising with the FCA so that we actually do take action when it is needed—and fast?

[Lord Callanan]

Perhaps it would be helpful to the House if I set out what powers the FCA has in this area. Under the short selling regulation, the Financial Conduct Authority has a range of powers which require the holders of net short positions in the issued share capital of a company to make notifications once the thresholds have been breached. It also provides the FCA with the power to suspend short selling or limit transactions where there are significant falls in prices. As I have said, this is being monitored constantly and as yet there is no evidence that it has contributed to the fall in market prices. It forms a relatively small proportion of trading activity at the moment and when studies were made after the financial crisis, again there was no evidence that short selling had contributed to the overall fall in the markets. Nevertheless, it is a situation that we are keeping under constant review and I know that the FCA is watching market activity very closely.