Hedge funds continue to short sell UK companies despite Bank of England calls to stop

Hedge funds are continuing to short sell UK-listed companies amid the coronavirus-driven stock market collapse, despite a suggestion from the new Bank of England governor that they should stop.

Over the first three months of 2020, the FTSE 100 plunged by 25 per cent, the share index’s worst quarterly performance since 1987, as many investors rushed to dump companies’ stock.

​The speed of the sell-off and the role of short-sellers in the market mayhem has concerned the Bank’s governor, Andrew Bailey, who told the BBC on 18 March: “Anybody who says, ‘I can make a load of money by shorting’ which might not be frankly in the interest of the economy, the interest of the people, just stop and think what you’re doing.”

Short selling is the – entirely legal – practice where hedge funds and other financial speculators borrow shares in listed companies from pension funds and sell them in the expectation that they will fall in price. Some argue that short-selling in a crash exacerbates stock market slumps – though this is disputed.

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