Last week, the temporary ban on short selling US financial stocks implemented by the Securities and Exchange Commission came to an end, greeted by a general consensus that it added to market confusion and didn't do much to halt the slide in the share price of financial services companies.

Since the ban was introduced on September 19, trading volume on the New York Stock Exchange dropped 35 percent and the Chicago Board Options Exchange Volatility Index surged to 57.53 on the day the ban ended.

The prohibition on shorting of more than 900 financial services stocks since the middle of September has also hampered the ability of hedge fund managers to protect their portfolios from losses in equity markets. According to Hennessee Group, the SEC's short-selling ban was a big factor in funds losing an average of 6.24 per cent in September.

But at least the SEC has realised that extending the ban made little sense. The question is whether the UK's Financial Services Authority, which has banned short selling of banking, insurance and related stocks until January, in the UK will take the same view. From past experience, it is likely to follow its US counterpart.

In both the US and the UK, politicians, regulators and exchanges are considering other ways of limiting short selling in an effort to prevent market manipulation. Hedge funds can only hope that future efforts are more carefully considered than those introduced to date.