Probe into stock market abuse claim

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The Financial Services Authority (FSA) warned it would not tolerate traders starting rumours and dealing off the back of them in the current market turmoil.

Halifax Bank of Scotland has reportedly been at the centre of the rumours after its shares plunged amid speculation of funding problems. HBOS strongly denies any such problems.

HBOS slammed the rumours as "malicious" and "lies" and insisted the bank was one of the strongest financial institutions in the market.

Sally Dewar, managing director, wholesale and institutional markets at the FSA, said: "There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling.

"We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them.

"We remind market participants of the need to take extra care, in this market climate, to adhere to the market code of conduct."

Martin Slaney, of spread-betting firm GFT Global Markets, admitted there was an "unusually high amount of rumours winging around the stock market". UK banks, he said, are the latest victim of the over-active rumour mill.

An FSA spokesman said one of the "bizarre" rumours which had been spread around the market was that Bank of England governor Mervyn King had postponed a trip to the Far East because of the market turbulence.

The reality, she said, was that Mr King had decided not to go to West Bromwich, although she could not say what this trip had been for.