London's hedge funds have dubbed the UK market watchdog's decision today to extend indefinitely reporting rules for the short selling of financial stocks ill-timed, just as new research shows a drop in the number of speculators betting on share price falls in the sector.

The Financial Services Authority today extended indefinitely rules it imposed in September requiring disclosure of short positions exceeding 0.25% of the market value of financial companies. Speculators must also tell the market when they increase short positions by at least 0.1%. The rules were due to lapse next week.