The stable lifetimes of many field-reversed configuration (FRC) experiments have been observed to be limited by the onset of the m = 2 rotational instability. The origin of the rotation which drives this instability is investigated with the aid of hybrid simulation methods. The loss of particles with guiding centres on open field lines is found to lead to localized rotation near the separatrix and this effect is found to be enhanced by end-shorting of the radial electric field outside the separatrix. In simulations allowing azimuthal variation the velocity shear is eventually relaxed so that the bulk of the plasma begins to rotate. These simulations also show that the m = 2 instability does not appear as long as rotation is localized near the separatrix. It is found that by increasing the separatrix radius it is possible to significantly delay the transfer of rotation from the separatrix, hence delaying the onset of the m = 2 instability.