EU states to lift ban on short-selling to restore market confidence

Six European Union states will scrap bans on short-selling shares introduced during bouts of extreme market volatility in March, when national lockdowns were rolled out across the bloc to fight the Covid-19 pandemic.

The bloc's securities watchdog, the European Securities and Markets Authority (Esma), said Austria, Belgium, France, Greece and Spain have decided not to renew short-selling bans that expire late on Monday.

French markets watchdog AMF said that since the implementation of the ban, it has observed a progressive normalisation in trading.

“Markets have partly reduced their losses. Trading volumes and volatility have returned to levels that are still high compared to mid-February. However, this reflects market participants’ uncertainties in the current context,” the AMF said in a statement.

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Italy, whose ban was due to expire on June 18th, has decided to lift its ban early to align itself with the other five EU states, Esma said.

Ireland was not among the countries that introduced a ban on short-selling during the worst of the pandemic.

Patchwork

The six bans left traders facing a patchwork of interventions in what is meant to be a seamless pan-European stock market of 27 countries at a time of extreme uncertainty. Germany and Britain in particular declined to introduce short-selling curbs.

Last week,the World Federation of Exchanges, hedge funds industry associations AIMA and Managed Funds Association, and the European Principal Traders Association called on the French markets regulator and finance ministry to end the ban.

“Over the longer term, the bans risk undermining confidence in key European financial markets and hampering the goal of a capital markets union, something that will be vital to European recovery from the profound economic shock caused by Covid-19,” the letter said.

“Market confidence has been further damaged by the lack of coordination when it comes to how bans have been implemented.”

– Reuters