Financial regulators of four European countries have applied temporary bans on short selling in an attempt to calm markets shaken by coronavirus.
March 19, 2020 | AtoZ Markets – Regulators in France, Italy and Belgium banned short selling in some stocks, aiming to curtail the plunge in equity markets driven by the coronavirus outbreak.
Related: Spain Bans Short Selling for a Month
Short selling bans sweep Europe
France’s AMF halted such trades in 92 stocks, while Italy’s CONSOB blocked the transactions in shares of 20 companies. Belgium’s FSMA has also imposed a similar restriction. French Finance Minister Bruno Le Maire said he would like to see that rule extended Europe-wide.
“We are standing ready to take stronger decisions if necessary to avoid speculation on markets. We will use all the means available to us to protect our businesses,” Le Maire said on a phone briefing with reporters.
The U.K.’s Financial Conduct Authority has not commented on a possible short selling ban in Britain. However, the Dutch regulator AFM said it continues to closely monitor developments in the financial markets.
Madrid, as well as Italy, had already ordered a one-day ban on short selling in the March 13 sessions.
Is short selling good for the market?
Short selling, in which traders sell borrowed shares with the aim of repurchasing them at lower prices to return to the lender, is controversial at the best of times. Proponents say it results in a more liquid, efficient market, and alerts investors to dodgy accounting or overhyped company prospects. Opponents accuse short sellers of being short termists who can destabilize companies by publicly criticizing accounting or management.
Moreover, shorts have had some notable successes lately. NMC Health Plc shares plunged after Muddy Waters Capital LLC made accusations of financial wrongdoing. Trading in the shares was then suspended. Thereafter, the company said an internal investigation turned up evidence of suspected fraud in its accounts.
Does short selling help the market and investors? Share your thoughts in the comment section below.