Euronext CEO Sees No Reason to Close Markets Over Virus Woes
Euronext CEO Says There’s No Reason to Close Markets Over Virus
(Bloomberg) --
Euronext NV sees no need to shut stock markets during the coronavirus epidemic as they’re functioning efficiently and providing liquidity, Chief Executive Officer Stephane Boujnah said, echoing sentiments of many market leaders around the world.
“There is no reason whatsoever to close markets,” he said in an interview on Bloomberg Television. “It’s extremely important to provide a home for liquidity and price formation.”
The Euronext CEO is the latest official to reassure investors that markets will remain open despite the spreading coronavirus that has wiped out nearly $20 trillion from global stocks in the past four weeks. Closing one major exchange while others continue to operate around the world could also be difficult for regulators.
The U.S. Treasury Secretary Steven Mnuchin yesterday said that stock markets will stay open and Americans “need to know they have access to their money.” The Hong Kong stock exchange said it remains committed to keeping its markets fully operational amid the coronavirus outbreak.
While extreme situations like the 9/11 terror attacks and hurricanes have led to market shutdowns in the past, “these conditions are not there in Europe,” Boujnah said.
“We have no operational problems,” he said, adding that in the face of lockdown conditions in many European countries essential staff are working on the platforms while most employees are working from home without any trouble.
Following 9/11, Wall Street was shut for four days. The stock market’s reopening triggered an immediate 13% plunge, and the market continued to drop 30% in the 12 months that followed. At no point during the 2008 financial crisis and its aftermath were markets closed.
“It’s strange, no one is talking about closing electricity, telephones, the internet or ATMs and credit, so why should we close liquidity and prices,” said Boujnah.
The Federation of European Securities Exchanges, an industry trade group in Brussels, said in a statement Tuesday that it’s crucial that markets remain open to allow investors to price risk, value portfolios and make informed investment and hedging decisions.
Short Selling Ban
However, steps are being taken to mitigate the volatility. Italy’s market regulator this week banned short selling for three months as it seeks to curb volatility amid the sell-off, and France and Belgium imposed similar prohibitions for a month each.
Declines in the S&P 500 this week triggered so-called circuit breakers that halted trading before the major indexes plunged the most since 1987.
Circuit breakers and bans on short selling are “small adjustments that are important to allow for the proper functioning of the markets,” said Boujnah. “It’s better to make these small adjustments and to keep the markets open so that liquidity and prices are available than going to a binary idea of opening or closing the markets.”
He added that as soon as prices and markets are absorbing balanced news flows of fiscal stimulus, “clearly the bans will become less relevant.”
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