Italy, France, Belgium Ban Short Selling Amid Coronavirus
France and Belgium have imposed similar prohibitions for a month each.
(Bloomberg) -- Italy’s market regulator banned short selling for three months as it seeks to curb volatility amid a sell-off caused by the coronavirus pandemic. France and Belgium imposed similar prohibitions for a month each.
“The measures have become necessary in light of the strong turbulence triggered in recent days by the Covid-19 pandemic,” Rome-based Consob said in an e-mailed statement on Tuesday. The goal is to “restore the market’s integrity.”
The Italian ban starts March 18 and applies to all stocks, according to the statement. The European Securities and Markets Authority, the European Union’s market watchdog, issued a positive opinion on the move. France’s AMF said its ban would last 30 days while Belgium’s FSMA said its decision would be in force until April 17.
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.
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, and the company said an internal investigation turned up evidence of suspected fraud in its accounts.
Consob had already ordered two one-day bans for March 13 and March 17 before this more sweeping measure. Italy’s FTSE MIB benchmark index has dropped 35% this year, the worst performer among major European markets. Spain already banned short selling for a month, beginning on March 17.
Italy’s Consob also temporarily raised its transparency requirements for holdings in 48 listed companies. Investors now have to disclose stakes of 1% or higher in large companies and of 3% or higher in small and medium-sized ones.
©2020 Bloomberg L.P.