Traders Face Extra Month of Short-Selling Bans in EU States (1)

Five European Union countries have banned the short-selling of equities for a further month in a bid to calm markets during the coronavirus pandemic.

France, Spain, Belgium, Austria and Greece said they would extend the prohibitions until May 18. The bans, which have been strongly opposed by hedge funds, proprietary trading firms and Germany’s primary exchange, were first instituted in March when regulators said such trading could exacerbate the steep declines in equity markets.

The European Securities and Markets Authority, which coordinates oversight across the region, said on Wednesday that the move by the five countries was “justified by current adverse events or developments which constitute a serious threat to market confidence and financial stability.” Italy banned short selling on March 17 for three months.

Short-selling, in which traders sell borrowed shares to profit from any fall in price, is controversial at the best of times. Proponents say it results in a more liquid, efficient market, and alerts investors to problems at targeted firms. Opponents accuse short-sellers of destabilizing companies.

Hedge funds and their lobbying groups have argued that the bans aren’t needed and can harm the ability of others to trade. The U.K. said last month that it saw no evidence that short-selling was causing the plunge in equity markets, and an influential lawmaker in Brussels this week said the bans should be allowed to expire.

“These decisions are bad for investors, bad for markets, and bad for the economy as a whole,” Bryan Corbett, chief executive of the Managed Funds Association, said in an emailed statement after the bans were extended.

(Adds details on Italy’s short-selling ban in third paragraph)

To contact the reporters on this story:
Silla Brush in London at sbrush@bloomberg.net;
Gaspard Sebag in Paris at gsebag@bloomberg.net

To contact the editors responsible for this story:
Ambereen Choudhury at achoudhury@bloomberg.net

Marion Dakers, Christopher Elser

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