EU Regulators Ban Short-Selling Amid COVID-19 Volatility

The FSMA in Belgium and the FMA of Austria have both implemented emergency measures.

More financial regulators have been putting in emergency measures in response to high market volatility due to COVID-19. In recent days, their attention has been focused on the short-selling of certain financial instruments.

Namely, the Financial Services and Markets Authority (FSMA) of Belgium announced on Wednesday that it had placed a ban of entering into a short sale, which might constitute or increase a net short position on stocks admitted to trading to Belgian trading venues.

This includes: “any transaction which creates, or relates to, a financial instrument and where the effect or one of the effects of that transaction is to confer a financial advantage on the natural or legal person in the event of a decrease in the price or value of another financial instrument.”

This ban is effective from the 18th of March, 2020, until the 17th of April, 2020 and applies regardless of where the transaction has been executed.

The FSMA is not alone in these measures, with the Austrian Financial Market Authority (FMA) implementing a similar ban on Thursday, which is also effective for a one-month period but may be ended earlier if needed.

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Commenting on the ban, the FMA’s Executive Directors, Helmut Ettl and Eduard Müller, said in a statement: “Speculative short selling may lead to significant risks in the currently exceptionally volatile global and Austrian market environment.”

“In the difficult situation caused by the economic impact of the COVID-19 virus pandemic, the stability of the financial markets and maintaining the confidence of investors in the orderly functioning of the markets must have absolute priority. This national measure is therefore both inevitable and appropriate.”

ESMA commends EU regulators’ measures

As Finance Magnates reported, today, the European Securities and Markets Authority (ESMA) issued a favorable opinion of France’s decision to implement an emergency short selling prohibition this week.

In particular, the Autorité des marchés financiers (AMF) of France has implemented a short-selling prohibition on all transactions which might constitute or increase net short positions on shares admitted to trading on French trading venues for a one month period.

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