FCA to Continue Short Selling Despite COVID-19 Volatility

Countries like France, Belgium, and Italy, have put an emergency ban on short selling.

The Financial Conduct Authority (FCA) announced on Monday that it would not put a temporary ban on short-selling despite the recently increased volatility in the market.

The United Kingdom’s regulator detailed that short selling volume only makes a small percentage of the total market activity.

“The FCA continues closely to monitor market activity, including short selling activity,” FCA stated. “Aggregate net short selling activity reported to FCA is low as a percentage of total market activity and has decreased in recent days. It will continue to fluctuate, but there is no evidence that short selling has been the driver of recent market falls.”

The regulator also assured that it is already taking into account many risk strategies with margin trading, and many major funds are closely tied with such activities.

“A great many investment and risk management strategies rely on the ability to take ‘long’ and ‘short’ positions,” the regulator added. “We also note that short selling is a critical underpinning of liquidity provision. The loss of these benefits would need to be carefully balanced before determining that any intervention to prevent short selling was appropriate.”

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Emergency ban on short-selling

Notably, many other European markets, including France, Belgium, and Italy, suspended short-selling activities on the market amid COVID-19-caused volatility.

The FCA, however, pointed out that many major economics including the United States have not put a ban on such market activities and it is also working with top counterparts for smooth activity in the market.

“The FCA has not introduced such a ban. Most European NCAs have not introduced such bans. Nor has the United States or any other major financial market,” the FCA noted.

“The FCA is working with international counterparts in the US, EU and elsewhere so that markets can remain open and orderly, and so they can continue to perform their essential role in supporting businesses, governments, jobs and the broader economy,”

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