FMA Extends Short-Selling Ban, Focuses on New Net Short Positions

The prohibitions have been extended until the 18th of May 2020.

As the coronavirus pandemic continues to cause strain on financial markets, the Austrian Financial Market Authority (FMA) announced this week that it has decided to extend the ban issued on the 18th of March 2020 to prohibit short-selling of certain financial instruments listed on the Vienna Stock Exchange (Wiener Börse).

The amended temporary measure, which has entered into force this Thursday and will remain in place until the 18th of Mary 2020, now relates to establishing new net short positions or increasing existing net short positions.

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As Finance Magnates reported, the measures implemented back in March by the FMA prohibited the short-selling of certain financial instruments, such as all shares that are admitted to trading on the Wiener Börse and that fall under the competence of the FMA.

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To put it simply, short selling is a trading strategy that allows traders to take advantage of markets that are falling in price. To short-sell means that you are selling a borrowed asset in the hope that its price will go down, and once it does, you can buy it back later for a profit.

FMA measures approved by ESMA

According to the statement released by the Austrian regulator on Wednesday, the updated measures were agreed upon with the European Securities and Markets Authority (ESMA), which has supported other regulators implementing similar measures.

Commenting on the update, FMA’s Executive Directors, Helmut Ettl and Eduard Müller said in the statement: “The temporary ban on short selling of shares that listed on the Vienna Stock Exchange (Wiener Börse) is essential due to the continuing and severe prevailing market uncertainty in relation to the COVID-19 virus and has proven itself to be correct decision in this ever so difficult situation.”

“Speculative short selling can cause the flaring up of market turbulence and lead to significant risks. Now is exactly the time where financial market stability and maintaining investor confidence in the orderly functioning of financial markets must be afforded absolute priority. Our measure has demonstrated itself to be unavoidable, effective and appropriate.”

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