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EU financial regulators protect the market by banning short selling


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The financial regulatory authorities of Belgium and Austria have both implemented emergency measures amidst the Covid-19 outbreak and related market volatility.

More financial regulators worldwide are putting in place emergency procedures in response to the high market volatility resulting from Covid-19 outbreak. The attention lately has been focused on short-selling of certain financial instruments.

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

The short sale prohibition 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.”

The ban came into effect on 18th March and planned to continue to 17th April.

The Hellenic Capital Market Commission (HCMC) of Greece also implemented a ban of short selling and aspects of credit default swaps from 18th March to 24th April.

The Austrian Financial Market Authority (FMA) followed with a similar ban or Thursday, also effective for a period of one month with the option of ending earlier if needed.

FMA’s Executive Directors, Helmut Ettl and Eduard Müller commented:

Helmut Ettl and Eduard Müller

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.

The European Securities and Markets Authority (ESMA), issued a favorable opinion of European regulators prohibiting net short positions.


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EU financial regulators protect the market by banning short selling

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