Spain and Italy ban short selling
26 July 2012 Madrid and Rome
Image: Shutterstock
Spanish and Italian regulators have introduced short selling bans due to extreme volatility in financial markets.
Spain’s regulator the CMNV said that its prohibition on the short selling of shares will be effective during the next three months until 23 October 2012 inclusive, and could be renewed or lifted as needed.
This preventive ban affects any trade on equities or indices, including cash equities transactions, derivatives in regulated markets or OTC derivatives, that has the effect of creating a net short position or increasing a previous one, even on an intraday basis.
“A net short position means any position resulting in a positive economic exposure to falls in the price of the stock,” added the regulator in a statement.
However, positions arising from market making activities will be exempted from the ban. The CNMV said of the exception: “For this purpose, market making covers investment firms that incur in a transitory (especially intraday) net short position either as a response or a hedge to a client order, or as a result of quoting bid and ask prices on a continuous way as market members, with or without a public commitment with the issuer or the market.”
Italy’s regulator Consob introduced its ban at the same time as Spain in reaction to “serious turmoil in the financial markets”.
The ban applies to insurance and bank stocks only, and could be lifted on July 27.
“Taking into account that the serious turmoil in the financial markets may threaten the stability of the financial system and the protection of investors, and taking into account the exceptional market conditions in the trading sessions of July 2012, characterised by high volatility and significant fall in prices,” it was necessary to introduce the short selling ban, said Consob in a statement.
Spain’s regulator the CMNV said that its prohibition on the short selling of shares will be effective during the next three months until 23 October 2012 inclusive, and could be renewed or lifted as needed.
This preventive ban affects any trade on equities or indices, including cash equities transactions, derivatives in regulated markets or OTC derivatives, that has the effect of creating a net short position or increasing a previous one, even on an intraday basis.
“A net short position means any position resulting in a positive economic exposure to falls in the price of the stock,” added the regulator in a statement.
However, positions arising from market making activities will be exempted from the ban. The CNMV said of the exception: “For this purpose, market making covers investment firms that incur in a transitory (especially intraday) net short position either as a response or a hedge to a client order, or as a result of quoting bid and ask prices on a continuous way as market members, with or without a public commitment with the issuer or the market.”
Italy’s regulator Consob introduced its ban at the same time as Spain in reaction to “serious turmoil in the financial markets”.
The ban applies to insurance and bank stocks only, and could be lifted on July 27.
“Taking into account that the serious turmoil in the financial markets may threaten the stability of the financial system and the protection of investors, and taking into account the exceptional market conditions in the trading sessions of July 2012, characterised by high volatility and significant fall in prices,” it was necessary to introduce the short selling ban, said Consob in a statement.
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