The British stock market watchdog temporarily bans the possibility of short selling, with investors speculating on a share price fall. This was announced by the Financial Conduct Authority (FCA). The measure will take effect immediately. The last time a ban on shortselling was imposed during the financial crisis in 2008.
Stock markets have plummeted in recent days due to fears of the corona virus. Speculating on further price falls can certainly cause even more uncertainty. Investors who go short sell shares they borrowed from the owner. They then hope for a loss of price to buy back the shares cheaply and earn the profit.
The European market authority ESMA says it will keep a close eye on the situation regarding the virus outbreak in the financial markets. Companies are required to disclose all relevant information about the impact of the virus on the results or prospects as soon as possible. This must also be made clear in the financial reporting. This concerns actual damage and potential effects, insofar as this is possible.
In South Korea, Italy and Spain, bans have also been imposed for shortselling. There are no plans for such a ban in Switzerland and Germany yet. Each country in Europe can decide individually to impose a (temporary) ban on short selling.
According to the AFM, developments in global equity markets, and on Euronext Amsterdam in particular, are closely monitored. Action will be taken when necessary. This can be done by stopping trading in individual funds or by stopping entire trading. “In this very exceptional situation, this will also be assessed in the light of the measures taken by the platforms themselves,” according to the AFM.