May 7, 2021

European Market Regulators Extend Bans on Short-Selling

The three countries, along with Belgium, imposed bans on short-selling, or bets on falling prices, of some financial stocks in an effort to stabilize markets after the shares of some European banks, like Société Générale, hit their lowest levels since the credit crisis of 2008.

Belgium’s financial markets regulator said Thursday that it would examine lifting its ban as soon as market conditions allowed.

The restrictions cover the short-selling of shares and equity derivatives in some financial firms. Short-sellers borrow shares and sell them with the intention of buying them back later at a lower price, a practice politicians and some investors have blamed for roiling markets. The initial restrictions introduced by France, Spain and Italy were temporary, lasting 15 days. Belgium’s is indefinite.

Traders had worried that Germany might also ban short-selling. But on Thursday, Dominika Kula, a spokeswoman for BaFin, the German markets regulator, said the agency had “all the regulation in place” for the short-selling of equities. Some market followers questioned the effectiveness of the short-selling bans, saying they would have little effect on equities. “Short-selling equities is not a significant danger to financial stability, so these bans are irrelevant,” Richard Portes, a professor of economics at London Business School, wrote in an e-mail.

Euro Stoxx 50, a barometer of European blue-chip stocks, has gained less than 0.1 percent since Aug. 11, the day the bans were announced. It fell by almost 1 percent on Thursday.

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