Euro nations ban short selling of financial stocks
The reaction rekindles memories of the chaotic days after the September 2008 collapse of Lehman Brothers.
France, Italy, Spain and Belgium have imposed temporary bans on the short selling of some securities in an effort to calm market turmoil amid concern about Europe's huge debts.
"Some authorities have decided to impose or extend existing short-selling bans in their respective countries,” the European Securities and Markets Authority said in a statement on its website.
“They have done so either to restrict the benefits that can be achieved from spreading false rumours or to achieve a regulatory level playing field, given the close inter-linkage between some EU markets.”
In a short sale, a trader hopes to make a profit by betting on the decline in the price of a share. The practice has been blamed for contributing to market volatility.
However, there are plenty of sceptics who view short selling bans as ineffective and can cause unintended consequences.
Certain fund managers described the move as a “knee jerk political reaction,” according to this article in the Financial Times.
While Greece banned short selling on Monday, no other European countries had followed suit until now.
The reaction rekindles memories of the chaotic days after the September 2008 collapse of Lehman Brothers, when several nations followed the UK in a shock move to impose emergency temporary bans on short selling bank stocks.
Meanwhile, the leaders of the eurozone's biggest economies, Germany and France, announced they will meet on Tuesday to discuss solutions to Europe's financial difficulties.
All three leading credit rating agencies reaffirmed their triple-A assessment of France, and analysts said they could not identify a trigger for the market turmoil.
NBR staff
Fri, 12 Aug 2011
Fri, 12 Aug 2011
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Euro nations ban short selling of financial stocks
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