Confusion reigns over a short ban

FRANCE’S financial regulator had to rush out an amendment to its short selling ban yesterday after traders complained it had stopped them shorting European stock index futures.

Amid another round of panic selling on European stock markets, traders said the ban left them unable to short futures on the Eurostoxx 50 index, which includes French banks Societe Generale, BNP Paribas and Credit Agricole.

The Autorité des Marchés Financiers put out a clarification after markets closed to allow anyone with a short position on a bank stock or related derivative to continue it by buying new options to replace expiring ones.

Traders warned that the shorting ban in Italy, France, Spain and Belgium could raise volatility and cut liquidity on stock markets across Europe as investors are less able to hedge long positions with short ones on the affected stocks.