France and Belgium end shorting ban
REGULATORS in France and Belgium have finally lifted the bans on the short-selling of certain financial stocks, six months after they were introduced as markets plunged on Eurozone debt fears.
The separate decisions, by French watchdog AMF and Belgium’s Financial Services and Markets Authority (FSMA), come after a boost to market sentiment and are expected to bring more liquidity to trading. They stop short of a full easing of restrictions, however.
AMF has lifted a ban on 10 institutions – BNP Paribas, Société Générale, Credit Agricole, Natixis, AXA, April, CNP, Credit Mutuel-CIC, Scor and Euler Hermes – but introduced a new regime of disclosing short positions
The FSMA lifted its ban on the covered short selling of KBC, KBC Ancora, Dexia, and Ageas because of the “lower volatility” of the markets but said a ban on so-called naked short selling, where the seller does not actually own the shares in question, would remain in place.
It also said that “significant” net short positions in Belgian financials would be subject to a reporting obligation. Nobody from the French finance ministry and the French treasury were available for comment.
France, Italy, Spain and Belgium introduced bans on short-selling financial stocks on 12 August in a co-ordinated attempt to restore market confidence as borrowing costs soared.
Short-selling normally involves borrowing a stock on the expectation it will fall in price. Traders then make a profit when they buy back the share at a cheaper rate.
The bans were triggered by a collapse in confidence in banks, including Soc Gen, but were criticised by institutional investors who complained that it barred them from engaging in legitimate hedging activities.
Spain has given little indication of when it will lift its indefinite ban on short-selling while in Italy curbs have been extended until 24 February.
Yesterday banks, many of which have exposure to Eurozone sovereign debt, pared earlier session gains, with the STOXX Europe 600 Banks index closing up 0.5 per cent after being up over one per cent in the morning.