Tags: france | spain | italy | ban | Short | Selling

French, Spanish, Italian Regulators Extend Bans on Short Selling

Thursday, 25 Aug 2011 12:49 PM

French, Italian and Spanish stock-market regulators decided to extend temporary bans on short selling introduced this month in a bid to stem market volatility.

Spain and Italy extended their bans through Sept. 30, regulators in both countries said in a statement. France’s Autorite des Marches Financiers said its ban could last as long as Nov. 11.

The three countries, along with Belgium, imposed bans on short-selling of some financial stocks earlier this month in an effort to stabilize markets after European banks including Societe Generale SA hit their lowest levels since the credit crisis of 2008. The restrictions cover short selling of shares and equity derivatives in some financial firms.

“Short-selling equities is not a significant danger to financial stability, so these bans are irrelevant,” Richard Portes, professor of economics at London Business School, said in an e-mailed statement. “The serious problem is speculation against financial institutions and sovereigns using naked credit default swaps. They should be banned.”

The initial bans introduced by France, Spain and Italy were temporary, lasting 15 days. Belgium’s is indefinite.

The benchmark Stoxx 600 Banks Index advanced 3.9 percent after falling as much as 3.5 percent on Aug. 11, the last trading day before the bans were introduced.

Short-sellers sell borrowed shares with plans to buy them back later at a lower price, a practice politicians and some investors blame for roiling markets.

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