Short-selling is an investment strategy that allows traders to speculate on the decline of a stock or securities price. Short-selling happens when a trader borrows a security and sells it on the market, and plans to repurchase it at a lower price. Short-selling appeals to most traders because, as the name says, it is usually a short-term operation, but it can be applied for medium and long terms as well.
Earlier this year, a few European countries temporarily banned short selling because of the extreme market volatility caused by the pandemic, despite hedge funds pressure of removing it. Regulators in Austria, Belgium, France, Greece, and Spain restricted short-selling until the middle of the current month. Italy was the exception, as the ban was supposed to end mid-June.
The authority supervising the securities and markets – European Security and Markets Authority (ESMA) – stated that the countries mentioned above have decided to end the ban today.
France’s AMF (Autorité des marchés financiers) recorded a normalization of trading since the ban came in force. However, according to the World Federation of Exchanges, AIMA, and Managed Funds Association (hedge funds associations), alongside the European Principals Traders Association, appealed to the French markets regulator and the Ministry of Finance to reconsider the decision. "Over the longer term, the bans risk undermining confidence in key European financial markets and hampering the goal of a capital markets union, something that will be vital to European recovery from the profound economic shock caused by Covid-19.”
As a proof of solidarity, Italy has decided to lift its ban today also.
Germany and Britain were also urged to take measures against short-selling. Both countries declined to take action.
Capex provides tools that support the development of personal strategies – the Integrated Tools suite, or Trading Central. During the time when the over-the-counter short selling market was put on hold, Capex clients were able to trade on CFDs on both market directions.
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Sources: forexlive.com, reuters.com, irishtimes.com, investopedia.com
