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European Regulators Won’t Follow Greece’s Ban on Short-Selling

European regulators are unlikely to follow Greece’s unilateral ban on short-selling, implemented as benchmark equity indexes for Europe tumbled.

Greece’s securities regulator banned all short-selling on the Athens exchange for two months starting tomorrow, citing “extraordinary market conditions prevailing in Greece,” according to an e-mailed statement from the Athens-based Hellenic Capital Markets Commission today. The European Securities and Markets Authority said that other national regulators had no plans to adopt similar measures.

Investors continued to flee equities after Standard & Poor’s downgraded the sovereign-debt rating for the U.S. by one level to AA+ on Aug. 5 and maintained its “negative” outlook. The ASE Index in Athens fell 6 percent today, the biggest decline in more than a year, closing at 998.24, the lowest level since January 1997, according to Bloomberg data.

“This will reduce the pressure on Greek shares, at least for some time,” Eddy Wymeersch, former chairman of the Committee of European Securities Regulators, or CESR, said in a telephone interview today. “The question is what happens to international exchange-traded funds with Greek shares. It will be difficult to enforce the ban on transactions outside of Greece.”

National Decision

ESMA, the European Union agency that oversees national regulators, said that Greece implemented a national decision and didn’t coordinate with others.

“To our knowledge, at present, other supervisors will not be implementing similar bans, although this is always kept under review,” said Victoria Powell, an ESMA spokeswoman in Paris.

Germany last year banned naked short-selling and speculating on European government bonds with credit-default swaps in an effort to calm the region’s financial markets. The move caused stocks around the world to drop and the euro traded near a four-year low against the dollar. No other European regulators followed the ban.

“The German ban was largely a political move,” Wymeersch said. “The Greek ban seems more like a real move to stop the downward trend in Greek shares.”

Italy’s securities markets regulator, Consob, has no “current plan” to ban short-selling, according to an official at the Rome-based watchdog.

Belgium’s Financial Services and Markets Authority has “no plans” to extend its existing ban on short selling, Jim Lannoo, a spokesman for the FSMA said in a telephone interview. The ban is limited to so-called naked short sales of some financial stocks including Dexia SA (DEXB) and KBC Groep NV, he said.

To contact the reporter on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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