European Union stock-market regulators will decide as soon as today on whether to extend temporary bans on short selling that they introduced this month in a bid to stem market volatility.
Authorities in France, Spain and Italy must all decide whether to extend the restrictions, which are due to expire over the next 48 hours. A spokeswoman for France’s Autorite des Marches Financiers, who declined to be identified, said the regulator will announce a decision after markets close today.
“We’re pretty confident that whatever happens will be coordinated among the regulators,” Darren Fox, financial services lawyer at Simmons & Simmons in London, said in a phone interview. “My instincts tell me that, unfortunately, the three countries that have expiring bans will roll them over.”
The three countries, as well as Belgium, banned 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.
The bans introduced by France, Spain and Italy are temporary, lasting 15 days unless renewed. Belgium’s is indefinite.
‘Mood of Uncertainty’
“The history of such bans is that it’s very hard to get a broad consensus among countries to move together and that these bans tend to be quite temporary,” Richard Reid, International Centre for Financial Regulation’s director of research, said in an e-mail. “Moreover there is always a risk that implementing such bans actually adds to the mood of uncertainty and that the reversal of the bans can give the impression of lack of direction.”
The AMF will issue its statement after the French market’s 5:30 p.m. close, the spokeswoman said. She declined to comment on whether the regulator will prolong its ban, which covers 10 financial firms including Societe Generale, France’s third-largest bank by assets, and BNP Paribas SA, France’s biggest bank.
Italy’s Consob and Spain’s CNMV will make announcements shortly after markets close as well. The European Securities and Markets Authority, which coordinates the work of regulators in the 27-nation EU, may also publish a statement at that time.
ESMA is “closely monitoring” the market situation and communicating with national supervisors, Reemt Seibel, a spokesman for ESMA, said in a telephone interview.
Consob will meet this afternoon to review the ban, two people familiar with the discussions said. An official at the Italian market regulator declined to comment.
Short sellers sell borrowed shares whose prices they think will fall with plans to buy them back later at a lower price, a practice politicians and some investors blame for roiling markets.
Belgium’s Financial Services and Markets Authority will publish a statement concerning the country’s short selling rules after markets close today, Jim Lannoo, a spokesman for the Brussels-based agency, said in a telephone interview. He declined to comment on the content of the announcement.
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.
The U.K.’s Financial Services Authority said it still has no plans to implement a short selling ban.
“We have an existing short-selling disclosure regime around financial stocks in place and we continue to monitor the activity in our markets,” Chris Hamilton, an FSA spokesman, said in an e-mail.