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European Regulator Backs Spain’s Three-Month Short-Selling Ban

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Nov. 1 (Bloomberg) -- The European Securities and Markets Authority backed Spain’s proposal to extend a ban on short-selling for three months from today, citing adverse situations that constitute a threat to financial stability.

Substantial selling pressures, serious financial, monetary and budgetary problems and risk of further downgrades on the Spanish sovereign all constitute a “serious threat to the stability of the financial market in Spain,” the Paris-based organization said in a statement on its website.

“The measure is appropriate and proportionate to address the above-mentioned threats that persist in Spain,” ESMA said in the statement.

Spain’s CNMV stock market regulator extended on Oct. 19 a short-selling ban until the end of the month and said it would notify ESMA of its intention to prolong the prohibition for a further three months from today. CNMV said it was taking into account the “exceptional situation” facing the banking industry and lifting the ban would “add uncertainty.”

Short-sellers sell borrowed shares with plans to buy them back later at a lower price, a practice some politicians and investors blame for roiling markets. The ban, which is effective as of 8.30 a.m. local time and expires at midnight on Jan. 31, can be lifted at any time if market conditions allow, the regulator said.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net;

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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