EU Regulators Ban Short-Selling Amid COVID-19 Volatility

More financial regulators have been putting in emergency measures in response to high market Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term due to COVID-19. In recent days, their attention has been focused on the short-selling of certain financial instruments.

Namely, the Financial Services and Markets Authority (FSMA) of Belgium announced on Wednesday that it had placed a ban of entering into a short sale, which might constitute or increase a net short position on stocks admitted to trading to Belgian trading venues.

This includes: "any transaction which creates, or relates to, a financial instrument and where the effect or one of the effects of that transaction is to confer a financial advantage on the natural or legal person in the event of a decrease in the price or value of another financial instrument."

This ban is effective from the 18th of March, 2020, until the 17th of April, 2020 and applies regardless of where the transaction has been executed.

The FSMA is not alone in these measures, with the Austrian Financial Market Authority (FMA) implementing a similar ban on Thursday, which is also effective for a one-month period but may be ended earlier if needed.

Commenting on the ban, the FMA's Executive Directors, Helmut Ettl and Eduard Müller, said in a statement: "Speculative short selling may lead to significant risks in the currently exceptionally volatile global and Austrian market environment."

"In the difficult situation caused by the economic impact of the COVID-19 virus pandemic, the stability of the financial markets and maintaining the confidence of investors in the orderly functioning of the markets must have absolute priority. This national measure is therefore both inevitable and appropriate."

ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term commends EU regulators' measures

As Finance Magnates reported, today, the European Securities and Markets Authority (ESMA) issued a favorable opinion of France's decision to implement an emergency short selling prohibition this week.

In particular, the Autorité des marchés financiers (AMF) of France has implemented a short-selling prohibition on all transactions which might constitute or increase net short positions on shares admitted to trading on French trading venues for a one month period.