Spain and Italy moved to ban short-selling of stocks as prices dropped and the euro traded below its lifetime average against the dollar on concerns about the European Union debt crisis.
Spain’s stock market regulator, the CNMV, said it was banning short selling of all stocks for three months, amid “extreme volatility.” Italy’s Consob said its ban, scheduled to last a week, was introduced on some banking and insurance shares because of the “recent performance of stock markets.”
Monday’s bans echoed decisions in August of last year by France, Belgium, Spain and Italy to temporarily ban short selling of financial stocks in an effort to stabilize markets after European banks, including Societe Generale SA, hit their lowest levels since the credit crisis of 2008.
“I don’t think it is particularly smart but it is to be expected,” said Owen Callan, senior dealer at Danske Bank A/S in Dublin. “Last time around it didn’t really have any lasting impact. This is trying to avert hedge-fund speculation, but the sell-off is not about speculation. This is not hedge funds trying to bring down the market.”
The Spanish prohibition also covers over-the-counter derivatives, the CNMV said. Market making activities are excluded from its measures.
The European Securities and Markets Authority “is aware” of the bans, David Cliffe, an ESMA spokesman, said in a telephone interview Monday. ESMA was set up last year to harmonize the implementation of market rules across the European Union.
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