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City watchdog bans short selling of Italian and Spanish stocks | Business

The UK financial watchdog has banned the short selling of over 140 major Italian and Spanish stocks, including Juventus and Lazio football clubs and banks.

The Financial Conduct Authority's ban one day applies to actions including Italian automakers Fiat Chrysler and Ferrari, Unicredit bank, and beverage company Campari Group. Spanish banks Santander and Sabadell, as well as the aircraft manufacturer Airbus, listed in Spain, France and Germany, are on the list.

Short sellers profit from betting on stocks which they expect to fall in price. They borrow stocks from a business, for a fee, then resell them in the hope of buying them back at a lower price and pocketing the profit.

The latest ban echoes restrictions imposed during the 2011 eurozone credit crunch, when short sellers placed large bets on stocks they expected to fall in price.

More drastic measures have been launched in Asia, with South Korea banning short selling for six months on Friday.

The FCA restrictions, which could be extended on Monday, follow a request from the Italian and Spanish authorities, who have launched their own ban after a historically turbulent week for international markets.

On Thursday, the Stoxx 600 index, the benchmark European equity index, suffered its worst day-long decline since its launch in 1998. The London and New York markets also experienced their worst day since the Black Monday crash of October 1987.

The FCA ban also has an impact on the short circuit on the actions of fashion brand Moncler, tire manufacturer Pirelli, insurer Generali and several Italian banks, including Mediobanca and Banca dei Monte Paschi di Siena.

The Italian FTSE Mib benchmark rose by more than 5% on Friday morning.

An FCA spokesperson said: We have received a request from the Italian and Spanish authorities to assist with a ban on short selling in their markets where secondary trading may take place in London.

In accordance with our normal practice, we assist these jurisdictions. The UK markets continue to remain orderly. The FCA continues to monitor the situation.

European regulators, including in the UK, introduced short selling bans for months during the 2008 financial crisis. That year, the FCA's predecessor, the Financial Services Authority, banned the brokerage of 34 stocks, including large banks, asset managers and insurers, for five months after the collapse of Lehman Brothers.

Short selling bans were then used to protect bank stocks that were highly exposed to the 2011 eurozone debt crisis.

Currently, the UK is bound by EU rules which allow any national regulator to ask all other countries to support a ban on short selling on their own country's stocks. The UK has been asked to apply bans by other countries on several occasions since, including once in 2019 and four times in 2018.

However, Neil Wilson, the chief market analyst for Markets.com, said that the short sellers were not to blame for the latest market turmoil. When problems arise, policymakers like to fall back on old game books, such as banning short selling of stocks, he said.

We see this kind of action from time to time when the markets have spasms and the recent rout is doing the trick. US regulators banned short selling of bank securities during the great financial crisis of 2008-2009, while similar measures were taken at the height of the European sovereign debt crisis of 2010-2011. As I pointed out, short selling is not the problem. The political answer is useless but the Mib is up 5% this morning, leading the European markets up.

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