A number of continental European national regulators banned shorting as a measure to calm turbulent markets two months ago. The restrictions were due to expire yesterday.

As expected, European financial regulators lifted restrictions on short selling from yesterday, ending a period during which the practice had been banned to help calm markets as the coronavirus pandemic hit investors two months ago. 

The UK’s Financial Conduct Authority had not imposed such a ban, however. 

The European Securities and Markets Authority, the EU’s securities markets regulator, yesterday said that the emergency restrictions had been ended by the following national bodies: Finanzmarktaufsicht (FMA) of Austria; Financial Securities and Markets Authority (FSMA) of Belgium; Autorité des Marchés Financiers (AMF) of France; Hellenic Capital Market Commission (HCMC) of Greece; and Comisión Nacional del Mercado de Valores (CNMV) of Spain.

The decision had echoes of similar moves by global regulators in the autumn of 2008 to ban short selling and prevent disorderly markets after the shock bankruptcy filing of Lehman Brothers. 

Shorting is the practice of borrowing a security, selling it in the expectation that its price will fall and repurchasing it at a set later date, in order to make a profit. During most market conditions shorting enables investors and traders to make money by taking a negative view of a security, and hedge their upside, “long” positions. Short selling can be squeezed in tough markets if providers of borrowed securities, such as prime brokers, increase collateral requirements, aka margin calls.