Following the recent financial crisis, which had a strong impact on international financial markets, many European and international Authorities have adopted banning measures regarding short selling activity. Short selling means any transaction of sale of securities that is not supported by the availability of stock, when the order is sent. This practice is considered by Authorities as a potential destabilizing factor, and therefore was subject to various restrictions.
Given the international importance of the matter, CESR has recently launched a consultation to assess the effectiveness of measures taken by member states and the effects they had on financial markets, in order to define the opportunity to introduce further measures, fostering cooperation and according to a more coordinated approach between the authorities.
ABI Position
Short selling ban did not contribute to reduce volatility as it may be attributed more to the massive mobilization of positions by institutional investors, rather then shot selling activities.
Short selling practice is an important instrument to ensure the efficiency of the market, both for primary and secondary ones.
Temporary nature of the measures adopted by Authorities has not allowed intermediaries to implement medium-to-long term organizational procedures to efficiently complain with the banning rules, given the uncertainty relating to regulatory choices and to whether the bans would be maintained in the future.
We believe that short selling ban is ineffective and involves high costs of compliance for intermediaries. ABI therefore shares CESR's approach to standardize the activities of its members and enhance regulatory cooperation at European level, since the isolated actions hinder greater cross-border operations in the markets.
• ABI remarks on CESR call for evidence on regulation of short selling by CESR members (20/01/2009) Full text >>