FCA complies with short-selling ban on Italian stocks

Financial regulator the FCA complied with a temporary ban on short-selling of Italian shares after measures imposed overnight by the financial authorities in Milan.  The ban lasts for today and covers all UK trading venues. Italy’s leading index the FTSE MIB fell 17% yesterday and the new restrictions add to an existing ban on naked short selling, the practice where punters sell shares they don’t own. Spain is expected to follow Italy’s lead while South Korea is set for a six-month short-selling ban. Markets around the world have been in turmoil due to fears over coronavirus, Donald’s Trump European travel ban and the oil price war. London’s blue-chip index the FTSE100 racked up its biggest loss since the financial crash of 1987 yesterday and since its peak in January has lost 30% of its value. Neil Wilson at markets.com said about the Italian move: “We see this kind of action occasionally when markets spasm and the recent rout fits the bill.  “US regulators banned short selling of bank stocks during the great financial crisis of 2008-09, while similar steps were taken during the height of the 2010-11 European sovereign debt crisis.  “As I outlined in an article a year ago almost to the day, short selling is not the problem. The policy response is pointless, but the MIB is up 5% this morning, leading European markets higher.”  Short-selling or shorting a stock is when an investor borrows and sells shares hoping that the stock price goes down so they can buy the shares back at a lower price and pocket the difference as a profit. Margin trading, where only a fraction of the value of the trade has to be paid upfront, combined with automated and algorithmic trades has seen shorting surge in importance.