NEW YORK/LONDON/ISTANBUL - New moves to curb short-selling in some countries have set the stage for a renewed battle between free market advocates and authorities aiming to check investors they see as profiteers who destabilize major companies.
Meanwhile, as Brexit looms, authorities in Frankfurt, Rome and Amsterdam could temporarily curb short-selling of companies to counter price swings triggered by the European divorce, officials have told Reuters. The former saw about 20 countries ban shorts of a total of more than 7,000 stocks, while the latter triggered bans of around 1,700, according to a 2018 study from the European Systemic Risk Board, which oversees the EU financial system.
Richard Payne, a professor at London’s Cass Business School, said that research suggested “the real effect of these bans is simply to increase trading costs and reduce trading activity.”of more than 400 U.S. financial stocks over the 14 days that short-sale bans were in effect in late 2008, for example, showed they did not have the intended effect.
The EU agency, however, remains committed to select interventions. This year, it backed Germany’s two-month short sale ban on payment firm Wirecard following a disputed media report of financial irregularities as “appropriate and proportionate to address the threat to German financial markets.” Financial regulators in Germany and France declined to comment for this story. Borsa Istanbul, the Turkish stock exchange and a financial supervisor, did not respond to a request for comment.Short sale bans are not recent market phenomena; they have roots in the early 1600s, when authorities intervened to support shares of the Dutch East India Company.