Hedge funds urge EU regulators to scrap short-selling curbs
France, Belgium, Spain, Austria and Greece consider extensions of restrictions
Hedge funds are urging European regulators to scrap bans on the short-selling of shares, as markets begin to settle in the wake of a sharp sell-off last month.
National authorities in five countries are considering whether the bans have done their job in stabilising stock prices, following a 30 per cent fall in the Euro Stoxx 600 benchmark triggered by fears over the spread of coronavirus.
The benchmark has since recovered as much as 15 per cent, prompting hedge funds to claim that extending bans would be damaging, pushing up the all-in costs of trading.
“The evidence from these short-selling bans is consistent with past experience: they have increased volatility, reduced liquidity, and acted as a tax on all investors,” said Bryan Corbett, chief executive of the Managed Funds Association, which represents hedge funds such as DE Shaw, Renaissance Technologies, Citadel, Two Sigma Investments and Third Point.
The month-long bans will start to lapse this week, starting with France on Thursday. Restrictions in Spain, Austria and Belgium are due to end after the close of business on Friday while a ban in Greece expires next week. Italy’s ban will continue until mid-June.
Other regulators across Europe, notably in the UK and Germany, did not impose bans of their own.
Last week Robert Ophèle, chairman of the French market regulator, Autorité des marchés financiers, said that he was inclined to extend his country’s ban, but would consider all data before coming to a decision.
Short selling is a practice widely used by hedge funds and involves managers borrowing shares and then selling them, hoping to buy them back later at a lower price before returning them and pocketing the difference.
Hedge funds are urging European regulators to scrap bans on the short-selling of shares, as markets begin to settle in the wake of a sharp sell-off last month.
National authorities in five countries are considering whether the bans have done their job in stabilising stock prices, following a 30 per cent fall in the Euro Stoxx 600 benchmark triggered by fears over the spread of coronavirus.
The benchmark has since recovered as much as 15 per cent, prompting hedge funds to claim that extending bans would be damaging, pushing up the all-in costs of trading.
“The evidence from these short-selling bans is consistent with past experience: they have increased volatility, reduced liquidity, and acted as a tax on all investors,” said Bryan Corbett, chief executive of the Managed Funds Association, which represents hedge funds such as DE Shaw, Renaissance Technologies, Citadel, Two Sigma Investments and Third Point.
The month-long bans will start to lapse this week, starting with France on Thursday. Restrictions in Spain, Austria and Belgium are due to end after the close of business on Friday while a ban in Greece expires next week. Italy’s ban will continue until mid-June.
Other regulators across Europe, notably in the UK and Germany, did not impose bans of their own.
Last week Robert Ophèle, chairman of the French market regulator, Autorité des marchés financiers, said that he was inclined to extend his country’s ban, but would consider all data before coming to a decision.
Short selling is a practice widely used by hedge funds and involves managers borrowing shares and then selling them, hoping to buy them back later at a lower price before returning them and pocketing the difference.