Six months have passed since European regulators in France, Spain, Belgium and Italy prohibited investors from taking short positions in financial stocks, making it impossible for investors to buy stocks in hopes that they would fall to a cheaper price before selling and keeping the profit. High volatility in the markets was their reasoning. Now France and Belgium estimate that economic outlook has changed, because yesterday they reinstated short selling in their countries. Spain and Italy are keeping the prohibition alive for now, but given the unanimous decision that regulators made in August, they should make a decision whether to lift the ban within the next few days.
The Comisión Nacional del Mercado de Valores (CMNV), Spain´s stock market regulator, insists that the measure will continue until the "outlook for the Spanish stock markets advises that we lift it." The regulator is expected to make a decision soon. "It seems logical that [France and Belgium's] decision could sway the CNMV to follow suit," said Danial Pingarrón, a market strategist from IG Markets.
Is it time yet?
At the beginning of February, CNMV vice president Fernando Restory assured that the investing environment "has not improved enough" to sideline the ban on short selling. He maintains this position still. The perception is very different for others. For the Dutch regulator, conditions are indeed different and, in fact, Belgium's market regulator, the Authority of Financial Markets and Services, demanded that the prohibition was dropped due to "low market volatility."
In France, on Saturday the national government, not the market regulator, made the decision to lift the ban. In Spain, the CNMV makes this decision. Yesterday, when the CNMV published short selling figures from the past two weeks, it did not want to say when it would lift the ban on short selling.