Crackdown on Italian and Spanish short selling

THE City watchdog has launched an unprecedented ban on shortselling shares in more than 100 Italian and Spanish firms.

The move came amid growing fears that household names from Ferrari to Banco Santander could be seriously destabilised in the Covid-19 crisis.

Short-selling allows traders to profit when the price of a company tumbles, and is typically used by hedge funds who can make millions in a matter of minutes if they get their bets right.

But the Financial Conduct Authority (FCA) was forced to ban traders from shorting 154 Italian and Spanish stocks yesterday, as regulators in those countries desperately attempted to restore stability after one of the worst market routs in history.

Italy’s regulator Consob and its counterpart in Spain, the CNMV, announced that they were banning the shorting of 85 and 69 stocks respectively.

They feared that traders were exacerbating the market sell-off by betting against companies which might be badly affected by the coronavirus.

Companies included in the oneday ban included Santander’s owner Banco Santander, TSB’s owner Banco de Sabadell, O2’s parent Telefonica, carmaker Fiat Chrysler and Juventus Football Club.

Under European rules, if authorities in one country ban short-selling in a particular stock then their peers around the EU – where the shares may be traded on secondary markets – must follow suit.

But it is the first time that the FCA has had to suspend shorting in such a long list of stocks.

An FCA spokesman declined to comment on whether the regulator would consider banning the short-selling of any UK stocks during the Covid-19 crisis.

He said: ‘UK markets continue to remain orderly. The FCA continues to monitor the situation.’