FCA halts short-selling of Italian stocks following market slides

Italian Stock Market

The Financial Conduct Authority has introduced a temporary ban on the short selling of certain Italian stocks, which will last until the end of Friday’s trading, in a move to calm the sustained frenzied selling following hefty slides in global stock markets this week.

The ban - which took effect at the start of Friday’ trading, in line with EU rules - covers some 85 companies across a range of sectors, spanning banks including Unicredit, natural gas distributor ItalGas, luxury carmaker Ferrari, and Juventus and Lazio football clubs.

The UK market regulator’s action, which follows a similar move by the Italian financial watchdog the Commissione Nazionale per le Società e la Borsa (CONSOB), comes after a 17 per cent slide on Milan’s stock market, the FTSE MIB, on Thursday.

A similar curb on betting against a list of 69 Spanish stocks was introduced by the Comisión Nacional del Mercado de Valores (CNMV), Spain’s securities regulator, after similarly sharp falls in Madrid this week.

Short-selling activity – a core component of most hedge fund strategies –  in the affected stocks will be paused until London markets close on Friday afternoon.

The FCA said in a statement: “Following the action taken by CONSOB, the FCA is satisfied that it is necessary to take the action set out in this notice to assist CONSOB, taking into account a similar price fall in the instruments on UK trading venues, and the volume of trading in the UK.

“This measure does not extend to transactions undertaken by market makers who have notified the FCA of their intention to employ the market maker exemption in this financial instrument and who are included on the list maintained by ESMA of market makers permitted to use the exemption.

“This exception only extends to those transactions that market makers undertake as part of their market making activities.”

Global stock markets have continued to see sharp falls in the value of companies on the back of fears over the continued Covid-19 coronavirus pandemic.

On Thursday, the UK FTSE 100 lost more than 10 per cent – its biggest fall since the Black Monday stock market crash of 1987 – before recovering on Friday morning, while Wall Street trading was temporarily halted after the S&P 500 against fell 7 per cent for the second time in a week.