France and three other European countries are banning short selling, with the moves coming after weeks of wild swings in global equity markets, reflecting investor worries about slowing growth, debt burdens and credit downgrades.
Belgium, Italy and Spain round out the other countries that will impose or extend existing short-selling bans beginning Friday, according to a statement from the European Securities and Marketing Authority late Thursday. The ESMA coordinates securities and trading rules among European Union member states.
Short sales are bets that a stock price will decline over time. In a regular short sale, the seller borrows a stock and sells it, understanding that the loan must be repaid by buying the stock.
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The authorities in the respective countries have decided to impose the bans “either to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field, given the close inter-linkage between some E.U. markets, ESMA said.
The French ban will prevent creating a short position or increasing any net-short position in French securities in the financial sector, according to French regulator AMF in a statement. The order covers 11 entities, including BNP Paribas FR:BNP +0.31% , Crédit Agricole FR:ACA +5.14% and Société Générale FR:GLE +3.70% .
Shares of French banks were rocked this week, in part on fears that France could lose its AAA credit rating, though surges on Thursday helped limit losses toward week’s end. The shares faced weekly losses ranging from 12% to 16%.
The Stoxx Europe 600 Index XX:SXXP +3.16% was on track for a weekly decline of more than 3%.
The ban on short sales recalls an order by the U.S. Securities and Exchange Commission in September 2008 that prohibited short sales of 799 financial stocks through October of that year. Read about the 2008 short-selling ban on U.S. financial stocks.
The other entities affected by the short-selling ban by France are April Group, AXA SA FR:CS +3.88% , CIC, CNP Assurances FR:CNP -1.39% , Euler Hermès FR:ELE +3.63% , Natixis FR:KN +6.34% , Paris Ré, and Scor.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles.
