Short-sellers in Europe get the green light as coronavirus bans on betting against stocks are lifted
- On Monday, the European Securities and Markets Authority said that a number of countries lifted previous restrictions on short selling, The Wall Street Journal reported.
- The ban on short selling was put in place in March as volatile markets reeled amid the coronavirus pandemic.
- US regulators did not ban short selling, instead saying it is necessary for normal market function.
- Read more on Business Insider.
Short-sellers rejoice — betting against the stock market is back on in Europe.
On Monday, the European Securities and Markets Authority said that Austria, Belgium, France, Spain, Greece, and Italy all lifted previous restrictions on betting against stocks put in place at the start of the coronavirus pandemic, The Wall Street Journal reported.
The ban on short-selling was put in place in March as volatile markets reeled amid the coronavirus pandemic. In April, several European countries extended the restrictions as market whiplashing continued.
Since, markets have calmed as the world begins to tentatively reopen parts of its economies, encouraging European regulators to do away with the bans after roughly two months.
Short-sellers bet against the market by borrowing assets such as stocks and selling them, profiting when the prices decrease and they can sell back to the lender. Some critics of short selling argue that it can weigh on equity prices, especially in times of increased volatility.
Regulators in the US did not ban short selling. In a March interview with CNBC, Jay Clayton, chairman of the Securities and Exchange Commission, said that short selling is necessary to facilitate ordinary market trading.
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