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Exchanges stay open

No evidence that short selling fuelled market falls

stock exchange

Some have banned short selling of stocks

Stock markets will remain open with the UK regulator saying there is no evidence that short selling has contributed to recent falls.

Some authorities have taken measures to control short selling – where investors sell a stock in order to buy it back more cheaply.

While there has been significant volatility in market prices over the past weeks as a result of the impact of coronavirus – and it “may continue for a period” – the Financial Conduct Authority said markets have “continued to operate in an orderly fashion in the UK..

It said it is working with international counterparts in the US, EU and elsewhere so that markets can remain open and orderly.

There is no evidence that short selling has been the driver of recent market falls

– FCA

It said this will allow exchanges to continue to perform their essential role in supporting businesses, governments, jobs and the broader economy. 

“Some European countries have introduced short selling bans, and, in line with our standard practice, we have followed those bans, where requested, in respect of shares for which relevant European National Competent Authorities (NCAs) are responsible.

“The FCA has not introduced such a ban. Most European NCAs have not introduced such bans. Nor has the United States or any other major financial market.”

The FCA said it continues to monitor market activity, including short selling which is low as a percentage of total market activity and has decreased in recent days.

Short selling is a critical underpinning of liquidity provision

– FCA

“It will continue to fluctuate, but there is no evidence that short selling has been the driver of recent market falls,” it said.

A great many investment and risk management strategies rely on the ability to take ‘long’ and ‘short’ positions.

“These benefit a wide range of ordinary investors including the pension funds for employees of companies and local government. We also note that short selling is a critical underpinning of liquidity provision.

“The loss of these benefits would need to be carefully balanced before determining that any intervention to prevent short selling was appropriate.

“We will continue to co-ordinate with our international partners and take all actions within our power where necessary to safeguard orderly markets.”

Asia lifted by Fed action

Asian stocks rebounded sharply early on Tuesday as the US Federal Reserve’s promise of bottomless dollar funding eased investors’ pain.

Analysts estimated the package could make $4 trillion or more in loans to non-financial firms.

While Wall Street was unimpressed and suffered further falls, Japan’s Nikkei rose 6.2% and if sustained this would be the biggest daily rise for the Nikkei since late 2016.

However, speculation is mounting that US jobless claims rose by an eye-watering one million last week, with forecasts ranging as high as four million.

Goldman Sachs warned that US growth could contract by 24% in the second quarter, two-and-a-half times the pace of the previous postwar record.



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