FCA temporarily bans short selling of Italian, Spanish stocks

The Financial Conduct Authority has temporarily banned the short selling of a slew of Italian and Spanish stocks on the FTSE 100 following heavy falls a day earlier on the FTSE MIB and IBEX 35.

It said in a statement: "Following the action taken by Comision Nacional del Mercado de Valores…the FCA is satisfied that it is necessary to take the action set out in this notice to assist CONSOB, taking into account: a) a similar price fall in the instruments on UK trading venues and b) the volume of trading in the UK."

Mediobanca, Poste Italiane, Moncler, Generali, UniCredit and Salvatore Ferragamo, Fiat Chrysler and Juventus Football Club were among those on the list.

Neil Wilson, chief market analyst at Markets.com, said: "Now it’s time to blame the short sellers…when trouble strikes, policymakers like to fall back on old playbooks, like banning short selling of shares. Italy’s market regulator has banned outright short-selling on 85 stocks after the FTSE MIB led the carnage in Europe yesterday with a 17% decline. It builds on the existing ban on naked short selling. Spain is doing similar today, while regulators in Seoul will ban short-selling for six months.

"We see this kind of action occasionally when markets spasm and the recent rout fits the bill. US regulators banned short selling of bank stocks during the great financial crisis of 2008-09, while similar steps were taken during the height of the 2010-11 European sovereign debt crisis. As I outlined in an article a year ago almost to the day, short selling is not the problem. The policy response is pointless."

Joshua Mahony, senior market analyst at IG, said the Italian decision to ban short selling on specific stocks could provide a framework for future action elsewhere if markets continue to tumble.

"However, the fact is that much of the recent decline is a case of traders exiting long positions and thus the continuation of that trend ensures that markets remain at risk."