(Adds reaction)
By Huw Jones and Joice Alves
LONDON, May 18 (Reuters) - Six European Union states will
scrap bans on short-selling shares introduced during bouts of
extreme market volatility in March when national lockdowns were
rolled out across the bloc to fight the Covid-19 pandemic.
The bloc's securities watchdog, the European Securities and
Markets Authority (ESMA), said Austria, Belgium, France, Greece
and Spain had decided not to renew short-selling bans that
expire at 2159 GMT on Monday.
Italy has decided to lift its ban, due to expire on June 18,
to align itself with the other five EU states, ESMA said.
French markets watchdog AMF said that since the
implementation of the ban, it has observed a progressive
normalisation in trading.
"Markets have partly reduced their losses, trading volumes
and volatility have returned to levels that are still high
compared to mid-February, however this reflects market
participants’ uncertainties in the current context," the AMF
said in a statement.
Equity strategists told Reuters the end of the bans
underlined how liquidity had improved in major European
countries, but questioned any impact the curbs had made.
"I don't think it (the ban) has made much of a difference,
to be honest," said Kevin Gardiner, global investment strategist
at Rothschild & Co Wealth Management. "I won't pretend that it
had a material detrimental impact on capital markets that I have
been able to see".
Equities has been out of favour over the past two months as
investors have preferred safer assets such as gold.
"Short selling bets are not particularly sexy anyway," said
Edmund Shing, global head of equity derivatives strategy at BNP
Paribas, pointing instead to hopes of a recovery as lockdowns
are gradually lifted.
The six bans left traders facing a patchwork of
interventions in what is mean to be a seamless pan-European
stock market of 27 countries at a time of extreme uncertainty.
Germany and Britain declined to introduce short-selling
curbs.
Last week the World Federation of Exchanges, hedge funds
industry associations AIMA and Managed Funds Association, and
the European Principal Traders Association called on the French
markets regulator and Finance Ministry to end the ban.
"Over the longer term, the bans risk undermining confidence
in key European financial markets and hampering the goal of a
Capital Markets Union, something that will be vital to European
recovery from the profound economic shock caused by COVID-19,"
the letter said.
The ESMA itself has required holders of net short positions
in shares to notify their national regulator if the position
reaches or exceeds 0.1% of the issue share capital. This
measures remains in force until June 16 and can be renewed.
(Reporting by Huw Jones; Editing by Toby Chopra and Alison
Williams)