Euronext chief backs short-selling ban
The chief executive of Euronext has said he backs the French government’s decision to ban short selling in an attempt to restore calm to markets shaken by the impact of coronavirus.
The French markets regulator last week ordered a month-long ban on bets against locally-listed stocks, joining Italy, Spain and Belgium — and later Austria and Greece — in a crackdown. But other regulators across Europe, notably the UK and Germany, have not followed suit.
“It was an excellent decision that made plenty of sense at that time,” said Stéphane Boujnah, whose Euronext group operates six equity exchanges around the continent. “It’s unfortunate that no European alignment could be found. We supported [the ban] not as a matter of principle, but as a matter of keeping the market open, but with a small adjustment,” he told the Financial Times.
Short selling involves borrowing shares and selling them, aiming to buy them back later at a lower price before returning them to the owner and pocketing the difference. The practice, often used by hedge funds, is controversial as it has been blamed for exacerbating volatility during times of stress. Defenders say banning it simply blocks investors from expressing a valid view on companies’ prospects.
Mr Boujnah said some companies and investors had become concerned that selling pressure during the pandemic shock to global markets was being “amplified” by short-sellers who “were not contributing to price information”.
“In this crisis context . . . in an environment when the regulator wants to take steps, in these types of circumstances, such compromises are acceptable,” said Mr Boujnah, who had been consulted by the government and the French markets regulator about the decision.
Bruno Le Maire, the French finance minister, had indicated the government was willing to go further in an effort to avoid speculation on the markets.
Euronext has also responded to the wave of volatility coursing though markets by reinforcing its internal circuit breakers — kill switches that kick in after rapid drops in prices to try to break self-reinforcing selling of certain stocks.
After short selling bans were introduced, and as markets plunged and volatility increased because of the spreading impact of coronavirus, Mr Boujnah defended keeping his exchanges open.
“All the policymakers, all the regulators were absolutely aligned that liquidity was important, price creation was working and that markets should continue to operate,” he said.
Mr Boujnah said that as trading volumes jumped to twice their normal level, his exchanges proved themselves by operating as normal — testament, he said, to many years of investment in IT and operating systems. “The proof of the pudding is in the eating, and we have that proof in the volumes that we have seen.”