Spain’s CNMV market regulator has banned short-selling of shares in 69 listed companies after fears over the coronavirus led to a historic sell-off of Spanish equities, Italy soon followed suit.
The restriction will apply to all liquid shares whose price fell more than 10% on Thursday and all illiquid shares that fell by more than 20%, the regulator said. Spain’s IBEX-35 index dropped 14.06% on Thursday, its worst-ever single-day loss.
Short-selling, in the context of the stock market, is the practice where an investor sells shares that he does not own at the time of selling them. He sells them in the hope that the price of those shares will decline, and he will profit by buying back those shares at a lower price.
Italy’s market regulator said it was introducing an outright short-selling ban on 85 stocks after the Milan bourse plunged 17% on Thursday, recording its worst loss ever, due to a coronavirus crisis in the country.
Market watchdog Consob said the measure, which concerns all the top names on the Milan bourse including banks UniCredit and Intesa Sanpaolo as well as energy groups Eni and Enel, would be effective on Friday.
The outright ban prevents sales of shares that have previously been borrowed, strengthening an existing ban on naked short-selling