Brokers are forced to adapt to the ban on opening short positions

More than a month ago, amid the rapidly spreading coronavirus pandemic, which, in turn, plunged global financial markets into chaos, many European and other regulators urgently introduced a ban on opening short sellings, in fact, on sale financial assets.

Now, as a result of the extension of such an extraordinary measure, some over-the-counter brokers are forced to bring their offer into line. Against the background of the extension of the ban on trading operations for sale in France, Belgium and Spain, the international online broker with Estonian roots, Admiral Markets, recently notified its customers that now trading in instruments by relevant indices is possible only in the “long” mode, that is, to increase quotes.

The forex broker said in a release that, The financial institutions of France, Spain and Belgium decided to extend the ban on trading short positions in stocks, indices and their derivatives until May 19, 2020. Therefore, trading in long positions only is available for the following instruments: CFD difference contracts for the IBEX35 index and stock CFDs; CFD on shares of Belgian companies; CFDs on the CAC40 index (index and index futures) and CFDs on shares of French companies.

In a situation where only buying is allowed, the company only accepts requests to shorten short selling. The rules for transactions on the purchase will not change.

We can remember that in addition to these countries, in early March 2020, many other regulators followed suit. In particular, on March 13, the London Stock Exchange announced a ban on short sales of Italian and Spanish stocks listed on this stock exchange, while Borsa Italiana imposed a similar ban on its stocks.

In South Korea, a similar ban on short sales was introduced on March 16 for a period of 6 months. The Spanish regulator also announced a similar decision then. Moreover, last week it became known that the Austrian Financial Markets Authority (FMA) decided to extend the ban introduced on March 18, now until May 18, 2020.

Financial market experts associate these measures with the events that took place in early March 2020 – the brutal sale of stocks and other assets on world markets – the worst period after the fall of Black Monday 1987 for the Stoxx Europe 600 index. One-day Italian stock exchange index FTSE MIB fell 15%, while the Spanish IBEX 35 fell 14%. Then, the next day, these indices grew by almost 5% and 3.7%, respectively.