ESMA supports Spanish regulator’s short-selling ban

Justification for the ban:

First, the CNMV considers that as opposed to a deterioration affecting just one issuer, based on fundamental economic facors, in the current context investors do not have accurate and public information on the impact of the public health crisis on each listed company, since events develop quickly and restrictions adopted by the Government might come with little or no advance notice. Hence, price formation may take place in an environment of partial information.

Second, the CNMV has observed cases of disinformation, rumours and false news in media and social networks regarding activities that could be affected by decisions of the Government or by the evolution of the crisis. Such rumours may affect listed companies and damage the confidence of investors in an efficient market, where prices should be formed with public, reliable information.

Third, the CNMV considers that, although Regulations (EU) No 236/2012 and Article 24 of Regulation (EU) No 918/2012 were drafted without considering the scenario of a pandemic, when identifying situations that could be considered a threat to market confidence, they refer to “natural disasters” that may damage financial institutions, market infrastructures, clearing and settlement systems and supervisors. The effect of the restrictions within the state of emergency on the availability of resources (including human and IT) could be similar to some natural disasters. The CNMV considers that the restrictions to the movement of workers and the fact that key personnel of infrastructures may be affected and unable to continue working, puts the market infrastructures, clearing and settlement systems at enormous strain to monitor, supervise and manage markets. The stock market is the most sensitive to this situation or distress. At the same time, the CNMV has not observed any disruption of clearing and settlement systems yet.

The full document is available at

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