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  • The CNMV prohibits short sales on 69 companies due to the coronavirus

The National Securities Market Commission (CNMV) has decided to end the ban on short operations on the Spanish stock markets, a measure that was launched two months ago now, coinciding with the stock market debacle unleashed by the coronavirus.

"After analyzing the evolution of the market and the circumstances that led to its adoption, and in contact with European securities supervisors who have adopted a similar measure, the CNMV has decided not to extend the ban on the creation or increase of net short positions currently in force that, consequently, will cease to be applicable today Monday, May 18, 2020 at 23:59 hours, "says a statement released by the supervisor before the opening of the session on Monday.

On March 12 and before the irrepressible collapses of the Ibex 35, the body chaired by Sebastián Albella decided to ban short sales on a total of 69 companies that, in his opinion, had been harmed the most by the continuous setbacks. Days later, that order was extended to all the securities, it has been extended in successive announcements until today.

Short sales are a speculative movement in the Stock Market that consist of betting on the fall of a security. Investors who bet downward or 'bearish' borrow a company's securities from their original shareholders for a specified time and in exchange for interest, and then sell them on the market as if they were their own. In this way they manage to generate a large volume of sales that causes a drop in the price of the shares, at which point the bears take the opportunity to buy them back cheaper and return them to whoever lent them to them.

With its ban, the CNMV sought to curb speculation in Spanish markets in the midst of a stock market storm. The Ibex 35 is being one of the indexes most punished by investors' doubts during this pandemic. The main Spanish index loses more than 30% so far this year, which is the biggest decline among its European comparables.

However, the Commission recalls that, for the purpose of notifying the CNMV of short positions, the new threshold of 0.1% of share capital set by decision of the European Securities and Markets Authority (ESMA) is still in force with the date March 16, 2020

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