There is “no evidence” that short-selling has been behind recent market falls, the UK’s Financial Conduct Authority (FCA) has said.
Some European countries have introduced short-selling bans, but the FCA said most had not and “nor has the United States or any other major financial market”.
In a note published yesterday, the regulator said aggregate net short selling activity reported to it was low as a percentage of total market activity and had decreased in recent days.
Being able to take short as well as long positions benefitted a range of ordinary investors “including the pension funds for employees of companies and local government”, and short selling was a “critical” underpinning of liquidity provision, the FCA said.
“We will continue to co-ordinate with our international partners and take all actions within our power where necessary to safeguard orderly markets.”
ESMA, the EU financial markets watchdog, has agreed to emergency short-selling bans in some EU countries but its chair Steven Maijoor yesterday said its objective was to maintain orderly and open markets.
“Open markets allow the process of adjusting prices to new information to continue, and they provide liquidity to the benefit of investors by allowing them to rebalance portfolios and meet contractual obligations,” he said.
On Friday several industry associations wrote to Maijoor and other EU policymakers to urge them to keep markets open. There have been some calls for markets to close.