Barnabas Reynolds, Thomas Donegan, Russell Sacks
Shearman & Sterling, 1 April 2020
In the wake of the COVID-19 pandemic, numerous European jurisdictions, including France, Italy, Spain, Greece and Belgium have enacted short sale bans in an attempt to stabilize financial markets and maintain investor confidence. The following note provides an overview of these bans as well as an overview of the 2008 partial ban(s) on short selling by the U.S. in response to the financial crisis. To date, the United States has not yet indicated that it is considering a ban on short selling in response to market volatility due to the COVID-19 pandemic.
Securities and Exchange Commission (SEC) Chairman Jay Clayton recently noted that he believes the United States should not ban short selling, as investors “need to be able to be on the short side of the market in order to facilitate ordinary market trading.” The U.K.’s Financial Conduct Authority (FCA) confirmed on March 23, 2020 that the U.K. has not yet implemented a short selling ban. Where other EU member states have implemented a short selling ban, the FCA has followed those bans.