Given the concerns raised by volatility experienced in European markets by the beginning of August 2011, some market regulators over the European Union have decided to take action and announced bans on short-selling or on short positions. These measures, taking effect on August 12th, are to be into effect over two weeks.

On August 11th, four European authorities decided to impose or extend existing short-selling bans in their respective countries. Market authorities from Belgium, France, Italy and Spain have done so either to restrict the benefits that can be achieved from spreading false rumours or to achieve a regulatory level playing field, given the close inter-linkage between some EU markets

In the absence of a common EU legal framework in the area of short-selling and given the very different national legal bases on which such measures can be taken, measures have been aligned as far as possible. The European Securities and Markets Authority (ESMA) has coordinated discussions between the national competent authorities, specifically on the content and timing of any possible additional measures necessary to maintain orderly markets.

ESMA which is one of the European Supervisory Authorities (ESAs) proposed by the Commission as part of the new financial supervision system put in place in 2011, backed the decision taken by the competent authorities emphasising that the Market Abuse Directive (MAD) imposes certain requirements referred to the prohibition of the dissemination of information which gives, or is likely to give, false or misleading signals as to financial instruments. ESMA also underlines that although short-selling can be a valid trading strategy, when used in combination with spreading false market rumours this is clearly abusive.

In the area of short-selling regulation, many European authorities already have in place either requirements for the disclosure of net short positions or bans of certain types of short sales. Given the situation in European markets, all competent authorities have reinforced the monitoring of their markets and are keeping their regulatory requirements under review.