The Autorité des marchés financiers (AMF) announced today that in consideration of the return to more normal risk indicators on the French market, the regulator has decided to suspend the imposed ban on creation of net short positions and on the increase of existing net short positions. The French agency, however, will closely monitor the situation in financial markets.
European financial regulators took the emergency measures in March to ban any creation of a net short position and any increase in an existing net short position for a period of a month or more to limit the unprecedented high market volatility resulting from the Covid-19 outbreak. French regulator AMF announced the ban on 17 March and took the decision to extend on 15 April for another month.
AMF wanted to avoid any pro-cyclical influence that the considerable uncertainties and decline in the market may have caused and implemented the unprecedented measure of prohibiting net short positions. Since the ban, markets have partly reduced their losses, trading volumes and volatility levels, although still high, have resumed to more normal positions. The French market’s volatility index has decreased from 84 at the closing on 16 March to 30 and the average daily volume on the CAC40 traded on Euronext has fallen from 12 billion euros to 4 billion.
The French regulator has consulted with the European Securities and Markets Authority (ESMA), the Austran, Belgian, Greek, Italian and Spanish authorities which took similar actions and has decided not to renew the ban on net short positions after it expires on 18 May 2020. The AMF will continue to monitor the financial markets and remain in close contact with other authorities and call for coordinated European action should the situation require it.
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