Return to normal on the Paris Stock Exchange. The Financial Markets Authority (AMF) on Monday suspended the ban on short selling. "Noting the gradual normalization of risk indicators on the French market, the Autorité des Marchés Financiers has decided to suspend the exceptional measure" , justified the stock market gendarme in a press release.
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The technique of short selling is to bet on the fall of a stock. An investor borrows a security to sell it on the market hoping to buy it back cheaper before returning it to the original lender. The objective is to pocket the difference between the sale price and the redemption price at the time the transaction is unwound. Considered speculative, this process, especially used by hedge funds, is risky in times of stock market crisis. It can mechanically accelerate downward the already badly battered titles.
Banning short selling helped stabilize equity markets
Vincent Guenzi, Head of Investment Strategy at Cholet DupontThe AMF and four other European stock market regulators (Austria, Belgium, Greece and
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