ROME: Italian market regulator Consob on Friday extended the ban on the short-selling of financial stocks until Sept. 14 because of ongoing uncertainty on the markets amid the euro zone debt crisis.
"Given the persisting state of uncertainty surrounding the financial markets, Consob decided today to extend the ban on short-selling to 6:00 pm (1600 GMT) on Friday Sept. 14," it said in a statement on its website.
Consob had put the ban in place on Monday, as Milan's stock exchange plunged over 5.0 percent amid fears that Italy would be pulled into the debt crisis sinkhole by a suffering Spain. The ban was due to expire yesterday evening.
Italy's stock exchange closed up over 3.0 percent yesterday following a pledge by the European Central Bank that it will not let the euro fail.
The yield on government bonds at a bond sale yesterday was also down.
But financial observers warned that market volatility may mean that relief among investors may soon wear off, with damaging results for Italy.
Consob's ban regards both "naked" — when investors do not have the underlying shares — and "covered" short-selling, when they do hold the stock.
In short-selling, investors are betting that a stock will fall in price. They borrow the same stock from a broker, sell it and then buy it back later at a hopefully cheaper price to pocket the difference.
Supporters claim the practice allows investors a hedge against risk but critics say it only adds to the downward pressure in falling markets and serves no real purpose beyond speculative trading for short-term profit.
The practice was temporarily banned in many countries at the height of the 2008 global financial crisis.
Italy extends ban on short-selling
