Piazza Affari, after the thump of 17%. Consob prohibits short selling

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After three days of heavy falls in Piazza Affari, Consob has decided to suspend short selling on 85 stocks listed on the MTA, the Italian telematic market, for the whole day today, March 13th. The resolution was adopted on the evening of March 12, at the end of a session in which the Milan Stock Exchange accused the worst performance ever in a single day: -16.92 percent.

To weigh on decidedly difficult days for the spread of Coronavirus were also the statements, subsequently partially corrected, of the ECB President, Christine Lagarde, regarding the tools to be used to face the crisis. “Whatever it takes2? It is not my purpose, “he commented, suggesting that the measures that could be adopted by the European Central Bank would not have been all those of the so-called” toolbox “. The heavy losses on the stock exchange have evidently made us fear that there may be margins for speculative maneuvers. Among the securities on which the ban was triggered are the blue chips in the Italian list, from Generali to the banks, Intesa and Unicredit and the other major ones, Telecom Italia, Enel, Eni, Fia and so on. Short sales are sales orders given on securities that are not held: beyond certain thresholds (0.5% of a company’s capital) are permitted and the Authorities must be notified.

The prohibition due to losses over 10 percent
The resolution clarifies that the ban was decided pursuant to Article 23 of European Regulation 236/2012, for the entire trading day of 13 March 2020. The article provides for restrictions on trading if “the negotiation has suffered a decrease significant during a single trading day compared to the closing price on that day of the previous trading day “. In such a case, “the competent authority of the home Member State for that venue shall verify whether it is appropriate to prohibit or restrict natural or legal persons as regards the initiation of short selling of the financial instrument in that venue or otherwise to place restrictions on transactions on that financial instrument in that trading venue in order to prevent a disorderly decrease in the price of that financial instrument. “

In the note released on the evening of 12 March by the Authority, it is explained that the provision was adopted “taking into account the price change recorded by the securities on 12 March 2020 (higher than the thresholds provided for by the aforementioned regulation)”. The threshold indicated is that of a decline of more than 10 percent.

Measure extendable for two days
According to the regulation, the prohibition «applies for a period not exceeding the end of the trading day following the trading day on which the price decrease occurred». A further extension is possible, but beyond two days, “if at the end of the trading day following the trading day on which the price decrease occurred, despite the measure imposed, a further significant decrease equal to at least half of the amount »10%« in the value of the financial instrument, compared to the closing price on the first trading day ».