France’s AMF suspends the ban on creation of net short positions

France’s Financial Markets Authority (AMF) today announces suspension of the ban on the creation of net short positions and on the increase of existing net short positions. The decision is made due to the progressive normalisation of France’s market risk indicators.

Let’s recall that the ban was introduced on March 17, 2020 amid the Coronavirus outbreak and the uncertainties surrounding its impact on the economy. Given the circumstances, the ban was extended until May 18, 2020. In a uniformly declining market, with considerable uncertainties about the future extent of the decline, an increase in short selling could have had a procyclical influence that the AMF wanted to avoid by implementing this exceptional measure.

Since the implementation of the ban, the AMF has observed a progressive normalisation. Markets have partly reduced their losses, trading volumes and volatility have returned to levels that are still high compared to mid-February, however this reflects market participants’ uncertainties in the current context. The French market’s volatility index has fallen from 84 at the closing on 16 March to a level of 30 and the average daily volume on the CAC40 traded on Euronext has decreased from 12 billion euros to 4 billion. This normalisation has also been observed on other markets subject to a similar ban.

Under these circumstances, the AMF, in consultation with ESMA and the Austrian, Belgian, Greek, Italian and Spanish authorities which have taken similar action, has decided not to renew the ban on net short positions, which will expire on May 18, 2020, at 23:59 pm. The AMF continues to carefully monitor the situation in financial markets and remains in close contact with other authorities.

The French regulator reminds the public that ESMA’s decision requiring net short positions holders to report new positions of 0.1% of the issued shares capital remains in force.