Short selling to continue, for now
Investors' eyes have been on Central and Eastern European market regulators following the Austrian Financial Market Authority's decision to consider short selling of Vienna-listed stocks as a sign of market manipulation if the net short position exceeds 0.25 percent of the issuer's share capital. New regulations have already been seen in several countries that allow short selling - such as the US and UK - because of fears that speculation has caused dramatic stock drops.
"The ČNB is preparing no measures restricting short selling in connection with recent financial market developments," said Pavel Zúbek, a ČNB spokesman. He mentioned that the ČNB has long performed analyses of margin trading, which can contribute to higher short-term volatility. In this context, it has focused on the financial stability of investment firms and the suitability of these transactions for certain types of investors.
"We cannot completely rule out that some measures will be taken in the future, but they will not be triggered by the capital market developments over the recent weeks," he said.
Stock traders agree that it is hard to say how much of a fall of a certain stock is caused by short selling, how much by the general mood in the market and by a company's real fundamentals.
Zúbek also said that a ban could have negative effects. "It makes standard risk management on the part of options traders virtually impossible," he added.
The ČNB considers the "potential illegal combinations" of short selling and dissemination of false information more problematic.
"The ČNB monitors such conduct regardless
of the current situation," Zúbek said.
Cristina Muntean
This is an edited version of an article originally published in Czech Business Weekly
