Temporary short sell ban

The FSA has issued a temporary short sell ban on Italian bank shares following a decision to do the same by the Italian Competent Authority (Consob).

Temporary short sell ban


The move comes as shares suffered significant price falls in the aftermath of the Italian election and will apply across all UK venues trading the instruments.

Shares in Banco Popolare, Mediolanum, Banca Carige and INTESA are all affected.

The FSA stated that the measure is justified to prevent “disorderly falls in prices.” Both entering into and increasing net short positions in the shares are prohibited, as are any other activities that will benefit the trader should the shares decline in value.

The ban does not extend to traders that have previously informed the FSA that they will be using the market maker exemption in these instruments.

Prohibition will be in force today, although it may be extended if the share prices fall significantly or the Consob extends its ban.

Meanwhile, Chris Wyllie, CIO at Iveagh Asset Management, said portfolio changes in response to the Italian election had so far been minimal and his macro outlook over the next three to six months (including Europe) is still relatively positive.

For this reason he has used tactical positioning to adjust to short-term risks, including holding an overweight in cash and trimming but not cutting Europe exposure. He has also increased exposure to negatively correlated assets such as long-dated treasuries and the dollar.

"Given the undesirable election outcome which most likely reverses the recent fiscal discipline in Italy under Monti, as well as ushering in a period of policy uncertainty, it’s perhaps no surprise to see Italian equities down almost 5% yesterday, with European equities down over 3%.

"This could just be business as usual in Italian politics but it may well provide the excuse the markets were looking for to have a correction. We will be monitoring the bond markets closely for clues about how far this might go," Wyllie concluded.


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