This article is more than 6 months old

This article is more than 6 months old

The UK’s financial watchdog has banned the short selling of more than 140 major Italian and Spanish stocks, including Juventus and Lazio football clubs, and banks.

The Financial Conduct Authority’s one-day ban applies to shares including the Italian carmakers Fiat Chrysler and Ferrari, Unicredit bank and the drinks firm Campari Group. The Spanish banks Santander and Sabadell, and the planemaker Airbus, which is listed in Spain, France and Germany, are among those on the list.

Short sellers profit from placing bets on shares that they expect to fall in price. They borrow shares in a company, for a fee, and then sell them in the hope of buying them back at a lower price – and pocket the profit.

The latest ban echoes restrictions imposed during the 2011 eurozone credit crisis, when short sellers were placing large bets on shares they expected to fall in price.

More drastic measures were launched in Asia, with South Korea banning short selling for six months on Friday.

The FCA’s restrictions, which could be extended on Monday, follow a request by Italian and Spanish authorities, who instigated their own ban after a historically turbulent week for international markets.

On Thursday, the Stoxx 600 – the benchmark index for European shares – suffered its worst one-day drop since its launch in 1998. Both the London and New York markets also suffered their worst day since the Black Monday crash of October 1987.

The FCA’s ban also has an impact on the shorting on the shares of the fashion brand Moncler, the tyre company Pirelli, the insurer Generali and a number of Italian banks, including Mediobanca and Banca dei Monte Paschi di Siena.

Italy’s benchmark FTSE Mib rose more than 5% on Friday morning.

A spokesman for the FCA said: “We received a request from the Italian and Spanish authorities to assist with a short-selling ban in their markets where secondary trading may occur in London.

“In line with our normal practice, we are assisting those jurisdictions. UK markets continue to remain orderly. The FCA continues to monitor the situation.”

European regulators, including in the UK, introduced months-long bans on short selling during the 2008 financial crisis. That year, the FCA’s predecessor – the Financial Services Authority – banned the shorting of 34 stocks including major banks, asset managers and insurers for five months after the collapse of Lehman Brothers.

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Short-selling bans were later used to shield bank stocks that were heavily exposed to the eurozone debt crisis in 2011.

Currently, the UK is bound by EU rules that let any national regulator request that all other countries support a short-selling ban on its own country’s stocks. The UK has been asked to enforce bans by other countries several times since, including once in 2019 and four times in 2018.

However, Neil Wilson, the chief market analyst for Markets.com, said short sellers were not to blame for the latest market turmoil. “When trouble strikes, policymakers like to fall back on old playbooks, like banning short selling of shares,” he said.

“We see this kind of action occasionally when markets spasm and the recent rout fits the bill. US regulators banned short selling of bank stocks during the great financial crisis of 2008-09, while similar steps were taken during the height of the 2010-11 European sovereign debt crisis. As I outlined … short selling is not the problem. The policy response is pointless but the Mib is up 5% this morning, leading European markets higher.”