The UK Financial Conduct Authority said Monday it is working with international counterparts in the US, EU and elsewhere to ensure financial markets remain open amid the ongoing uncertainty caused by Covid-19.
“While there has been significant volatility in market prices over the past weeks as a result of the impacts of coronavirus and this may continue for a period, markets have continued to operate in an orderly fashion in the UK,” the watchdog said.
The FCA noted it has followed European countries in banning short-selling in companies that trade under European National Competent Authorities.
The regulator has not introduced a market ban on short-selling, citing that most European countries have done the same, as has the US or any other major financial market.
The FCA said: “The FCA continues closely to monitor market activity, including short selling activity. Aggregate net short-selling activity reported to FCA is low as a percentage of total market activity and has decreased in recent days. It will continue to fluctuate, but there is no evidence that short selling has been the driver of recent market falls.”
Many investment and risk management strategies rely on the ability to take “long” and “short” positions, the FCA said. These benefit a wide range of ordinary investors including the pension funds for employees of companies and local government.
“We also note that short selling is a critical underpinning of liquidity provision. The loss of these benefits would need to be carefully balanced before determining that any intervention to prevent short selling was appropriate,” the FCA added.