Reaffirmation of Short Selling Ban in Ireland

The Irish regulator has reminded stock brokers in the country and overseas that the shorting ban on Irish bank stocks hasn’t been lifted, as a response to the heavy turbulence in financial stocks being experienced recently.

The regulator in Ireland has issued a note stressing to stock brokers to keep alert in respect of the continuing short-selling ban; which ban doesn’t allow speculators to make profits from Irish banking securities that are falling in value.

The regulator only added that the reminder was ‘a precautionary measure’. It seems that the notice was targeted especially for brokers and their compliance departments in the United Kingdom to remind them that the ban on shorting of Irish bank stocks is still in place. The notice was issued after some industry participants started querying about whether the ban is still applicable.

The shorting ban in Ireland was originally issued in September 2008 to protect banking institutions following a period of heavy volatility in the financial markets as the banking system was stressed to the limit at the height of the economic crisis. The ban has remained in place ever since, even after the UK regulator (Financial Services Authority) lifted a similar ban at the start of the year (2009).

‘The Irish Financial Regulator is concerned that all stock brokers, including those based outside of Ireland, maintain a sustained awareness of the continuing requirement to refuse to execute financial transactions with persons aiming to short-sell Irish bank shares, or to acquire short positions through instruments such as CFDs [contracts for difference] and spread bets,’ the notice said.

It appears that this is a precautionary measure and it is not believed that any significant breaches of the shorting ban have been uncovered, nor does the authority believe that the recent weakness in banking stocks have been driven by short selling.

Irish banking securities have been falling recently amid investor worries that the banks may need more capital; Bank of Ireland’s stock price has fallen by some 40 per cent since the middle of last month, while Allied Irish Banks is down about 45 per cent since the end of September. Bank stocks have also been suffering on fears that the European Union may impose stricter restructuring terms for banks receiving state assistance after the European Commission required the break-up of Dutch bank ING as a condition of its bailout.

Tags: CFDs, contracts for difference, short selling, shorting, shorting ban, spread betting

This entry was posted on Tuesday, November 10th, 2009 at 11:27 pm and is filed under Industry News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.