Italy Regulator Introduces Short Selling Disclosure

Monday, 11 Jul 2011 12:00 AM

 

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Italian market regulator Consob on Sunday approved new disclosure requirements on short positions in an effort to curb stock volatility after a selloff hit domestic bank shares and government bonds on Friday.

Markets are worried the euro zone debt crisis could reach Italy. High public debt and anemic growth, coupled with domestic political tensions, make the country vulnerable to speculative trades.

Starting on Monday, investors will have to inform Consob of net short positions on Italian stocks when they represent 0.2 percent or more of the company's share capital, the regulator said in a statement on its website.

After that, investors will have to notify every variation equal to at least 0.1 percent of the capital.

"The measure strengthens Consob's powers of supervision in the current market phase, marked by highly volatile share price movements," Consob said, adding similar measures existed in other European countries such as Germany.

The provision will be in place until Sept. 9.

A source close to the matter had said earlier on Sunday the regulator would meet to discuss the current "exceptional" market situation and consider making short-selling more transparent.

On Friday, Consob said it was closely monitoring the situation with particular attention to the price fall of stocks such as Italian bank UniCredit and insurer Fondiaria-SAI.

The cost of Italian government debt soared on Friday and financial stocks fell due to worries a higher cost of funding for Italian banks would dent their profits.

Shares in UniCredit, Italy's biggest bank by assets, lost 20 percent last week with a 7.9 percent drop on Friday alone.

Fondiaria-SAI, which is carrying out a capital increase, fell 7 percent.

European Union lawmakers are trying to find an accord to introduce curbs on short-sellers, who typically borrow securities and sell them on, expecting to buy them back later at a lower price to repay the lender and pocket the difference.

The hope is to reach a deal over the summer for a vote in the early autumn.

© 2014 Thomson/Reuters. All rights reserved.

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