LSE chief attacks short-selling ban as 'misguided' and 'counterproductive'
Monday 31 May 2010
The chief executive of the London Stock Exchange has launched a stinging attack on the German government's unilateral decision to ban so-called "naked" short-selling in some financial stocks and bonds.
In an interview with an Italian newspaper, Xavier Rolet described the ban as a "mistaken decision that risks having an effect which is the opposite of what is desired". He continued: "I would, in fact, suggest to eliminate the ban. And then to construct market infrastructure that helps investors. Markets are global: you can't think of acting unilaterally because it would be counterproductive."
A spokesman for the exchange later confirmed that the comments – in business daily Il Sole 24 Ore – tied in with the LSE's view that short-selling is a legitimate market practice that helps with the formation of prices and the provision of crucial liquidity to markets. The LSE has undertaken research which found that a temporary ban on short-selling bank stocks in Britain – imposed by the Financial Services Authority at the height of the financial crisis – served to squeeze liquidity in banking shares.
Liquidity is the degree of trading activity in a stock or market, and is crucial to investors – only with sufficient trading liquidity can they be sure that they can buy into or sell out of a particular stock when they need to.
Short-selling involves betting on price falls in, for example, share prices by borrowing shares in a company and selling them in the hope of buying them back at a cheaper price. Naked short-selling is controversial because the "sell" orders are placed by traders before they have even ascertained whether they can first borrow the shares. Critics say it is used by speculators as a means of driving down prices as part of an "attack" on vulnerable companies or bonds.
Germany's ban sparked a panic on the financial markets because it took investors by surprise and fuelled fears about what might be behind it. It also caused consternation among some of the country's trading partners, including the US.
Mr Rolet was hired by the LSE, which owns Italy's main stock exchange, the Milan Bourse, to lead a turnaround of the business. He notched a notable success recently when Project Turquoise – the pan-European share-trading platform it controls – overtook rivals' trading volumes after they suffered problems with the "leakage" of confidential data.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...