Solution : Hot news from Italy Italy Bans Short Selling Of Stocks After Wall Street Crisis
MILAN (AFP)--Italian securities market regulator Consob said Monday it was suspending until the end of October the short selling of shares in banks and insurance companies.
Following in the footsteps of the U.K., the U.S. and several other countries, Consob said in a statement that "the measure is aimed at guaranteeing transparency."
Short-selling, used in particular by speculative hedge funds, is when investors borrow stock and sell it anticipating a fall in its price, then repurchase and return it later. If the share price has indeed fallen, the investor earns a profit.
The practice allows investors to earn profits from falling stock prices, but some have argued it also has contributed to the severity of the downturn in markets.
"It is necessary to avoid the situation where financial markets are focused on speculative maneuvers that could have the effect of an abnormal reduction in the share prices of banks and insurance companies," said Consob.