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COVID-19 Implications on Short-Selling Restrictions

Since March, financial market participants have witnessed a storm of extreme volatility that has forced regulatory bodies to bring significant changes to the short-selling rules across global equity markets. While a majority of the jurisdictions in the European Union have decided to reduce the threshold from 0.2% to 0.1%, jurisdictions hit hard with the current pandemic like France, Belgium, Italy, Spain and Austria have decided to ban short selling for a brief period of one month. In Asia and the Middle East, jurisdictions like South Korea and the UAE have also decided to ban short selling in an effort to combat the virus’ negative impact. Jurisdictions across other continents in less threatening situations have explicitly highlighted that they are keeping a close watch on the current status of the pandemic and would not shy away from taking requisite actions in order to maintain sanity in the financial system.

S.No Jurisdiction Regulatory Changes
1 Austria On March 18th, short selling was banned for a period of one month.
2 Belgium On March 17th, shorting of index-related instruments was banned for a period of one month only if the shares represent more than 20% of the index weight on Euronext Brussels.
3 France On March 18th, the regulatory body banned the short selling of shares for a period of one month. The ban applies to transactions executed on a trading venue or over the counter. The measure applies to any natural or legal person domiciled or established within the European Union or in a third country.
4 Spain On March 18th, short selling was banned for a period of one month.
5 Bulgaria
6 Croatia
7 Cyprus
8 Czech Republic
9 Denmark
10 Estonia
11 Finland
12 Germany
13 Greece
14 Hungary
15 Iceland
16 Ireland
17 Italy For the next three months, the threshold for a net short position is decreased from 0.2% to 0.1%.
18 Latvia
19 Lithuania
20 Luxembourg
21 Malta
22 Netherlands
23 Norway
24 Poland
25 Portugal
26 Slovakia
27 Sweden
28 South Korea Ban on shares listed on KOSPI, KOSDAQ and KONEX for six months.
29 UAE Short selling restricted in UAE financial markets.
30 UK No ban on short selling for now, but the FCA is monitoring short- selling activity closely.
31 India Instead of restricting short selling, SEBI has increased the margin of stocks, and derivative market position limits are restricted to 50%. If it reaches 50%, then a new position can’t be created.

IVP’s regulatory reporting platform, IVP REGULATORY REPORTING (RAPTOR), assists buy-side managers across the globe in servicing regulatory mandates in over 50 jurisdictions. The solution’s transaction filings module comes equipped with a configurable rules set-up toolkit to help buy-side managers swiftly incorporate and monitor regulatory changes. IVP also offers a premium white glove managed services model that removes the burden away from clients of monitoring exceptions and helps streamline the process of filing transaction-driven mandates, both on short selling and substantial shareholding, across the globe.

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