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CMVM admits banning speculation on falling shares

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The Portuguese stock market regulator CMVM has admitted that it will put a stop to short selling on the Lisbon stock market as shares take a tumble because of the coronavirus pandemic.

There are four companies listed on the Lisbon Stock Exchange (PSI-20) which could be targeted for short positions, known as ‘short selling or shorting’ whereby investors benefit from devaluations. The CMVM has admitted that within the context of the pandemic, it will use its power to stop such speculation, but only if it recognises that write-downs are picking up because of this practice.
They are: – Altri (0.5% capital), BCP (0.68%), CTT (3.11%) and NOS (1.32%).
Indeed, speculation on the devaluation of shares listed on the stock market could be temporarily prohibited on the Lisbon Stock Market by the capital markets regulator if it sees evidence that share falls are being provoked by speculators who bet on this type of investment.
In a number of decisions and recommendations issued on Friday, which include companies being forced to inform about the effects of Covid-19 on their business and which places limitations on the actions of shareholder boards-, the CMVM advises that it will “constantly monitor the behaviour of investors with short positions in national issuers”.
The short positions are positions that some professional investors take in listed companies and benefit when there is a devaluation — unlike traditional long-term positions were gains are made on the increase in the value of shares.
This monitoring by the CMVM regulator headed by Gabriela Figueiredo Dias works by “evaluating on a permanent basis the possibility of introducing temporary prohibitions of forming or strengthening short positions on shares transacted in the national market.”
Up until now, within the context of the pandemic. The CMVM has not implemented temporary prohibitions unlike other European regulators such as the Spanish which has prohibited ‘shorting’ for a month, until 17 April.
The PSI-20 has seen sharp falls on the stock market since 1993 but these were not exacerbated by the practice of short selling.


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