FIA and its affiliated organizations, FIA PTG and FIA EPTA, today issued the following statement in response to calls for short selling bans by global policymakers. FIA President and CEO Walt Lukken stated:
“Contrary to intentions, prohibitions on short-selling have been shown to significantly degrade market liquidity and price formation of those affected products while increasing trading costs and volatility. These bans have shown to be ineffective, and have significantly harmed market quality while causing unintended consequences on related markets. FIA joins other trade associations in opposition to calls for short selling bans being considered by government authorities.”
Lukken noted that several academic studies regarding short selling bans have shown that past prohibitions have lessened market quality without evidence that the bans relieved downward pricing pressure of these instruments. See SEC Office of Economic Analysis (2008); European Systemic Risk Board Working Paper (2016); Federal Reserve Bank of New York (2012); and The Journal of Finance (2012).
FIA, the global leading trade organization for the futures, options and centrally cleared derivatives markets, believes in the importance of keeping markets open during the COVID-19 outbreak to ensure markets can continue to raise capital, manage risk and discover prices. FIA has created a dedicated COVID-19 webpage for members and the public to access the latest government and market information regarding the outbreak’s effect on this industry.
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