Short-selling ban: different rules applied by market surveillance authorities

During periods of market turbulence, short-selling of shares has time and again come into focus for the public and gained the attention of market surveillance authorities – after the financial and banking crisis of 2007 to 2009, and most recently in March 2020.

What is short-selling of shares?

Optimistic investors aim to capitalise on price rises, but a short seller bets on the fact that the share price will fall. The idea is to sell borrowed shares (covered short sale) in the hope of buying them back at a lower price after a certain amount of time and thus profiting from falling prices.

Global divergency in short-selling regulations

By banning short selling during market turbulence, market surveillance authorities aim to stabilise share prices, slow down a crash and increase market confidence. But what is the global view?

France, Austria, Italy, Spain, Belgium and Greece (from mid-March to 18 May 2020), as well as China and India, all decided to ban short selling, and thus betting on falling prices; other countries have warned that such bans increase market distortion. The US, UK, Germany and Switzerland have repeatedly emphasised that in a time of crisis, a lack of transparency in stock exchanges and direct intervention in the markets does not achieve the desired result.

The main argument for lifting the short-selling ban after just two months in the European countries concerned was the underlying market data, which shows that overall price performance is no better than that in comparable jurisdictions not subject to restrictions.

Regulation in Switzerland

In Switzerland, a ban on the short selling of financial stocks was introduced in 2008 and lifted again in 2009. The SIX Swiss Exchange generally permits covered short selling (supported by securities lending), but may issue additional rules in specific situations. There is currently no obligation to report short selling in Switzerland. As a result, there tends to be less evidence of potential abuse or market manipulation subsequently investigated by the Swiss Financial Market Supervisory Authority (FINMA). (Short) selling constitutes market abuse if it is done with the intention of manipulating the market.


Despite differing rules and restrictions on betting by means of short selling, there are legitimate reasons to allow short selling – particularly in terms of maintaining market liquidity.