Originally published in Practical Law Multi-Jurisdictional Guide 2012/13: Capital Markets.

The 2008 financial crisis led securities’ regulators around the globe to limit or prohibit short selling, believing that it could lead to a collapse in securities’ prices. However, although such measures were introduced almost simultaneously at national level (for a limited period of time), they lacked homogeneity as they had not been previously agreed upon at international level, with the consequence that their application created serious issues in the global financial markets.

In Europe, the patchwork adoption by national regulatory authorities (NRAs) of measures restricting or prohibiting short selling, in the absence of EU law harmonised rules, further destabilised the markets.