French, Italian and Spanish financial regulators extended the temporary bans on short selling that were initiated earlier this month.  In Spain and Italy, the bans run through 9/30, while the ban in France could last into November.  All prefaced these remarks on the condition that they might lift the ban when the market stabilizes - which presumably means before the current periods run their course.

The initial bans - introduced on 8/12 by France, Spain and Italy - lasted 15 days. They were imposed after shares of Societe Generale and other lenders hit 3-year lows.  A similar rule introduced the same day in Belgium is indefinite.  In Greece, the first country to institute a ban, the regulator said it would reassess its ban on short selling, which is scheduled to expire 10/7.

Yet, in spite of the bans, European bank stocks have fallen another 8%. 

Critics still want regulators to clarify the scope of the rules - particularly since another 30 days, at least, have been tacked on.  “The details are still too vague and there is still far too much confusion on what these bans actually cover.”  Richard Portes, professor of economics at London Business School, had this to say:

“Short selling equities is not a significant danger to financial stability, so these bans are irrelevant.  The serious problem is speculation against financial institutions and sovereigns using naked credit default swaps. They should be banned.”

German Share Drop.   Just today, German stocks and index futures tumbled as traders were whipsawed by speculation that regulators were poised to impose restrictions on the equity market, and amid concern the nation’s finances are deteriorating. That market recovered most of the drop but still closed down.

U.K.'s Financial Services Authority reiterated today that it has no plans to introduce any restrictions on short selling beyond current disclosure rules.   [Bloomberg, 8/25/11]