Various European countries have forbidden short-selling of stocks so as to balance the instability at the index. The step taken by the European countries is expected to influence the practice of short-selling of stocks in the market of the US.

The four European countries who have implemented ban on such practice are France, Belgium, Italy and Spain effective. Also, the countries like Greece and Turkey have imposed a ban on short-selling of stocks.

As per the European Securities and Markets Authority, “They have done so either to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field, given the close interlinkage between some E. U. markets”.

Short-selling of stocks meant taking stocks on loan from its actual owners, the traders sold those borrowed shares when the prices were high and then repurchase those shares when their rates fell at the index. The difference in the price of selling and buying is the profit earned by a trader.

The move had improved figures of the stock at the index and has helped the European banks to overcome some of its losses. In France, the country’s market regulator’s banned short-selling or increasing short-selling positions, which was implied for 15 days on 11 financial institutions. Similar steps were taken Italy and Spain they imposed a 15-day ban so as to recover the financial shares, whereas Belgium imposed the rule for a longer period.