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Short-selling banned in 4 European countries

Short-selling of certain stocks is now forbidden in France, Italy, Spain, and Belgium. The ban on short-selling comes as concerns about Europe's debt worsen.

By Angela Charlton, Greg KellerAssociated Press / August 12, 2011

A broker speaks on the phone in a trading room in Paris, Wednesday, Aug. 10, 2011. Short-selling certain stocks in France and three other European countries is now prohibited.

Jacques Brinon / AP

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PARIS

France, Italy, Spain and Belgium are banning short-selling on select stocks amid efforts to calm market turmoil that has sent bank shares gyrating wildly and aggravated worries about Europe's huge debts.

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The European Union's markets supervisor, the ESMA, announced the move late Thursday night after boosting surveillance of stormy markets earlier in the day. The move capped two days of whipsaw trading that saw French banks' market value fall and rise by billions of euros.

In a short sale, a trader hopes to make a profit by betting on the decline in the price of a share. The practice has been blamed for contributing to market volatility.

The ESMA said in a statement that the four countries "have today announced or will shortly announce new bans on short-selling or on short positions" as of Friday.

The French market regulator, the AMF, announced late Thursday that it is banning for 15 days net short-selling on 11 stocks, including those of banks Societe Generale, BNP Paribas and Credit Agricole and leading insurers.

Belgium's market authority said it would ban short-selling on financial shares such as leading banks and insurers as of Friday. Belgium had already banned naked short selling, basically a bet on a decline in the price of a share without borrowing the share, since August 2008.

Several countries banned short selling amid the financial crisis of 2008 to try to tame volatility. But some experts said the bans actually contributed to a feeling of uncertainty.

French bankers and officials scrambled to soothe investors' nerves after days of suggestions that France could be the next major economy to lose its coveted triple-A credit rating. By late in the day, those efforts appeared to have an effect, but economists said the rebound remained very fragile.

The European Union's markets supervisor said Thursday that regulators were increasing surveillance of financial markets following the days of steep selloffs.

Bank of France head Christian Noyer blamed "unfounded rumors" for plunges in the shares of top banks, including Societe Generale and BNP Paribas, and said the country's financial institutions were sound. The country's market regulator warned of sanctions against anyone who fuels or profits from rumors that fed the sell-off.

Noyer said that French banks' first-half earnings "confirmed their solidity in a difficult economic environment" and that the banks' capital cushions were healthy.

French bank stocks fell Thursday until strong U.S. jobs data helped propel solid gains on Wall Street late in the European trading day. BNP Paribas closed up 0.3 percent and Societe Generale rose 3.7 percent.