Regarding short sell bans

🤝 Help
1

Hello, how does this affect trading212? Let’s say the us bans short selling, will I still be able to sell on CFD account here, or at least close my positions? Ty

2

@negullah Short sale bans won’t affect CFDs. You’ll have no trouble shorting or closing existing positions.

3

Thank you, I was suspecting that, nice to know it for certain though. Have a nice one!

4

I just thought of another thing. Considering markets might close in the US, how does that affect our ability to close position in CFDs? Lets consider both situations: 20% circuit breaker and general market close due to technicals irrespective of circuit breaker. Ty

5

@David Apparently shorting CFDs are now banned? How do they suddenly affect CFDs now?

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6

In this case we made a wrong assumption initially, for which we apologise.

Trading 212’s revenue comes from clients’ trading so we want to offer as many products both long and short as we can. Some markets introduced short selling bans in 2008 with mixed results. From memory the 2008 bans did not directly affect derivatives, but they did affect the stock lending market which made hedging short positions difficult. Trading 212 has arrangements in place that we felt could have enabled us to continue offering short CFDs in the face of similar restrictions. When David replied on 13th March, indications were this would be the case.
On 18th March, the FCA included statements from the Home state regulators. It was explicit that it applies to ‘all related instruments’, which include CFDs.

While we do not believe short selling bans are the right tool to stablise markets, we want to operate in a credible regulatory environment. That benefits of proper regulation go hand in hand with more onerous obligations. I don’t think there is any doubt that FCA regulation is a benefit for our clients (not to mention a pre-requisite of operating), so unfortunately the ban is something up with which we have to put.

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7

Hi @anon86329651,

Thanks for your answer.

What would happend with an openend position when a ban occurs?

Regards

8

In general terms, open positions are not affected. There can be situations where they have to be closed, but this is normally when the stock lending market calls the stock in, so a position can no longer be hedged. We don’t anticipate this being an issue, but if it was we would give you as much notice as possible.

The short selling ban is designed to stop new sales driving the market down irrationally, so logic dictates open positions should not be banned. Most regulators are mostly logical…

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9

Thanks a lot for your quick response!