The coronavirus has led the Spanish Stock Market to suffer the biggest debacle in its history last Thursday after closing the session with a -14.06% drop: almost all the values registered falls higher than -10% and the measures announced by the European Central Bank (ECB) they did not help stop the bleeding.
After this black Thursday, the National Commission of the Stock Market (CNMV) sent a statement late at night in which announced that it prohibited short positions in 69 companies in the market. With this measure, the regulator wanted to curb the panic in the market that dominated the whole day and avoid betting against these companies, which include Telefonica, Santander and Iberdrola, to name a few. Already on Friday, the Ibex rebounded and closed with an improvement of 3.7% up to 6,629.60 points.
However, this it is not the only resource that the CNMV can use to manage the Covid-19 crisis. As explained by the legal sources consulted by Vozpopuli, Article 21 of Royal Decree-Law 21/2017, of December 29, on urgent measures for the adaptation of Spanish law to the European Union regulations on the securities market, allows the body that presides Sebastian Albella suspend negotiation in the event of special events “That may disturb the normal development of operations on that financial instrument or that advise such measure for the sake of investor protection.”
Specifically, the law states that “may agree to suspend trading of the financial instruments admitted to trading in regulated markets subject to its supervision when special circumstances occur ”. According to the same sources, the coronavirus crisis and the subsequent declaration of the alarm state are sufficient circumstances to resort to this article if the CNMV considers it appropriate. During the last week, Wall Street has had to suspend the listing twice for 15 minutes to contain the financial bleeding.
Suspension lights and shadows
However, a possible suspension of the listing opens a new scenario that can generate new damages. On the one hand, it would serve to stop the depreciation of companies on the stock market and avoid a massive flight of funds, but at the same time investors who require it would be deprived of liquidity and that they may even be willing to ‘undersell’ if they need to.
Further, would also prevent buying to those who consider that the fall in the market is a good opportunity to find ‘bargains’ that they believe will revalue in the future. The final decision, in any case, rests with the CNMV, which for days has been monitoring the evolution of the health crisis and its impact on the market for the minute.