Greek bourse lifts short-selling ban

Greece lifted a ban on short-selling shares on Wednesday, returning the market to normal after the havoc of the debt crisis, a move expected to bring back short-term traders and boost thin trading volumes.
Greek stocks greeted the move with gains of almost 1% on light volume of 75 mln euros, but brokers hope turnover will pick up in due course. Greece's securities watchdog banned short-selling in shares on April 28 after investors, fearing a national debt default, dumped assets including stocks.
Regulators feared short-selling tactics were exacerbating the downswing, but after an IMF/EU bailout in May, market conditions improved and volatility eased.
"One impact we can expect is a rise in trading activity, which is good for the market. Lifting the ban gives traders more flexibility," said Aris Xenofos, head of EFG Eurobank's Mutual Fund Management arm.
The average daily trading volume on the Athens stock exchange has fallen to 158 mln euros in the January to August period, compared with 202 mln in 2009.
Despite the stock market's 29% fall so far this year, foreign holdings have not markedly retreated. But trading activity has declined, and the return of short-term players could help it recover.
"What really dropped was trading velocity. With the ban removed, one can expect the return of short-term trading, which will mean a higher velocity and hence stronger volumes," said Socrates Lazaridis, vice-chairman of Hellenic Exchanges, the operator of Greece's stock and futures markets.
On the day before the restriction was imposed in April, Greek stocks fell 6%, with banks plunging 9%. After the market closed that day, Standard & Poor's cut Greece's credit rating to speculative grade.
It was the second time during the global economic crisis the securities watchdog moved to ban short sales on the Athens exchange. The first was in October 2008, with the restriction eventually lifted in June 2009.
Though the short-selling ban has been lifted, naked or uncovered short-selling — selling a security without first borrowing it or ensuring that it can be borrowed — remains off limits. Short-selling on the Athens bourse must still meet an uptick rule and be flagged.
Greek institutional investors, mutual funds and closed-end funds are not allowed to short stocks but can take a bearish view via stock index futures traded on the derivatives exchange.
"It will be interesting to see whether our expectation of a rise in trading activity is confirmed," Lazaridis said.
Foreign portfolios hold 48.5% of the Greek market's free-float and account for about 45% of turnover, based on the latest statistics.