Short selling Romanian stocks and other instruments traded on the Bucharest Stock Exchange will be available starting August 2. This operation will also give investors the opportunity to profit from declines in local share prices and to better protect the value of their portfolios, and should also lead to higher trading volumes on the local market.

The Bucharest Stock Exchange (BVB) and Central Depository (CSD) have made it possible for investors to make operations of lending and borrowing, short selling and buying on margin in a new and flexible regulatory framework starting August 2, the two institutions announced on Friday, July 29.

BVB and CSD have fulfilled all the necessary steps to change own rules and both Financial Supervisory Authority (FSA) and the National Bank of Romania (NBR) approved the new rules. Local banks and brokerage firms active on the stock market will provide these operations to their clients at their discretion, BVB announced.

“Short selling is an indispensable element of a developed capital market. It creates new possibilities for the investors, protecting the value of the investments and giving a chance for gains resulting from intensive speculative trading. Lending of financial instruments puts them at work generating new revenues for the lenders and ensuring the safety of the short selling for the market,” said Ludwik Sobolewski, CEO Bucharest Stock Exchange.

“The end of the regulatory process marks a significant milestone in the modernization of the Romanian capital market and opens the way for market participants to use those well awaited possibilities,” he added.

The most important changes of the Bucharest Stock Exchange Rulebook include: possibility to carry out short selling operations for the financial instruments admitted to trading at Bucharest Stock Exchange, regardless of their type and features; possibility to enter short sell orders without any restrictions related to price, minimum volume or order type; and removing the obligation to specifically mark the short selling orders.

“This new accomplishment‎ enhances the quality of the infrastructure of the capital market, making it more competitive versus other markets in Eastern Europe and drawing attention of the international players,” said Lucian Anghel, President of the Bucharest Stock Exchange board.

Short selling allows investors to sell shares they do not own when they expect the share price to go down. The investors first borrows the shares through a margin account, sells the shares, and then waits to repurchase them at a lower price in order to give them back.

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editor@romania-insider.com