Asset Servicing Times | European exchanges pledge to stay open

It is “crucial” for markets to remain open and weather the economic storm brought on by the rapid spread of the novel coronavirus around the world, according to the Federation of European Securities Exchanges (FESE).

The FESE has confirmed that its membership, which constitutes 36 exchanges across Europe, will remain open.

Despite extreme volatility triggered by the coronavirus pandemic and multiple EU market regulators banning short selling to shield some of Europe’s biggest companies, the FESE says that the closure of markets during the current crisis could hit contracts and generate an “unpredictable number of defaults”.

Regulated stock markets play a key role in social and economic functions, these functions have been put to the test in the past, for example during the financial crisis – when other sources of liquidity dried – despite this the exchange markets remained operational, the FESE adds.

Moreover, the association warns that closing markets would remove transparency of investor sentiment and reduce investors’ access to their money; all of which would compound current market anxiety and result in a negative decline in investor outcomes.’

“During a time of heightened volatility and anxiety, it would not be wise to change operations in such a way,” says FESE’s director general Rainer Riess. “This is a topic that requires careful consideration and given various consultations ongoing it would be premature to speculate about any changes.”

Elsewhere, Deutsche Boerse has separately reassured investors that it has initiated “comprehensive measures” to protect its staff and contribute to overall market stability.

“We are confident that our business continuity measures will allow us to maintain our services at an acceptable level. We have no plans of market closure. Quite the opposite: We will work hard to keep our exchanges open even if the circumstances will worsen further,” the exchange adds.

While exchanges have vowed to stay open, regulators in France, Italy, Belgium and Spain introduced temporary measures to halt short selling on falling shares at scores of companies from the world’s largest brewer Anheuser-Busch InBev, to Spanish bank Santander and Air France-KLM.

Elsewhere the Philippines Stock Exchange is the first to close its financial markets in response to the widening coronavirus pandemic. With 30 percent of Phillippine equities dropping, the exchange says it has taken necessary action amid fear of global recession.

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