Drawing the boundaries of ‘Naked’ short-selling by market-makers: the regulatory challenges of high-frequency trading

Vincenzo Bavoso and Michael Galanis

Capital Markets Law Journal, 2025, vol. 20, issue 3, 7

Abstract: The recent fine issued by the Italian securities regulator, CONSOB, against two Dutch hedge funds that had profited by shorting Saipem’s shares, provides an opportunity to reflect critically on two inter-related legal and regulatory questions. First, this case reveals an important and open problem in relation to the regulatory treatment and space of naked short-selling. Second, this article further delves into the potential application of the market-making exemption invoked by the Dutch hedge funds that critically operated as high-frequency traders. The function of market-making, particularly in the context of automated algorithmic trading, leads to further questioning the meaning and scope of this exemption.

Date: 2025
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