Wednesday, May 19, 2010

Germany Says "Nein" To Naked Shorts!

Yup - the Germans are taking on the banksters in a big way.
BaFin banned naked short sales and unsecured CDS on government bonds in the euro zone

The Federal Financial Supervisory Authority (BaFin) on Tuesday naked short sales of debt securities by euro zone countries, which are admitted to trading on a domestic exchange in the regulated market, temporarily prohibited. it has also temporarily banned so-called credit default swaps (CDS), where the reference obligation is a liability, at least one country of the euro area and they do not serve to hedge risks (unsecured CDS).

Bloomberg reported the story too and explained:
Short-selling is when investors borrow shares they don’t own and sell them in the hope their prices will go down. If they do, the investors buy back the shares at the lower price, return them to their owner and pocket the difference.

The market response to this should be very interesting indeed!