Germany seeks to extend ban on naked short-selling [View All]

Source: guardian.co.uk

Germany wants to introduce a ban on "naked" short selling of shares and derivatives that could include all company stocks, as part of a clampdown on speculators.

A draft finance ministry document says measures aimed at stabilising financial markets would include a "ban on naked short selling of shares, including derivatives referring thereto," Reuters reported today. The document does not state whether the proposal is aimed at all shares, or specific companies.

The controversial ban would cover euro currency derivatives not used for hedging. Naked short-selling is the practice of selling shares without owning them, borrowing them, or ensuring that they can be borrowed in the future.

A week ago Germany unilaterally banned the naked short-selling of eurozone government bonds, their credit default swaps (CDS) and the shares of the country's 10 biggest financial institutions. The country's sudden crackdown on speculators triggered fresh turmoil in financial markets, leading to a sell-off in shares and wild swings in the euro. The ban on naked short-selling – widely blamed in the country for the deepening eurozone debt crisis – was intended to shore up the embattled single currency, but backfired and caused the euro to slide to a four-year low against the dollar.

Read more: http://www.guardian.co.uk/business/2010/may/25/germany-extend-naked-short-selling-ban