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German short selling ban will be permanent.

A new fast-track law in Germany to introduce broad restrictions on naked short selling will be permanent. This was highlighted by the head of the German financial regulator BaFin, Jochen Sanio, during a press meeting when asked about the recently introduced temporary short selling ban.

Germany shocked markets on May 18 by making the plan for a ban of naked short selling a reality. A selective ban on uncovered shorting for 10 financial stocks, European bonds and credit default swaps (CDS) was implemented for the duration of one year with a special directive. To be permanent and extended, the German government is now working on a respective law restricting uncovered shorts for all stocks traded on German exchanges and also on currency derivatives used to short the euro, if they are not used to hedge real transactions.

As it materialized earlier this week, the new bill is called "law for the strengthening of financial market stability", and will also contain a regulation to disclose large short positions. If a net short position exceeds 0.2 percent of the total number of shares of a company, the financial regulator BaFin has to be noticed. If the position exceeds 0.5 percent, it even has to be announced publicly.

The ban of uncovered short-selling will include all German stocks traded on regulated exchanges, all European government debt securities and any default insurance derivatives (CDS) on those bonds.

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Publication:International Business Times - US ed.
Article Type:Brief article
Geographic Code:4EUGE
Date:May 28, 2010
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