Germany bans naked short-selling, swaps speculation
China Daily, 19 May 2010
Germany prohibited naked short-selling and speculating on European government bonds with credit-default swaps in an effort to calm the region’s financial markets, sparking investor anxiety about increasing regulation.
The ban, which took effect at the midnight of May 18 and lasts until March 31, 2011, also applies to the shares of 10 banks and insurers, German financial regulator BaFin said in an e-mailed statement. The step was needed because of “exceptional volatility” in euro-area bonds, BaFin said.
Chancellor Angela Merkel’s coalition is seeking to build momentum on financial-market regulation, with lower-house lawmakers due to begin debating a bill today authorizing Germany’s contribution to a $1 trillion bailout to backstop the euro. US stocks fell, Treasuries soared and the euro extended its decline as the announcement, made after European markets closed, caught traders by surprise.
“It represents an escalation of regulatory risk for the investing community,” said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc in Cincinnati. “The German action suggests that the drama in Europe continues to unfold and escalate.”
