Tuesday, May 18, 2010

Germany Attacks "Speculators" aka Naked Shorts of All Stripes

This all sounds so familiar.... change the country, change the instrument, all the world wishes reality would not be what it is.Decades of overspending & over leverage are coming to 1 shore after another. While I don't see much use for naked CDS myself (other than as pure speculation) vs a very legit use of CDS against long positions one might own, the time to 'regulate' them was a long while ago - not in the middle of crisis. As for naked short selling of stocks; that should have been fixed ages ago - but I guess the investment banks and their clients (hedgies) were too busy making money on it for years. [Sep 15, 2008: SEC Finally Gets Around to Addressing Naked Short Selling?] I am surprised the Europeans had not followed the U.S. lead when it finally got around to 'fixing' it a year and a half ago domestically. Of course our financial oligarchs said it would be too hard to fix naked short selling on stocks for years on end - until they themselves were attacked by naked short selling ... another lie by our "financial innovators"... anything that makes a buck is "good" in Cramerica after all [Apr 7, 2009: WSJ - Short Sellers Squeezed All Around]


Tonight at midnight, Germany attacks ...
  • The German government plans to ban naked short-selling from midnight at the country's 10 most important financial institutions, a spokesman for the Finance Ministry said on Tuesday.
  • The spokesman said the ban on naked short-selling will also apply to credit default swaps (CDS) on euro government bonds as well as euro government bonds.


I am boggled why the ban is only against the 10 most important financial institution - naked shorting should be gone period.
  • In a proper short sale, the investor is supposed to borrow the stock, sell it and then repay the borrowed stock that's bought (hopefully) cheaper. When it's naked, the short-seller never borrows the stock in the first place, and so it is never delivered.

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