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19 May 2010

BaFin prohibits uncovered short-selling transactions and uncovered CDS in government bonds of euro zone


French finance Minister Christine Lagarde, ruled out a similar move by France and called for an urgent meeting of European securities regulators to discuss the implications of Germany’s unilateral ban.

The Federal Financial Supervisory Authority (BaFin) temporarily prohibited uncovered short sales of debt securities of euro zone countries admitted on a domestic exchange to trading on the regulated market. It also temporarily prohibited credit default swaps (CDS) in which the reference liability is at least also a liability of a euro zone country and is not used to hedge default risks (uncovered CDS).
The Financial Times reports that the French government led European reaction against the German government’s move to ban the naked short selling of eurozone sovereign debt instruments.
Christine Lagarde, French finance minister, ruled out a similar move by France and called for an urgent meeting of European securities regulators to discuss the implications of Germany’s unilateral ban.
Sweden and Holland also dismissed the move by Germany as European equity markets tumbled and the euro hit a fresh four-year low against the dollar following the German announcement. The yields on US treasuries approached the lowest levels of the year as investors shunned risky assets.
 
 


© BaFin

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