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Europe, Futures Plunging On Rumor Of Pan-European Naked Short-Selling Ban

Tyler Durden's picture




 

The latest market rumor is that Europe is on the verge of instituting a pan-continental naked short-selling ban, primarily focusing on killing CDS trading which Germany has had success in bringing other countries over to her perspective. Incidentally yesterday Greek CDS ended the day 40 bps higher, once again proving that market regulation left in the hands of politicians will always backfire. Also in the rumor column: France to institute 3 year public sector wage freeze. We know what a "storming" of any particular building in Paris tends to result in. Conviction pair trade of the day: long guillotine manufacturers, short Goldman "conviction buys" (the latter is a given natural short hedge to any long trade).

 

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Thu, 05/20/2010 - 07:45 | 362552 Debtless
Debtless's picture

one shouldn't be able to sell what one does not have. simple really.

Thu, 05/20/2010 - 07:50 | 362563 Optimystic
Optimystic's picture

Agreed.  All NSS should be banned.

Thu, 05/20/2010 - 07:57 | 362577 harveywalbinger
harveywalbinger's picture

Naked shorting is counterfeiting.  Period.

http://www.deepcapturethemovie.com/

Thu, 05/20/2010 - 09:20 | 362790 Dread Pirate Roberts
Dread Pirate Roberts's picture

It's gambling.  If you own something you don't want, you can sell it or hedge against a decline in value.  If you don't own it, don't buy it.  You can't sell what you don't own.

Thu, 05/20/2010 - 07:57 | 362578 Me XMan
Me XMan's picture

+1

Thu, 05/20/2010 - 08:12 | 362611 Optimystic
Optimystic's picture

Another good reason........

Thu, 05/20/2010 - 07:59 | 362585 EscapeKey
EscapeKey's picture

Agreed. Oh yeah, signing up for five car insurance contracts and torching my car will add liquidity to the system, especially seen from the perspective of... me!

 

Thu, 05/20/2010 - 08:04 | 362598 Sudden Debt
Sudden Debt's picture

Oh! We have a entrepreneur amongst us! :)

Thu, 05/20/2010 - 08:30 | 362659 Cheeky Bastard
Cheeky Bastard's picture

ha ha ha

+10000

Thu, 05/20/2010 - 08:37 | 362668 EscapeKey
EscapeKey's picture

Well, if you agree with the principle, you should short sell CDS contracts on me! That will furthermore "add liquidity to the system".

Or, perhaps we could wrap up these CDS contracts into a synthetic CDO, create a hedge fund to market these, float on the market, and then buy call options on the symbol, as I expect more profits (and more "liquidity") as I expect to torch MORE, higher-insured cars.

Or perhaps buy put options, as you'd expect at some point, the law and order catches up with this blatant fraud, and puts me in jail for some serious amount of time?

Except, of course, we can't do that, as it would take all this "liquidity" away! Bulletproof plan!

Thu, 05/20/2010 - 08:28 | 362653 JacksCompleteLa...
JacksCompleteLackOfSuprise's picture

+1

Thu, 05/20/2010 - 08:48 | 362714 TBT or not TBT
TBT or not TBT's picture

Why can't I borrow a friend's used car and sell it, if I think I can buy him an equally good or better replacement of the same model later, supposing he wants it back?   Its all good as long as I maintain the wherewithal to replace the car should he want it back.

Thu, 05/20/2010 - 07:51 | 362565 Hx3
Hx3's picture

Burn Baby Burn!

Thu, 05/20/2010 - 07:54 | 362572 Kataphraktos
Kataphraktos's picture

Did you chant this on 9/11, too? Just wondering.

Thu, 05/20/2010 - 07:56 | 362576 Me XMan
Me XMan's picture

Idiot question.

Thu, 05/20/2010 - 08:06 | 362601 Kataphraktos
Kataphraktos's picture

Tell that to the 3 bank employees and one fetus that perished in a burning bank branch two weeks ago.

Thu, 05/20/2010 - 08:12 | 362610 Me XMan
Me XMan's picture

What's 9/11 got to do with this???? Stupid question.

Thu, 05/20/2010 - 08:22 | 362638 Cheeky Bastard
Cheeky Bastard's picture

Dont be a douche; i love the smell of mayhem in the morning, but i hate dead babies and people on fire; bankers or no bankers.

In short; fuck off.

Thu, 05/20/2010 - 08:03 | 362594 Sudden Debt
Sudden Debt's picture

Then it was Fly baby Fly...

Thu, 05/20/2010 - 08:02 | 362593 Sudden Debt
Sudden Debt's picture

DAS CRASH!

Thu, 05/20/2010 - 08:03 | 362595 EyesWise Shut
EyesWise Shut's picture

I would be surprised if Germany would not succeed in "winning over" other EU countries to join them in the ban. Just imagine what would happen if by some unlucky coincidence the German parliament would not agree to the bailout!

Thu, 05/20/2010 - 08:10 | 362607 Me XMan
Me XMan's picture

If DAS crashing then no more bailout money going to Greece.

Thu, 05/20/2010 - 08:04 | 362597 mister_x
mister_x's picture

PPT bid at open. Guaranteed.

Thu, 05/20/2010 - 08:08 | 362603 Anton LaVey
Anton LaVey's picture

Other than bankers and TBTF, I just can't see where the problem is.

This may be the very first step on a path back to some sanity. Or, more likely, complete meltdown.

Of course, I have no idea what I am talking about, so feel free to ignore me (yes, I am talking to you, 'austrian'  economists).

Thu, 05/20/2010 - 08:22 | 362637 SWRichmond
SWRichmond's picture

once again proving that market regulation left in the hands of politicians will always backfire.

feel free to ignore me (yes, I am talking to you, 'austrian'  economists).

I want to see genuine free markets, not half-free, or half-free with government backing of TBTF, or etc etc.  How did the big banks get so big that they can challenge the power of governments?  Not through free-market mechanisms, I guarantee you.  They got that way through corruption, bribery, kickbacks, etc.  I want genuine free markets.

The thing that MUST be de-funded is government.

Thu, 05/20/2010 - 08:30 | 362658 JacksCompleteLa...
JacksCompleteLackOfSuprise's picture

+1

Thu, 05/20/2010 - 09:39 | 362834 Anton LaVey
Anton LaVey's picture

I want genuine free markets.

Agreed.

But a genuine free market still need regulations. Banks that are TBTF got this way because governements failed in their duties, which are to provide robust legal frameworks preventing excessive speculation and excessive concentration of banking powers.

Since the banks were TBTF in 2007, the only logical conclusion was to nationalize them, fire the Bernie Madoff clowns that were running them and break them up into as many smaller pieces as possible. But the TBTFs have become the robber barons of their time, with their fingers in as many pies as possible, including running crucial parts of the government. For instance, is it at all surprising that Henry Paulson, the former CEO of Goldman Sachs, became the U.S. Treasury Secretary? The fox guarding the henhouse has got nothing on these guys.

There was a reason the Glass-Steagall Act was voted and there also was a reason the same act was repealed. Re-read that sentence slowly and let it sink in for a moment.

Let us be honest: the sh*t has hit the fan a long time ago. Since the TBTF are now running amok over the world's markets, it's time to forget good manners and kick them in the nuts before the whole thing comes crashing down. Banning short selling is a very good step in that direction. Kudos to the Germans.

Thu, 05/20/2010 - 08:20 | 362631 I am a Man I am...
I am a Man I am Forty's picture

Tyler, why are you pro naked short selling?!?!  Are you in the synthetic credit default swap market or what?  If the regulators won't prevent naked shorting, should not the government step in and enforce the law?  If the market crashes because of it, so be it.

Thu, 05/20/2010 - 08:35 | 362674 JacksCompleteLa...
JacksCompleteLackOfSuprise's picture

At the risk of feeding the troll...

Tylers comments arent pro naked short, he is merely relating the possibility that some market participants are pro-naked short selling, and that their response to the restriction of NSS is to leave the market, leading to the market falling.

Just because a person claims/discovers an action has a negative consequence doesnt mean said person is automatically against that action.

Thu, 05/20/2010 - 11:32 | 363025 I am a Man I am...
I am a Man I am Forty's picture

I'm not a troll douche bag. I'm not imagining things, several others have noticed as well. This is not the first post on this subject where the tone doesn't jive with the subject matter.

Thu, 05/20/2010 - 08:30 | 362657 orange juice
orange juice's picture

Well this will only reroute short trades into the fx markets.

Thu, 05/20/2010 - 08:33 | 362666 JacksCompleteLa...
JacksCompleteLackOfSuprise's picture

FED is just price fixing, leading to malinvestment and demanding periodic creative destruction to correct. We should see what life without the FED is like.

Im not sure a gold based currency is the way to go, although sometimes to move forward you need to go backwards.

I read somewhere that currency was essentially a claim on human labour, but machines now do all the work. So maybe we need to start thinking like E=MC2, and that currency is a claim on energy. We should consider an energy backed currency.

Thu, 05/20/2010 - 08:49 | 362716 Oh regional Indian
Oh regional Indian's picture

Currency is actually a claim on energy that can do useful work (useful as in net positive contribution).

Used to be that there was a direct correlation, in a given geography, as to what that exchange rate was. With human effort, that was easy, mow my lawn, 10 bucks for you.

Machine+abstraction+lag+further abstraction+export of labour+slave labour+arbitrage (of every sort)+printable unbacked fiat....etc. bascially junked that equation.

Thus this whole mess we are in.

I'm the tech-no-logical Messaiah

(read like ChumbaWumba)

;-)

Thu, 05/20/2010 - 08:34 | 362672 walküre
walküre's picture

The sooner the better.

Billions in bonuses destroyed. Bummer / not.

Rest assured, bankers with loads of cash are going to salvage what they can.

A sperling in the hand is better than a pigeon on the head.

Money is not going to be worthless. Not now.

Cash is king. The bankers will make sure of that.

When is a good time to convert cash into risk? September, maybe. Need another 10% down from here before I get excited to buy the S&P.

Thu, 05/20/2010 - 09:12 | 362776 SteveNYC
SteveNYC's picture

I'm all for simplifying things. If naked shorts complicate the marketplace (as it most certainly seems they do by making things even more intertwined and interdependent) then ban them.

Simple markets, simple rules. Only way the public ever comes back in.

Thu, 05/20/2010 - 09:42 | 362845 Grand Supercycle
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