This page has been archived and commenting is disabled.
Full BaFin Naked Short Ban Announcement
BaFin banned naked short sales and unsecured CDS on government bonds in the euro zone
The Federal Financial Supervisory Authority (BaFin) on Tuesday naked short sales of debt securities by euro zone countries, which are admitted to trading on a domestic exchange in the regulated market, temporarily prohibited. it has also temporarily banned so-called credit default swaps (CDS), where the reference obligation is a liability, at least one country of the euro area and they do not serve to hedge risks (unsecured CDS).
In addition, the BaFin naked short sales of shares of the following companies in the financial sector has not:
* AAREAL BANK AG
* ALLIANZ SE
* COMMERZBANK AG
* DEUTSCHE BANK AG
* DEUTSCHE EXCHANGE AG
* DEUTSCHE Postbank AG
* GENERALI HOLDING AG Germany
* HANNOVER REINSURANCE AG
* MLP AG
* Munich Reinsurance Company AGThese prohibitions apply from 19 May 2010, 00:00 clock, 31 March 2011, 24:00 Clock, and will be reviewed.
Contact for market participants to reach under the number 0228 / 4108 - 4004th
Yet isn't it ironic that just a few inches, pardon, centimeters below this notice we find this article on BaFin.de:
BaFin clarifies: So far no evidence of massive speculation against Greek bonds
The Federal Financial Supervisory Authority (BaFin) – contrary to media reports – has so far not found any evidence of credit derivatives known as Credit Default Swaps (CDS’s) being increasingly used of late to speculate against Greek government bonds.
BaFin increasingly has been monitoring the markets for government bonds and credit derivatives of selected countries within the Eurozone. In an analysis cited by the press, BaFin had explained its assessment.
In its analysis, BaFin had explained that a major cause of the increase in the CDS spread was growing demand for credit hedging against the country risk Greece.
The data published by the US Depository Trust & Clearing Corporation (DTCC), a trade repository, do not indicate that new open positions are being built up, nor do they point to speculative activities on a massive scale.
»
- 7458 reads
- Printer-friendly version
- Send to friend
- advertisements -
It's always good to see the French getting the one-fingered peace sign from somebody.
Denninger had an interesting comment on this in the evening Market Ticker.
"Germany has had it with naked shorting of Gold, and specifically noted bank manipulation of gold prices via naked shorts beyond intent or ability to deliver."
He give no link or source for this quote, or implied quote.
I read through the BaFIN site again, and could find no reference to gold or the short of gold being involved in this action in any way.
Anyone have an insight into this?
I wrote my own piece earlier. I was interested to see Karl have a similar take, given his earlier reaction which was negative. But I was floored by his statement about gold being involved. If this is true it is huge, but the prices do not seem to bear it out.
http://jessescrossroadscafe.blogspot.com/2010/05/merkel-to-wall-street-and-london.html
Thanks in advance for anything you might add.
arthurcutten@yahoo.com
That would clearly make sense in light of the run on physical they've had in the last week or so.
He might just be making shit up.
Im still trying to absorb him saying that..I need a minute..
This whole works is starting to not pass the smell test..That gut feeling that somethings about to come off is churning..Either that or im geting more paranoid in my old age..I basically sleep through the 08 chaos, I just knew the knckleheads had something to pull out there ass..Im feeling now however that were working without a net..
This is the best explanation I've seen for the panicked, borderline insane manner they announced and instituted this shorting ban:
http://seekingalpha.com/article/205794-der-tarp-germany-is-hiding-a-big-banking-problem
No mention of gold....but a plausible reason for the panic...
There were reports several months back that Germany wanted their physical gold holdings returned from a New York depository. This was not received well in Washington. Now they want a stop on naked gold shorting. Interesting....
Germany wasn't the only one...
Hong Kong recalls Gold Reserve
HONG KONG (MarketWatch) Sept 2009 -- Hong Kong is pulling all its physical gold holdings from depositories in London, transferring them to a high-security depository newly built at the city's airport, in a move that won praise from local traders.
http://www.marketwatch.com/story/hong-kong-recalls-gold-reserves-from-lo...
BTW, great post at Jesse's tonight. Thanks.
I'm completely dumbfounded by the repeated references to "naked short selling of shares" being banned. Is ZeroHedge abusing the term "naked short selling" or did BaFin really say that? If so, what the hell could they possibly mean?
Banning "Naked CDS" (meaning you bought the CDS on bonds you don't own) would be an understandable move, even if a dumb idea. But "naked short selling" as it applies to the stock market is an already-illegal practice (that therefore makes no sense to ban) where shares are sold short without first being borrowed.
What gives here? I keep seeing references to this ban applying only to "naked short selling". Is this a matter of BaFin saying that and not knowing what they were talking about, or ZeroHedge using the term "naked" indiscriminately to describe something else? What specifically is meant by "naked short selling" in the context of this ban?
xPat
Wishful thinking. No other explanation for that extrapolation...
the gold shorting cabal has been counting on the US gold reserves as the nuclear option. time to press the button barry its either that or interest rate swap induced implosion.
Goldman Sachs Advice Hands Clients Losses in 7 of 9 Top TradesBy Ye Xie
May 19 (Bloomberg) -- Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aq1TZHxNGpWU&pos=7
Shit Hits The Fan
One bond trader said he expected Wednesday's trading session to be one of the most volatile in living memory: "It will be complete chaos....
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7738144...
Your confused? Gia Moron, a spokeswoman for Goldman Sachs, declined to comment.http://www.bloomberg.com/apps/news?pid=20601087&sid=aq1TZHxNGpWU&pos=3
Common sense folks just completely mocked by the dead head fed goons fleecing of America!! All these names thrown out are just a mockery from a place they get names for such a gullible crowd!! HELL!!
Gia Moron?
Still fighting over 1.2200.
We need Carl Sagan back for the CBs: Billions and billions and billions...
IMHO....complete over reaction to this. This is no big deal. Everyone can go home now....LOL
- meanwhile in Iraq, a cold front approaches.
http://www.youtube.com/watch?v=_hqsaE65xTQ
Thank you for putting all this in perspective.
I have never seen the purpose of CDS.
A bond is a bond.
If I loan John $20 and than I go to Peter and buy CDS because I feel John will have a "credit event" it really just distorts the whole process.
If I felt that I needed to buy insurance on the loan to John, I should not have loaned the money to John. If John doesn't pay me back than I'm screwed....shoulda done my homework before I lent him the money.
Furthermore, If I never loaned John money I definately should not be able to buy credit insurance on him. If a bank wants to loan money to John and they see that Johns CDS is jumping through the roof because I've been buying millions in credit protection than John can't get a loan from a bank?
The whole process has just turned into a garbled fart.
financial innovation is porn
Bonds are supposed to be based on trust. If you feel the need to "hedge" trust than you really shouldn't do the bond.
This whole thing just seems ridiculous to me. I think all CDS should be banned.
Return some level of trust to the market.
+10000
Perhaps they're less about trust and more about "couldnt be arsed doing due diligence"
what trust?
trust is a passe, don't we know that by now?
You don't want to be doing business without insurance...
Yea...
But I shouldn't be able to buy insurance on your business. I would assume you wouldn't want me (or anyone) having a vested interest in your business failing.
mr dabolina mr bob dabolina
+1
You know whats up
http://www.youtube.com/watch?v=GEPOgntWfiE
Maybe CDS's aren't the vehicle for this, but I can make a bet with anyone about anything.
In fact I'll say, even without betting, I have a vested interest in the US government failing to usher in a new era of fascism. I wish I had a few billion dollars to bet against the US.
CDS prices can still skyrocket among "legit" bond holders and bond prices can still plummet on plain-old long sales.
This is a great experiment (for the rest of us to observe anyway). Let's see what happens!
+1
It always seemed to me that the entire purpose was to keep the velocity of money moving, so the financial markets could take a cut every time it passed by.
It seemed crazy that if you made 'a bet', you had to take out insurance against yourself being an idiot, and another policy against your client, and then the currency risk, and so on, and so on; they all devalued your profit. So why make bad judgements? Only if the profit margins are so high and that none of these costs have any relevance, does it make any sense. (If it did, everyone's mortgage would have all sorts of bells and whistles attached to match.)
And worst of all, none of the money made had any tangible benefit to the country, indeed it was a pure burden.
I'm quite happy if we have a total meltdown in the financial markets. It is quite clear that no-one's savings are safe (outside of shiny metal) and no-one's pension will have any real value when the time comes.
There are enough good people who can rebuild the economy. There are certainly enough greedy people who deserve to be victims, and will hopefully get to be.
I'm just naive. The ban is on naked short selling. So, now they can't do what they were not supposed to do anyhow -- selling stuff you ain't go and won't get. And all this time I thought that selling quit claim deeds to the Brooklyn Bridge was illegal. And this decision to enforce the rules is going to set fire to the stratosphere. See? Told ya I was naive.
so much for that nwo imf sdr bs..I knew that crap wasnt going to fly, trying to get a bunch of countries to do what we want them to do,lol@that..
CDS serve NO economic purpose. It's like buying insurance on somebody else's property. Of course, you have an interest in burning that property down. Why do you think insurance companies won't allow you to buy insurance on something you don't own? Why should it be different with CDS? Because big money is ALWAYS allowed to do EVERYTHING the retail suckers aren't?
GOOD RIDDANCE CDS.
+10000!
Ok, how about if I would like to invest in a Thailand mobile phone co, for example, but I am uncomfortable with the systemic political risk in Thailand. If I buy bonds in the company, but hedge the sovereign risk via CDS, surely this serves an economic purpose?
And insurance companies have allowed corporations to take out life insurance policies on employees for their own account and have even allowed the contracts to remain after empoyees have left.
Well, if you have have concerns about "systemic political risk" in Thailand, I'd say you're better off not buying anything there. Why would you want to reward a country which hasn't put its political house in order with investment dollars?
"And insurance companies have allowed corporations to take out life insurance policies on employees for their own account and have even allowed the contracts to remain after empoyees have left."
Although I'm sure it is being abused as much as everything else these days, I would think that if an employee is performing mission critical tasks for the company and the company would suffer material losses if the employee died, it actually might serve an economic purpose.
CDS, on the other hand, is pure GAMBLING.
Sorry, but I see no difference between CDS and bund futures. I can't see why one should be gambling.
Also, take the Thailand example and imagine a fixed rate corporate bond in the US, that you put and interest rate swap against to receive a net floating rate. In essence (ignoring swap spread for a minute) you have a long corporate risk, short Treasury position - what's so bad about this?
My general point is, I have used CDS for many years as a risk management tool. They are flawed in many ways (especially the more complex structures such as CDOs) but they can be used in constructive way.
Ya but it's hard to feel really empowered and well supported until you know you have a bunch of festering black hole banks that stink so bad flys won't eat the shit behind you're bold daring market moves.
Let me give you a slightly better translation:
Computers have trouble with German putting the verbs at the end of the sentence sometimes.
Isn't Germany politely advising everyone to calmly exchange IOU's & square the ledger
I am stunned by the horror from the zero hedge crowd. My god. it will be much more difficult for goldman to sell me crap it is investing against in some behind closed door ccds market.
Naked shorting is illegal, but my understanding, common in the US. a prop that has cds, and is short the market. Borrows more than the entire free float of a stock. come on look at porsche with VW. prosche controlled all the stock. where was the wuantity of stock to short from. it wasn't there in the first place. (maybe this wasn't the exact scenario, but the idea is the same). this is one of the major ways goldman build then breaks the bubble that we pay for. borrow but never takes delivery. by the way the evidence of naked shorting in the us market is huge during the drop. but of course nobody caught (guess it was the big boys doing it)
as for the guy who wants to hedge the thai company. they you hedge with the bhat (currency).
if done correctly there is nothing wrong with almost any product. in the hands of a sociopath/banker it is another matter. you see the press get angry at anachists in the street.
making it profitable for the big banks to bring the system to the edge of destruction is stupid. they make money from it and we get stuck with the bailout.
the germans/and the world were lied to by the Greeks about
their finances. goldman actively sold bonds to people that they knew didn't deserve the rating (they worked to keep the true situation hidden), and I'm sure bought naked cds on the bonds.
by the way they have done this in the muni bond market as well. now they have the prop desk, are too big to fail, and access to the discount window. the company is a financial weapon of mass destruction. in the right hands maybe it isn't such a bad thing. but the FWMD is being run by a bunch and nut cases from IRAN and noth Korea who threaten to destroy everything unless they get bailed out. we call those leaders terroists
Goldman's next gig is carbon trading. Once the financial market mess is sorted out and has stabilized, the agenda over climate change, carbon offset and trading of credits is coming back.
On the one hand, the governments try and combat speculative WMD and on the other hand the same governments think that they're doing the world a favor by setting up the biggest scam ever in the form of carbon trading.
Maybe Merkel will realize what is played and pull out of the climate change scam before too much money is wasted.
Europe already has the best waste management, clean energy and overall sustainable living concepts of any continent in the world. The US is centuries behind in that regard. Not even worth mentioning South East Asia here.
I see allot more growth potential in Europe because their demographics are in favor of a sustainable economy. Unemployment is lower in Europe and there's talk already that the economies will face a talent shortfall in the next decades. There is going to be incentive for talent from all over the world to locate in Europe.
It's a no brainer, really. Europe is ahead of the races in so many ways. America is fading away in this last ditch effort now.
Jim Rogers is bearish on the US and the Dollar and calls for 1.60 USDEUR long term. Buying Bunds is cheap in USD plus the interest rates are getting higher faster. Heli-Ben doesn't have that option.
CDS are OTC agreements between 2 consenting adults, how can you ban them?
Change terminology, multiply the maths by 2 at the beginning and divide by 2 at the end, call it a DDS and sell that instead.
The only time I have ever had the opportunity to 'naked short' something was when I was on a govie bond desk. Then, no one thought twice. Just ask for 'double corporate' deliery and roll the pig (pardon the pun, this was pre-PIIGS).
Bottom line is, this is not an option available to the average citizen.
i used to love trading in the buff...but now with this ban...need to get some clothes...
Don't worry, people who need naked shorts can still get all they want on the black market. Or, just download them for free from piratebay.
Finally one smart govt. which does things quick and fast without giving speculators sufficient notice of what is happening......
CDS - NULL AND VOID. PERIOD. 600 TRILLION? TAKE THE BALL AWAY FROM THE CHILDREN PLAYING IN THE STREET.
No Pun Intended. Wait. Pun Intended...