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Germany To Ban Short Selling At Midnight, Only Naked Shorts To Be Affected
Update 4: Merkel to formally announce naked short-selling ban on Wednesday.
Update 3: Hearing naked ban will also apply to credit derivatives, i.e. naked CDS.
Update 2: Bloomberg chimes in quoting Deutsche Presse which reports that the ban will only apply to naked shorting. We are looking for official confirmation on what the final proposal will look like as there is a lot of confusion currently and no formal announcement. Regardless, investors are wondering what has changed today to institute this now.
Update: short selling ban will apply to stocks and euro government bonds according to German N-TV station. This is an act of desperation and will force all those who are long German assets to sell asap (selling is still legal).
Reuters headline for now, that the German Finance Minister will institute a short-selling ban at midnight. If true, this is huge, as it means the market will become massively dislocated once again. We can show charts of how Thailand, US and Greek markets reacted when this was introduced (short jump followed by significant slide lower), but you get the image. One wonders just how horrible the news flow over the next 24 hours will be for this drastic measure to be introduced.
Full and most recent Reuters update below:
BERLIN, May 18 (Reuters) - Germany plans to ban naked short-selling on stocks and euro government bonds, German all-news network N-TV reported on Tuesday.
German coalition sources told Reuters earlier that Finance Minister Wolfgang Schaeuble plans to ban short-selling from midnight.
Economy Minister Rainer Bruederele told Reuters that it was possible the short-selling ban would be quickly enacted.
No other details were immediately available.
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This is going to continue to be fun to watch unfold
As if volume wasn't already pathetic to begin with...
Holy shit, EUR/USD just tanked!
Fuck it, the only legit trade left is to go long Circuit Breaker Futures.
No, there are others:
1) go long on high-precision scales
2) go long on hydrochloric acid manufacturers
3) go short on manufacturers of paper money counting machines
4) go long on Mizar M24 Electronic Gold Tester
What no ban on naked short selling of cheese futures? wtf?
ha...ha....ha...we've seen this play before. It didn't end well for the government that brought a supersoaker to a gunfight.
<a href="http://www.elpremiomaximo.com">Gerogia palatino</a>
Thanks for a great post and Interesting comments. I found this post while surfing the web forum. Thanks for sharing this article.
"Heh, heh. Everything is totally fine. These are strong, healthy securities. German securities!"
Do they want things to go down quicker ???
I'm tempted to use the Maria on a Citi Jet analogy........ :-)
Go ahead, use it. I won't tell. :>)
Tyler, please do post those charts. It would make a nice reference for the clueless.
That would be me.
Why they have some ominous annoucement to make tomorrow? Banning short selling doesnt do much aside from a temporary meltup. Looks like put options will cost more to buy in the future.
Yeah I never understood that - I can still buy put options, so what will banning short selling really stop?
Ban the shorts? We saw what happened last time they did this for US banking
institutions, not pretty.
They are telegraphing the crisis, if you ask me.
Thats what I am thinking.
Yes, that seems to be the case.
This is a measure of what they know.
++
I see... I see... KATLA!!! hahahahahahaha!
We don't need no stinking telegraphing, we are making the crisis up!
Keeping my eye on Katla here:
http://www.ruv.is/katla/
I am one of the clueless..What effect would only buying have?
Currently high frequency trading (HFT) with no other market participants causes "price drift" (upwards, historically). Central bank and government interference in the markets for the last couple years causes the same thing. As a result, all stocks are priced too high (they aren't worth their current price).
Selling, including short selling, is a necessary mechanism to promote price discovery (establish the correct price for a stock). [Side note: We also have current big problems with "naked" shorting, which is fraudulent printing of shares that don't exist, which is never a good idea; but shorting itself is essential for the market to function.]
By banning short selling, a "vacuum" will form below the current share price (the shares will be priced in the market *above* what they are actually worth). It removes liquidity, and disables price discovery. All buyers are screwed (the shares aren't worth what's being paid). Institutional sellers can't sell (nobody thinks the shares are worth that, and large positions cannot be liquidated). The result is increasing market actions for "step-function" corrections in share prices (i.e., volatility).
This will end badly, because liquidity and price discovery will be removed, resulting in the ever-increasing-coiling of a spring that wants to LAUNCH (lower).
ABSOLUTELY PERFECTLY CLEAR..Thank you so very much for taking your time to answer that for me..I really appreciate it..
Just to add to the previous explaination....
Economists who study bubbles have listed several market conditions which are pre-requisites.
Lack of liquidity and an inability to short (whether because shorting is prohibited or because it's too expensive) are the top two causes of bubbles.
And we all know how pleasant a bubble burst is....
+1 thanks.
Another thank you.
Even this uber noober can understand that ...
I need to go buy more popcorn.
+100 ... Thank You !
The Reuters update and the same story in German daily Handelsblatt state that NAKED shorting of stocks and government bonds will be banned.
Selling previously borrowed stock (regular shorting) is not affected.
Just to be anal about this, why did you not explain what a naked short is?
From my previous post:
Shorting (good) and "naked shorting" (bad) are different.
Shorting: (example), A stock's current market price is $100. I think it should sell for $80, so I won't buy it. However, I'll sell it for $100, because I think the market will soon figure out it should be priced at $80 (and I'm willing to incur risk while I wait):
For shorting, I may reap the benefit of knowing the "better" price of the stock. I incur the risk that if it never drops in price, I'll lose money when I need to "cover my short" at some point, at market price, to give it back to the guy from which it was borrowed. The market benefits through liquidity because I wouldn't play at $100, but I'm willing to incur a risk for an expected future price around $80 (e.g., a market buy/sell transaction occurs now when it otherwise would not).
Naked Shorting: I like running naked through the woods because I like the light breeze on my hot loins and the expressive freedom it exudes. From "shorting" (defined above), to do "naked shorting", skip steps (1), (4), and (5).
Naked shorting is illegal for you-and-me, but is often done in dark pools by the big investment houses. The net effect is I can "sell" a zillion shares that don't exist, driving down the price of "real" shares. I never cover (never buy what I've sold). All I'm doing is distorting market price, with zero capital and risk up-front, and pocketing cash, by putting in no cash and carrying no risk (if I don't get caught). While illegal, this is common these days for predatory market manipulation (google the big topic).
For example, if a company has 5,000 shares of stock TOTAL, you can go to your online brokerage account and buy 6,000 shares of that stock. Impossible, but your trade will go through (that's only possible through fraud).
Shorting: Good. Naked shorting: Bad.
At various times, markets have banned shorting (that's stupid). Naked shorting is always illegal, but regulators sometimes puff up their chests to pretend they are going to address that as a problem with new weird regulations and arbitrary timelines.
Rubbish .... if shorting is good, naked shorting is even better by that rationale since it gets you to an end result even quicker.
The issure is that a corporation controls the number of shares issued, and the market responds with a market capitalization by establishing a price on that share (e.g., what the corporation is worth).
Covered shorting does not interfere with that process (the number of shares in existence does not change).
Naked shorting *does* interfere with this process: The company only issued 1,000 shares, but I can sell 1,000,000,000,000 shares, diluting the market value of an individual share. Now, it doesn't matter what the company issues: I can print shares faster than the company can issue new ones or retire old ones. That's fraud (I'm not an agent of the company, I cannot issue new shares, I'm just printing shares that don't exist and selling them into the marketplace).
Borrowing money to buy a car is leverage. Borrowing shares to sell is leverage. If you're comfortable with leverage, the car dealer sells a car he would otherwise not have sold, and the shorting triggers a "sell/buy" transaction where it otherwise would not have occured (e.g., liquidity).
Except that's crap.
Your example implies two things:
1.) the short has an endless supply of capital
2.) shorting is no more risky than a long position
also, I wouldn't throw around the word "fraudulant" so cavalierly. There is no intent to defraud people into thinking there are more shares in a naked short.
Endless enough. We're talking about leverage at 20:1, 80:1, 300:1, and even infinity:1 through dark pools. It is leveraged transactions with uncovered hedges that take us to $1 quadrillion in derivatives on a planetary $65T GDP.
Further, while you *can* get endless capital (leveraged with hedges), you don't need that. A small percentage of a company's market capitalization, leveraged 100:1, can collapse the stock price through a positive feedback loop that takes the stock to zero. No need to cover then.
Purchasing a stock for $100 puts at risk AT MOST $100. In contrast, my selling you my obligation to purchase a future share at market rate is a risk to me of $80, $100, $1K, $1M, $1B, $? (it's unbounded).
Google "predatory market manipulation" in regards to "naked shorting". For example, there is a long-running case study regarding "Overstock.com" and share price manipulation.
Regarding the term itself, I subscribe to Bill Black's definition for "fraud":
A more complete statement that says the same thing:
In my use of the term "fraud", I assert that knowingly false statements are made and incorrect information is given to induce deceitful transactions.
Unfortunately, today that includes statements by our regulatory agencies and government officials.
Another issue with enforcing the rules against naked shorting is that the short seller can plausibly deny they knew they were naked, because all they have to do is find a broker-dealer that will let them clear the trade. It is the broker-dealer's responsibility to identify the shares to the short and that is where the nakedness is hidden (so to speak). Meanwhile, the brokers are all trying to cultivate relationships with the hedge funds and are therefore incentivized never to say no to a short, naked or not, especially since the rule is not enforced at all.
+ 100
Good accurate posting in my opinion Mikla, Naked Shorting is a complete crock of shit. It does not benefit the market, liquidity, or price discovery it merely benefits players with a big enough position to distort the market for their own profit.
jesus fucking christ
shorting [normal] - no dilution [depends on net interest]
shorting [naked] - dilution [ price down certainly if float impacted enough]
No, naked shorting is counterfeiting.
There's no way that such a thing would be allowed under a more sensible regulatory regime.
The fact that the regulators can allow and disallow naked shorting at will is just proof of the disgusting corruption.
naked and short only works when you're good looking and young
You are right, alarmist.
yes, i got burned by the bullshit "banning of all financial shorts" (regular AND naked) back in the fall of '08...
Me too, my Lehmann shorts spiked, and TD Ameritrade made a margin call. Ultimately, I made money on the transaction, but only peanuts compared to what I otherwise would.
+1, mikla you're a scholar and a gentleman.
del
Thanks mikla!
+1000. Thanks. (mind if I cut and paste?)
Cut-and-paste away.
I've copyrighted the individual letters, but feel free to reproduce in any way you like how they are assembled. ;-))
I reiterate my belief that ECB and Fed are colluding to devalue the Euro so that Euro debt can be repaid in devalued Euros swapping dollar-denominated instruments that ECB already holds. It's a gamble without a formal accord ( a la Louvre or Plaza) since ECB might competitively devalue in a race to the bottom. Might explain the China crash, Libor drift and nervous markets.
How is it going to play out with China? I was looking at the Shanghai composite and it looks like it found some support but, it is hard to be bullish on anything these days.
Short sales banned on financial stocks or all equities or all securities?
So much for "free markets" finding their price. Achtung!
soon they will ban selling....only buying will be allowed.
no. if they are following the U.S. manual, it is straight to PPT.
god save the banks!
german efficiency is shown in dealing with yet another problem.
Where do I get off this world?
ve have vays of makink you stop shortink
Ban "naked shorts" or all shorts, Tyler?
Banning short selling at midnight? That will not have any effect. They should ban short selling on thursdays!
As Randy says, short people got nobody to love...
http://www.youtube.com/watch?v=uFmv22ghzQw
Keiser mentions this possibility yesterday---around the 2: 30 minute mark, Note the UK was against this
Max Keiser on Athens International Radio - 17 May 2010http://www.youtube.com/watch?v=QHu8Ul6Cm-w&playnext_from=TL&videos=nLLNmyliYNU&feature=sub
looks like ze Germans got to chapter three in the "How to ruin your economy for dummies."
Looks like the East German Finance Minister is showing his true colors...
Oh, and what a handy excuse for the starting point of today's afternoon market melt-up!
Huh? What are you talking about? Wolfgang Schäuble? He was born in Freiburg im Breisgau in Baden-Württemberg. He joined the Junge Union, the youth organization of the CDU in 1961. He's West German and has always been a West German conservative.
However, in his last job as Interior Minister, he was known around these parts as Stasi 2.0
My apologies for the confusion.
I thought the reference to the socialistic nature of this idea was clear.
"One wonders just how horrible the news flow over the next 24 hours will be for this drastic measure to be introduced".
These are the prescient comments that keep me coming back.
That and talk of 'keynesian fire pits'
Options markets rejoice!!!
a short selling ban is okay.
it simply does not go far enough.
if you don't own it or will not be manufacturing it for delivery, you should not be able to sell it.
and there should be no derivitives of any kind.
plain vanilla investments. in productive endeavors (at least the investors expect they will be productive.)
This bullshit created by Wall Street is quite frankly, illegal gaming.
wrong - banning NAKED short selling is appropriate. Short selling is acceptable as it (by the "invisible hand" analogy) permits the best opportunity for px discovery on a particular security.
However, agree on derivatives - they are merely a synthetic means of creating leverage that would not exist otherwise. The mere compounding of this leverage of these derivatives are part of the problem we now face. By some accounts the world-wide derivatives exposure is estimated to be in the quadrillions.....tick, tock, tick, tock.....
Isn't naked short selling a way of leverage since it can exceed the float of the stock? Short selling when you can "borrow" shares seems reasonable.
Correct.
Disagree Busy.
Derivatives in their simplified forms are usefull. A corn farmer, worried that the price of corn will fall before his crop comes in, should be able to lock in his profits on his produce, by selling a future contract, to a corn buyer who is himself worried that the price of corn will go up before the next crop comes in. It is simple hedging on the parts of both players and clarifys their personal balance sheets allowing them to more efficiently manage their business until after harvest time. Both parties reduce their risk, or at least quantify it.
To a certain extent this can be extended to other commodities and markets. It is the degree of extent that is the problem. The slicing and dicing of risk that was a large feature of the sub prime meltdown is not helpfull for any party in the lmedium term although both sides get something for nothing in the short term (a house and some arrangement fees).
To some extent one always has to try and quantify the risk of any aspect of ones life from putting money in a bank to crossing a busy road. Is it worth the risk? However by the same margin one has to realise that mankind currently lacks the understanding to quantify risk anywhere near completely. At the end of the day rolling the dice is always going to be rolling the dice.
Uhhh, if you buy it, then you own it.
Speculation is good, because it ensures access to goods. Even now, our oil is less than it would be otherwise had it not been for the huge spike in oil that caused people to store it in tankers offshore. Imagine where the price would be now if they hadn't done that.
Speculation is good - you mean to tell me that wasting half my day trying to preserve my paper wealth is a good use of my time.
Whole armies of men and women are up to their eyeballs with manipulated markets and their cheerleaders while the basic infrastructure around them crumbles to dust.
Perhaps you like to speculate on the rate of entropy but surely the waste of resources and talent lost to create a "efficient Market" would be best spent building something that lasts.
If the Germans have really wakened up to the theft of their savings through the creation of counterfeit currency then I salute their judgement but it has taken some time.
Perhaps they just do not like agreeing with the French.
EVERYTHING is bad in a manipulated market. That does not mean that you need to ban all trading, it means you need to stop manipulating the market.
That said, the updates have come out and said this is a ban on naked short selling, which is fraud. This is good, in my opinion. I can't really see any really free market argument for allowing naked shorting any more than I can for selling something that doesn't belong to you, like the Brooklyn Bridge.
Watch how Monsieur Sarkozy and his
finance minister would spin news.
I expect ascending discrepancy between
Germany and France.
Don't you guys get it? It's just another "globally coordinated" market intervention by the Fed/ECB combine. They're trying to engineer "The Euro Default That Wasn't". The way they're doing it is a controlled Euro devaluation (check!), followed by opening dollar swap lines today (check!), followed by use of said swap lines to pay back devalued Euro-denominated debt.
In the past these global interventions were done by international accord through the G5 or G7. In bypassing this mechanism they've scared China markets (hence Monday's crash) and are making global credit and equities markets nervous too (many examples).
The German short sale ban is to prevent massive liquidation of German securities on the basis of devaluation.
i like your thinking..
I am hoping for a similar $ devaluation
Orrr it could just be gravity pulling these social democracies down, Hayek-style, and the Fed/ECB are caught in the larger current, swimming, but to little avail.
DUMB FUCKING MORONS.
^This....
Man what an awful idea.
+ 100 !
I never knew Jesus and morons have the same middle name
and the German DAX which is strangely near recovery highs is a yummy short.
I wonder if they got some coin involved keeping it there these days as the french cac was plunging (and other european stocks) the dax was very resilient
Yes. Sell the DAX. Sell all of it until its worth zero.
These guys were supposed to be the smart ones, the market friendly ones, the guys who unerstood that its bet to leave us all alone, we dont harm most people.
Jesus fucking christ what have they done to their wonderful country. Now they are just like the French.
Hope you got GOLD or SILVER!!! This is nothing more than desperation move before the cat is let out of the bag. There must be some gargantuanly bad news about to hit the skids.
This smacks of a deliberate trough-digging. Someone wants to buy on the trough. Watch for short selling bans to be lifted after the puppetmaster has a good buying or selling spree.
I am amazed that so many people think that politicians are just "dumb". Any time you have to ask yourself why someone would do something that makes no sense, you just aren't looking hard enough for a reason. Same thing with all strange politics. Why would the US congress pass a health care law that was massively unpopular, and risk their comfy incumbencies? Because they are or are going to profit handsomely from it, even if it tears the country and the insurance companies apart.
Look at all the "leaks" of sensitive market info the US gubmint has had, followed by an "oops". No oops. Someone wanted to make a buttload of money off that oops.
I don't think most politicians and the super rich are particularly dumb - I think they are insanely shrewd - shrewd enough to know it works to their advantage for everyone to assume they are dumb as a box of rocks. Not to say they don't deserve a king-size beating one way or the other.
"even if it tears the country and the insurance companies apart."
The insurance companies are making a killing off that healthcare law. Massive increase in customer base. I heard some dumbass recently claim that this would hurt the healthcare companies because of more people on Medicaid. Who do you think administrates Medicaid programs?
Read the law, or at least the relevant parts. It's a short-term gain, long term nuke. What's going to happen when people realize the insurance companies are required by law to cover them no matter what condition they have, and they can't charge more due to health condition? Guess.
It often looks good on the front end, but the law of unintended consequences is a killer.
Ditto. This is a plan to destroy private health insurance. The writers of the law want that, and this law would give it to them. I say "IF" because the bill is wildly unpopular and so are the politicians who enabled it. House of Representatives can defund serious parts of it starting next year. Supreme court can hobble it entirely merely by doing their job of protecting the Constitution. There are tons of other stupid provisions in there too. Take for example the requirement that we all generated 1099's for any transaction over 600$ Awesomely stupid.
"and they can't charge more due to health condition?"
Pretty sure that's not in there, but I'm always glad to be wrong on anything, otherwise I can't increase my knowledge base.
The point of the law was in part to erase the burden of being denied coverage if you have a serious illness. That was why they paraded around a little kiddie with a sad history on stage during the runup and the signing of it (like all good political ploys, his story was largely bogus). Pricing someone out of the market is an end-run around coverage denial, just like cutting someone's work hours is an end-run around firing them.
No, they can't charge you extra as a result of either your health status or your sex, but that provision doesn't kick in for a couple more years I think (2014??). It may already be in place for "children" (you know, those under age 26 or whatever).
It's not intelligence. It's raw criminal cunning.
Just like how a smuggler will switch from drug-selling to prostitution once the former stops being as profitable.
They're not intelligent in the normal sense. Yes, it's shrewd, they ALL make a lot of money from this mad game... but it usually comes to an end in pain.
See: Russia, 1917.
The czars were brilliant, until they weren't.
You bought it, you go broke with it. Sucks if you own any of that crap.
Isn't tomorrow the Greek bond redemption date everyone was worried about? Something like $30-35 billion?
Is Germany telling everyone Greece wont get the bailout?
Therefore, German banks would get slaughtered.....
Ah yes. the truth finally comes out!
"A Bingo has been called. Please hold on to your cards as we validate the numbers."
101 years, you win the untwist-the-spin- doctoring game!
The pols in Germany are worried about a Greek-led meltdown tomorrow in the fixed income and equity markets. The pols will now say that they are doing everything in their power to stop the speculators. Whether a meltdown happens or not, the pols will flash their "get out of jail free" card.
Hi, i live in Germany.
Apparently only naked short selling is a banned by the BAFIN according to German media sources.
Just NAKED short selling to be banned in Germany.
18 May 2010 17:40 BST *DJ Germany To Ban Naked Short-Selling From Midnight -German Lawmaker
When the f'k was naked short selling EVER legal?! (Not directed at you London dude.)
Yeah, that's like saying "Illegal Immigrants are Illegal". Not that we do anything about it here in California...
So it is GOVERNMENT BONDS and stocks! Good luck being a market maker/primary dealer in Government bonds and not being able to set up a short position in anticipation of having to bid on customer sales. This will either force very wide bid/asks or will clog liquidity in what are supposed to be liquid assets.
Ah, now that explains the massive run up in the Dax. Tomorrow will be very interesting with a big vacuum underneath.
Must be some pretty dreadful news about to hit if they are banning it now and not waiting till the market falls first.
Stupid idiots will only make the falls deeper and faster. As for just naked shorts, yeah, they will make sure that shorting will be harder to do.
Why do they not ban longs.. or ban selling, oh but you are allowed to blow crazy mad bubbles, that doesn't matter does it!
18 May 2010 17:40 BST *DJ Germany To Ban Naked Short-Selling From Midnight -German Lawmaker(MORE TO FOLLOW) Dow Jones Newswires
May 18, 2010 12:40 ET (16:40 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
18 May 2010 17:56 BST DJ Germany To Ban Naked Short-Selling From Midnight - LawmakerFRANKFURT (Dow Jones)--Germany will ban so-called naked short-selling from midnight, a lawmaker with the ruling Christian Democratic Union told Dow Jones Newswires Tuesday.
"The ban of naked short-selling will be valid from midnight," Norbert Barthle, the CDU budget spokesman, said Tuesday.
He added that Chancellor Angela Merkel will announce the plan in her speech to the lower house of parliament Wednesday morning.
So-called naked short selling--which differs from short selling in that the sold shares aren't borrowed in advance--came under fire at the height of Greece's struggle to refinance its debt, with many euro-zone governments saying such transactions in credit default swaps, a type of default insurance, artificially inflated Greek funding costs.
-By Andrea Thomas, Dow Jones Newswires; +49 69 29725 500; andrea.thomas@dowjones.com
Much ado about nothing. It's NAKED shorts only that are being banned.
I love this "freedom space" to death but let's keep our focus on the big issues instead of over reacting to every bid of incomplete information.
But they will no doubt make it much harder to do normal shorts by making the borrow very difficult or impossible
No they wont; it probably means that inventories will need to be reported every day and total borrowing will be measured against the float. Its really not big of a problem. Failure to comply will be heavily punished either by money penalties or banning from market participation.
It should only happen in the US-- but the SEC/DTCC broker/dealer bankster hedgefund owners have been getting away with it for so long, they see no reason to stop.
Much ado.
If I buy a put on the bund, or a put on the DAX, from my broker, can he delta hedge himself by shorting "naked" futures? Are market makers exempt for this reason?
Right now I dont know.
"Hilfe, Hilfe, we are sinking!"
"What are you sinking?"
"We are sinking of banning short zelling in ze nude"
LMAO
+1 Classic!
lol
http://www.youtube.com/watch?v=8vBn2_ia8zM
Excellent!
Now can we prozeed wisz ze meltup...
LMAO
http://www.youtube.com/watch?v=1qtt-PeHsjY
Great, hadn't seen that one before ;O)
LMAO
Funny.
Ship, meet immovable object aka lighthouse.
Merkl said she would combat HF.
Banning naked shorts is a good way to do just that without interferring with market dynamics and mechanis.
In another news; Madoff exemption still applies in the US [SAC and Einhorns preferred trading strategy when the numbers need to be met, but aren't]
My Dear Friends,
You must not short ze paperz.
Regards,
H.
The last time the US banned naked short selling was August, 2008.
And after that we had 9 months of the good stuff :)
This is not a bad move, but they should have narrowed it onto short selling their gold/silver. They want JPM off of their German silver, and I do too. I want JPM o stop using the "money" that was "bailed out" to them to stop shorting Precious Metals altogether. I know they have to eventual;ly, as shorting metal they do not have is burning a hole in their pocket. But when the money is free I guess they do what they want.
Short selling is fine if it is on a corporation or <sarcasm> person...the joke is because corporations are people, and I would sell Wall-Mart short as I would sell Jim Cramer short if I had the chance.
The next step is for them to ask NY for their gold reserves. I wonder if NY said "your reserves are on loan to you" would Germany wine, or would NY ignore them altogether.
As we speak EUR/USD took a massive dip.
Engineered Devaluation.
All the precious metals are down too. Bond auction?
I can still short the 'EWG' ETF.
http://www.google.com/finance?q=ewg
Pretty extreme. What could be coming that could make them do something like this?
Maybe the US ban on the IMF bailing out countries with over 100% debt/GDP means the IMFs $320 billion share of the bailout fund won't be coming, which is the only real money in the bailout, the rest is smoke and mirrors
Maybe an announcement that another Euro country has been cooking the books?
Maybe the recent election results means Germany is about to announce it won't participate in the bailout?
Maybe a big bank about to announce a huge write off on something? (Although since the govt backstops EVERYTHING now, what can they lose money on?)
Economic numbers can all be massaged, so what could it be?
The UK isn't going to announce anything until the emergency budget on July 22nd
Any other theories?
You mean to say naked shorting was legal in Germany? Really? Why don't I believe this?
http://online.wsj.com/article/BT-CO-20100518-710130.html?mod=WSJ_latesth...
WSJ says just naked shorting.
Now... that's certainly interesting.
Thank you for inciting me to use google.
If wikipedia is to be believed then naked CDS make up most of the CDS market, which sounds to me like they're trying to control spreads by reducing demand.
Furthermore it sounds like this will impeded the basis trade whereby a hedge fund buys naked CDS, later the Bonds that mature at roughly the same time, and pocket the spread with little to no risk attached. The hedge fund makes a pile of money AND the government gets to issue more debt in the meantime.
Is my assessment accurate Assetman?
I'm not really sure the Germans can control sovereign CDS spreads, as the contracts written can be done just about anywhere.
Either the Germans are sending a very broad message that naked shorting of anything is not going to be allowed in their own yard (go take a hike, hedgies who don't hedge).
Or something more sinister is afoot in its own sovereign credits (i.e., massive new issuance, currency dislocation) that would prevent speculators from making a run on their own demise.
As my mother used to say "it's probably nothing... but you'll certainly notice it if it's not".
It's even more interesting that the French seem content not to play along, oui?
I continually get the sense that actions like this taken by government are attempts to subvert market forces that don't agree with their views so I'm inclined to say they're scapegoating, but then I have a pretty Libertarian bias.
At any rate I feel as if politicians are unpredictable (which is probably why I'm still surprised when they go and do exactly what some obscure Austrian economist predicted they would several decades ago) but if I had to guess I'd say France will be following suit shortly.
1.23 is looking real tenuous.
We're just gettin started...
http://www.bloomberg.com/apps/news?pid=20601087&sid=ae5fcjy54xnu&pos=3
Naked short ban on 10 most important financial institutions... wow, some pretty bad stuff about to hit!!
Yes, Greek Independence Day is tomorrow!
O, in germany the greeks are welcome to their independence! More independence please!
OMFG!
Angela Merkl to ban shorting naked.
So all clothed shorters have no issue, right?
Naked shorting has been going on? Yeah, I didn't know Germans were so liberated.
spank me, spank me hard...In GS We Trust...
...for ever believing there was a Free Market
My guess is the IB/Broker-Dealer/Power-Players want all the shorts to themselves.
If legitimate shorts aren't available to small players, well, tough luck.
That's the way the strudel crumbles.
Just confirmed by the German Bafin:
very curious, but it was in the works
for a while, timing is disturbing, reminiscent
of Kriegspiel
Schauble is on all fronts, his team
drafting a 12 point plan for the Brussel's
Econfin meeting on Friday, and just recently
rejected the idea of a financial tax, while
having Angie's full support for dramatic tax cuts
Anyhow, the Germans always said they wanted
their own "financial reform", it looks like it will
come public in bits and parts
Guys, guys: A ban on "naked short selling" has already been established as code for "impending market interventions" by the central bankers using the big banks as their proxies. Has everyone forgotten 2008-9 in the US?
Our naked short selling ban was a prelude to regular massive engineered short squeezes in the financials, most notably on March 9th, 2009 when ALL SHORTS (not naked) in Citi and BofA were called in by primary broker/dealers. Every hedgie had to cover.
Germany already has a history of doing this. Remember the Volkswagen short squeeze?
Bloomberg had it up but now has killed the link.. It said that blanchflower said eu would need a 2nd bailout..
trading "naked" CDS should be banned.
for one, it is illegal to sell insurance to individuals who have no significant interest in the property being insured, i.e. i cannot buy insurance on your house.
second, as we've learned from AIG practices, the CDS issuers have neither the intention nor ability to pay up, becasue none of them haev any reserves. Sovereign CDS sellers are simply relying on the bailout....
Time to go to plan B!
Oh yeah right... this is plan B....
I'm sorry to be stupid, but I see no good derived from naked shorting except to the guy who is naked short. I remember Taibbi's article about it and agreed with him then and agree with him now.
we have a bad on naked shorting in the united states. this is a good idea. some how certain people short things with more stocks than the available float. sec of course doesn't enforce. confirmed delivery of the short before you can make the trade. three days lay over I believe. wall street borrows for shorts, does the trades, never takes delivery bad stuff
Update: short selling ban will apply to stocks and euro government bonds according to German N-TV station. This is an act of desperation and will force all those who are long German assets to sell asap...
I know this is an oversimplification but if they are long they aren't naked and should be able to buy protection of some sort. NAked shorts, cdos, whatever, i.e. that thing they did with aig, should be illegal all over the world. If the usa wasn't a safe haven for maggots it would be.
From FT:
Update: Confirmation, plus details. Flashes, via Reuters:
Note the subtle difference in the last two flashes, which does suggest restrictions on futures and repos.
...these people are bat-shit crazy.