Italian Regulator Urges Banks To Destroy Shorts, Pull All Stock Borrow, Generate Marketwide Squeeze

Tyler Durden's picture

Frequent Zero Hedge readers may recall that back in the spring of 2009, when the market needed a desperate boost by any and all insivible hands, we exposed one of the methods of ramping stocks as being stock custodians, in this case State Street and Bank of New York, generating a wholesale squeeze by pulling borrow, or in other words retrieving lent out shares so those who are short are forced to cover. Many laughed assuming this was merely yet another deranged rant. It wasn't. Fast forward to today, when we learn that the Consob, Italy's market regulator and SEC equivalent, has "recommended to stakeholders who have lent shares in Italian companies to retrieve them" - i.e., playbook artificial short squeeze 101. This is two days after the Consob banned naked short selling: a move which had disastrous consequences after the market continued plunging and would have collapsed entirely had it not been for the ECB and/or China buying Italy bonds before yesterday's Bill auction. ""Yes, we've exercised moral suasion by asking all those who have lent shares to retrieve them," Consob Chairman Giuseppe Vegas told journalists on the sideline of a conference." And now you know how to generate a market-wide short squeeze.

From Reuters:

Financial daily Il Sole 24 Ore reported on Wednesday Consob wanted banking foundations -- which are key shareholders in Italian banks -- to retrieve the shares lent to short-sellers.

Short-sellers typically borrow securities and sell them on, expecting to buy them back later at a lower price to repay the lender and pocket the difference.

Consob introduced on Sunday disclosure requirements on short-sales asking investors to notify short-positions on Italian stocks when they represent 0.2 percent or more of the company's share capital

And now you know that any and every market rule will be "morally swayed", and shorts will be literally anihilated, when it seems that the entire market pyramid is unravelling. Will this desperate attempt have a long-lasting effect? Of course not, as it merely confirms just how powerless the global Ponzi scheme is to prevent its implosion if it simply plays by the rules.

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ZeroPower's picture

Market manipulation can only go so far. Watch for more death in the ITA space after this short lived bounce.

Crisismode's picture

Italy has taken a sharp hit on the jaw, and is reeling toward the floor, about to go down for the count, the Chinese ref can drag out the count as long as possible, but the contender won't be waking up again soon.


Sudden Debt's picture

Those brainiacs don't seem to realize that the once who lend out the shares would just sell them when they could retrieve them which would plunge the stocks and give the remainder shorts a bigger profit.

I also still want to see the first investor who does what regulators propose :)

"Don't short us! It's not the right thing to do!" =  Look at me! My stock is going down and you can make a fortune shorting it!

Quintus's picture

What are these 'Rules' of which you speak?

cossack55's picture

Olden-speak, similar to "laws" and "justice". Only still exist for those whose networth is over $25 million.  Everyone else is "serf" or "slave".  Welcome to amerika.

amarshall's picture

Strong calvinball reference

cossack55's picture

Wonderful. Another Orwellian term added to the lexicon. Thanks.

billwilson's picture

"This is two days after the Consob banned naked short selling: a move which had disastrous consequences after the market "


What? Is that backhanded support for "naked shorting", a practice that should alwasy be illegal! Shorting is fine, naked shorting definitely is not fine.

Tyler Durden's picture

Sure. Just don't forget to also ban inverse (1-infinite leverage) ETFs as well as price regressive options, which drive the price of the underlying in sufficient volume.

ZeroPower's picture

While option vols and pegging has been pretty clear with that respect, im unaware of ETFs having any say at all on movement of their underlying.

i.e SPY does not move the ES.

(Wasn't my junk, though i know you know)

Sudden Debt's picture

Why not?

Do you think that game is so save?

50K and you can play it :)

Just check out some sites. In small print they all say that almost 99% of all those trades end badly.

And there's always the balance check at the end of each trading day.



equity_momo's picture

Buy puts. This is a surefire signal the market is ripe to crash.  Guaranteed.

Sudden Debt's picture

Just stay away from that rigged game and go PM's.


GeneMarchbanks's picture

Kick the can is dead! Long live the kicked can game!

Sudden Debt's picture

that can has turned into a oil drum filled with plutonium rods and that "road" is actually the pier your walking on and that blue "horizon" is the sea.




jbc77's picture

Ya know, this stuff is just surreal. I pray to God the global banking cartel eventually gets destroyed. Is Consob so foolish to think that a forced squueze will matter for more than a few days?!? Whats next, outright bans on selling stock you own? This will backfire because after the squeeze when the selling resumes there will be no buying to cover. We are living in the Twilight Zone people......

Azannoth's picture

If 'God' was real he'd be a banker, I mean just look at it objectively,

- god has a full monopoly on 'his' currency - salvation

- he 'enforeces' his monopoly by assimilating or killing all competition

- You have to pay him 'interest' in form of prayer and veneration if you like it or not

- he does not give you an option of using a different god or currency, your locked in

- and above all, he's Too Big to Fail!!!

cosmictrainwreck's picture

and He always enjoys a good chuckle.....

snowball777's picture

Why would God destroy God's work?

Debt Rolling's picture

Well, I found pretty funny too the -10%/+10% inversion on FTSEMIB banking stocks in less than 2 hours yesterday at ~10AM local time. The -15%/+15% swings in the space of minutes on Unicredit were laughingly ridiculous.

The good thing is that suspensions, short selling bans and institutional/ECB support actually aggravate the collapse. Traders are only that dumb. The heavy, greasy, fat hand of the ECB buying peripheral bonds in panic is easily recognizable. So is the supplicating voice of Ghizzoni calling Berlusconi for action. 

Flore's picture

its always the shorts... never the idiots who run the company

max2205's picture

This is what happens when Govt gets their backs pushed against the WALL.

Sudden Debt's picture




In Belgium we have 2 political parties who are now screaming "we should do this and that to save the economy" and blablabla....

Nobody ever says: You've both been in power for 60 years, lost the last election BUT you guys where the once who screwed up this country all along because of BAD managment.

Idiots, meet firing squad, firing squad, fire at will. The one that misses pays the first round after this.



ziggy59's picture

as mentioned the other day.. it CONjob. mispelling across the board

jkruffin's picture

Prime reason why the retal investor has vacated the markets and will never return.  They just put any price on the board they want any time they want.  How are futures so high this morning after all the bad news that continues to come out globally? Not just here in the US, but everywhere it is bad and getting worse.  Yet they find time to ramp futures up again?

This is about the most ignorant financial system I have ever seen.  Lie, cheat, steal, borrow, pump, manipulate,  rinse then repeat when it gets worse.  Just unbelievable!

bigwavedave's picture

i think that the govt and regs should squeeze more often. or headfake more often. just shake out the longs as well as the shorts.

Vampyroteuthis infernalis's picture

The banksters knew that Greece, Ireland and Portugal were troubled and played up their "crisis" to make money. Italy is TBTF. This was not supposed to happen. Caught them with their pants down.

luigi's picture

It needs to work just until tomorrow evening (Ital. time) when the next BTP bid will be closed.

tim73's picture

It is all good and proper when American rating agencies short the fuck out European nations but when the countermeasure flares start lighting up the sky, you crybaby fucks start crying mama. You guys started this, let's PLAY!

camoes's picture

Unintended consequences 102: Rigged market won't allow participants to express true price signal? No worries, drop the numeraire used (fiat currencies) and express in a supply limited numeraire (gold, silver & oil). Deflate the numeraire, bitchez!!!

Urban Redneck's picture

How is a bunch of bankers and shadow bankers borrowing a couple bucks of other people's money leveraging it insanely and simply trying to artificially drive the valuation of certain companies to 0 purely for profit when they know they are being backstopped by very same governments that will have to backstop their target once once it is dead a reflection of true price signals?  THE FLOOR BEING KICKED OUT FROM UNDER CERTAIN INSTITUTIONS IS THE UNINTENDED CONSEQUENCE OF MORAL HAZARD AND TBTF.


gimli's picture

Well --- if you can't go short ya gotta buy gold and possibly the miners now.

..... and ...... in consideration of Italy's presenet situation --- buy a lot of pasta too.

ZackAttack's picture

Because this is the obvious solution for rising bond yields and insolvency.  

caerus's picture

The evil speculators!!! Nooooo!!!

lizzy36's picture

When it comes to Italy we aren't exactly talking about a country without political risk. It has been functioning is a semi autocratic state for about 10 years.

Berlusconi is not exactly a strong leader:

In Italy Berlusconi is not just bedding young women left and right but flaunting it publicly and giving them high-profile government posts? More to the point, how is it that he’s still in office? True, he’s facing criminal charges, but Italians have come to accept that that doesn’t mean much. He’s been indicted more than 20 times (not including four or five current trials) and has managed to escape conviction each and every time. In any other Western democracy, a leader like this would have been pushed out long ago.

And he has been changing laws for the last 20 years to save himself from JAIL:

He never wanted to learn that.” Tackling his one priority of saving himself, he came on like a bull in a china shop. When rumor spread that his brother, Paolo, might be arrested for having allegedly bribed tax inspectors to keep Fininvest out of the prosecutors’ investigations, Berlusconi issued a special decree that made it illegal for the judiciary to arrest people for political corruption and fraud. With the stroke of a pen, thousands of defendants who’d been arrested for corruption were suddenly free men. Throughout Italy, it became known as “the Save-the-Thieves Decree.”

Together, they would tailor the laws to fit their immediate legal needs. To wit: Berlusconi was still facing a serious charge of accounting fraud related to illegally transferring millions of dollars to Craxi. So Parliament decriminalized that kind of false accounting, rendering the charge moot. He stood accused of tax evasion. Suddenly there was amnesty for tax evaders. He was facing the charge of having bribed a judge: Parliament passed a new law granting immunity to Italy’s highest-ranking leaders.

Count on the fact that this country will do WHATEVER it takes, to evade the consequences of its debt burden, including but not limited to rewriting the definition of debt ;).

Hondo's picture

JPM is my custodian......and if they pull any shit like this I'll make sure JD sits in a jail cell for the rest of his life.....I believe most custody banks (promoters of the shadow banking system) used clients money to juice earnings during the 2005-2008 your balances very carefully.

Spartaguy's picture

I fully expect the SEC and its Goldman employees to follow the example of Italy and squeeze short-sellers..HA!!