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.