Italy May Enforce Naked Short Selling Ban As Early As Tonight To Prevent Market Rout

Tyler Durden's picture

Once again the great diversionary scapegoating of speculators begins, after as Il Sole 24 Ora reported that the Consob, or Italy's regulator, may enact a naked short selling ban as early as tonight. The premise is that it is the shorters who are responsible for the ruinous state of the global ponzi. Not the fact that it is a, well, global ponzi. Distraction 101. And yes, it did not work back in 2010 when banning naked shorting was implemented in other European countries, it will not work this time either. But it won't stop bankrupt governments from trying. To wit: "Commissioners will assess the situation before markets open Monday, said a Consob spokesman, who declined to be named in line with the regulator's policy. Commissioners may decide to restrict "naked" short-selling in line with similar decisions taken in other European countries, he said.... The Consob meeting occurs after shares of Italy’s biggest
banks fell to the lowest in more than two years on July 8, and
government bonds dropped, driving 10-year yields to a nine-year
high." 24 Ore adds: "Consob intervened several times in the past on short selling after the collapse of Lehman Brothers to protect stock markets."

More from 24 Ore:

Meanwhile on Sunday afternoon, Lamberto Cardia, Consob, who led Consob from 2003 to 2010, had more to say. For Cardia short selling "in the presence of a serious crisis should be totally prohibited for the period required." For the former chairman of Consob, the day after the crash of Lehman Brothers Bank restricts short-selling within three days, "it is preferable to a reduction in short-term market movements rather than attend to the serious damage that will result in load of listed companies, also strategic for the country. "

And to think there was a time when the stock market could drop without resulting in strategic consequences for the host country...

As noted, this is not the first time this approach has been taken:

On July 5, European lawmakers voted in favor of a ban on short selling of government bonds in the EU unless traders have at least “located and reserved” in advance the securities they intend to sell. The European Union Parliament in Strasbourg, France, also called for restrictions on traders’ use of credit- default swaps to profit from defaults on sovereign debt they don’t own.

The European Securities and Markets Authority, which co- ordinates the work of national regulators in the 27-nation EU, should be given emergency powers to temporarily ban short selling or trades in CDS on sovereign debt in the EU, the Parliament said.

Politicians including German Chancellor Angela Merkel and French President Nicolas Sarkozy have claimed that naked short- selling and credit-default swaps worsened the euro area’s sovereign-debt crisis, and have called for EU curbs.

Michel Barnier, the EU’s financial-services chief, said last year such trades may lead to “disorderly markets and systemic risks.” Finance ministers from the 27-nation region agreed in May that traders should be allowed to short sell government bonds and stocks if they have a “reasonable expectation” that they can obtain the underlying securities. They also rejected calls from Germany for a ban on sovereign CDS.

Alas, this is nothing more than an attempt to indicate that Consob has control over the situation when it has none. As a reminder the US instituted a ban on all short sales in financials, only to see longs dump all their holdings and lead to the biggest plunge in the market in the aftermath of the Lehman collapse.

Thus, in attempting to mitigate the crisis in the aftermath of "Black Friday", Italian authorities may have just made the bears' job that much easier.

h/t G.C.

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TruthInSunshine's picture

It's all good, Brosephs:


Italy, Shcmitally.

Debt, Schmet.

Default, Schmefault.



max2205's picture

Naked shorting should be banned everywhere......all the time

el Gallinazo's picture

Totally agree. As Max Keiser says, it's just another type of counterfeiting.

Idiocracy's picture

+100.  Amen!  It is counterfeiting and theft, pure and simple.  The opposite of free market capitalism.  

To 'defenders' of NSS: How would you like it if you built a company and some jackasses could just will its shares into existence and sell them at any time?  Why does the SEC even bother with all the stringent share registration requirements if they allow this to persist? The fact that the SEC winks at it proves they are the pathetic lap poodles of the elite broker lords.  


Regular short selling is fine and healthy for markets.

SilverIsKing's picture

You can't sell Consob short.  They are a very creative bunch.

Git yer gold while supplies last!!!

DoChenRollingBearing's picture

Italy may be the first BIG example of what´s coming...

Just a few more weeks to get gold please!  Just a few!  I promise, and then I will have enough!

Water filter and food too.  Maybe another 300 rounds of ammo for each...

HungrySeagull's picture


My soul mate!

Not really lolz.

Good luck!

TheTmfreak's picture

Shit is happening too fast for me and I can't make any purchases! I want da gold. Gimmie da gold.

Sudden Debt's picture

And the housing bubble in Italy is also hughe.

500K for a rowhouse is quite normal in Rome these days. The older the more expensive is their crede. It's just nuts. And rental prices are tiny compaired to the selling prices.

1. Rates are going up so there will be massive foreclosures comming

2. Unemployment is quite high en will get a lot higher.

3. No real efficient industry base.


This coctail is toxic!

HungrySeagull's picture


In US Dollars or Italian money?


Maybe those big brass beds that are fuckable for strength might still have value on the firesale market.

Sudden Debt's picture

the made in europe kind of funny paper.


The_Euro_Sucks's picture

Lol, Dochen, even a shrimp like me already knows for almost 2 years that Draghi (ex goldman sucks) made deals for Italy like  Greece. The market (giants) know this way longer. I see no suprises coming exept paper going higher. ECB has the same owners as the FED.

disabledvet's picture

That's what the Fed said. Flag moving time?

Cleanclog's picture

Shouldn't be called a "market" anymore.  So medicated and manipulated that simple buying and selling, or anticipatory buying and selling is challenged.  

Gonna get even more nuts when US GDP becomes further downestimated with new China export news.    Carry on!  

ziggy59's picture

algos will read- less countries may default than predicted this weekend,. Dow -5th dimension, "up up an away"...more fluoride and chemtrails right away!!

ziggy59's picture

should be named and written for what it is.. Conjob.

buzzsaw99's picture

Just ban selling of any kind. Buying only permitted.

three chord sloth's picture

Don't be silly... we can't ban all selling. What about the insiders and the VIPs? We must allow them to cash out -- at inflated prices, of course -- or the world will end!!1!1! After all, why do you think they're pumping up stocks everyday... the wealth effect? The good of the pension funds?

JJSF's picture

That's what the comex did when silver prices became too high in 1980. Banned all buying..only selling allowed. Meanwhile board members of the comex were well stocked on their shorts and did quite well.

SamuelMaverick's picture

I read some articles about the comex scam in 1980, one of the articles included an interview with one of the Hunt brothers where he explained how Comex retroactively changed the margin requirements which pretty much wiped the Hunt brothers and their investment associates out. It blew my mind that Comex could just change the rules in the middle of the game to enable an outcome that they desired. The board of the Comex were in fact loaded up on shorts and made a killing. 

Libertarian777's picture

IIRC, that article basically indicated the Hunt brothers were not speculating. They were long silver, and were intending to take delivery, until the Comex changed the rules as to how many contracts a person may be long.

That plus the overnight change in the margin requirements, forced them to liquidate.

malikai's picture

I think you're on to something. Are you an EEA economic consultant?

mt paul's picture

if i can't trade naked.... 

might as well put on pants 

and go bugger porcupines ....

hardcleareye's picture

ahhh.... having pulled my share of quills out of dogs, even with pants that sounds painful...... but then again..... traders have never stuck me as "mentally sound".

smlbizman's picture

should gold have a strong open at 6?

DoChenRollingBearing's picture

I´ll be by a little later to take a look at gold´s price as well.

Iam Rich's picture

Thought naked shorting know...not legal.  It's called counterfeiting.

buzzsaw99's picture

the squid has tentacles made of synthetic cdo.

Problem Is's picture

In the real world where Jamie & Lloyd don't write the laws and pay(off) the regulators...

uranian's picture

my first thought, too. lulz at when it's become so commonly accepted to commit crime that it warrants special mention when the relevant financial authority decides to actually prosecute the crime.

and it entertains me that i go away for a week and pay little attention to the latest round of financial impending doomness, and now it's a different country about to go down the crapper. my bets are for the UK next week!

Mr.Kowalski's picture

Banning short sellers is rather like shouting "Oh sh!t this is bad" from the rooftops. In doing this, they'll actually scare real investors into cash withdrawls and stock dumps.  

FeralSerf's picture

Short selling should be banned if the short seller can't   beg, borrow or rent (note: I didn't include "steal") some real valid shares to deliver to the buyer.  He also shouldn't get the use of the money he gets from the short sale until he covers.  The non-naked shorter also has a risk of a short squeeze, which may not a problem for the naked short seller with the resources to short the company into oblivion.

Otherwise, I agree completely that short sellers add liquidity and honesty to a free market.

combatsnoopy's picture

No kidding.

‎"Finance ministers from the 27-nation region agreed in May that traders should be allowed to short sell government bonds and stocks if they have a “reasonable expectation” that they can obtain the underlying securities. They also rejected calls from Germany for a ban on sovereign CDS."

---so let's say somebody sells naked bonds to squeeze Italy. Let's see how many UNCOLLATERALIZED collateralized subprimes the subprime dealers sold? $200 Trillions worth-when there was ONLY $86 trillion(?) bonds that exist on the US markets? 

Uhhhh-Did the subprime dealers think that they could collateralize $200 trillion worth of subprimes with only $86 trillions of bonds (IF that?).... 


$200 TRILLION > $86 TRILLION. By a lot of money.   The difference is $114 Trillion, I'm sure Bernanke's printing press of tax dollar collected Treasury yields and inflation of USD has that in it's back pockets. 

But the subprime dealers did it anyways, against better judgement. Thank you SFAS140 and Repo101. 
It seems like the EU is putting Italy in an unfair position and it's pushing the Euro down on purpose.  The naked short selling reminds me of how Soros shorted the British pound and the Myanmar currency.  At least Soros was straight forward with his intentions, the EUis not.  

Again, What makes the Finance Ministers in Europe think that Wall STreet speculators and others in hidden tax shelters are going to sell naked on reasonable expectation that they can obtain bonds (that might not exist) based on Wall Street's past behavior of selling uncollateralized "collateralized" debt obligations they couldn't cover?

Why is the EU/Finance Ministers/The European Securities and Markets Authority putting Italy in a bad position? The Euro (that they head) is getting dragged down because of this.  To anyone else this is a rather bad judgement call on their part. Hmmmm....are they forcing Italy to take a bailout?

The question is WHY?

DeadFred's picture

1. Find out who exactly decided to make and announce this change.

2. Take a look at their personal investment portfolio.

3. Marvel at the beauty of their leveraged short position.

ZHers should know better than to assume government officials are actually trying to help their countries. The top has been reached, the short squeeze is over, and the algos have been reprogrammed to 'down' mode. They won't get any more free goodies until the panic level is notched up a lot.

disabledvet's picture

and away from their banks. Thanks Mr. ECB! At least when Greenspan did it we had to wait for the inevitible. Here's the Greenspan approach:
versus as posted earlier "The Trichet Way":

six of one half dozen of the other i guess.

DoChenRollingBearing's picture

Yeah, well good luck with that Italy.  .govs never learn...

TruthInSunshine's picture

Everything right now has reached the point of Absurdum Maximus.

In other words, this is what it sounds like when PIIGS+UK+US fly.

In a hurricane, even pigs can fly [if for brief period, and with bad outcome].

HungrySeagull's picture

A car was auto photographed running a red light 8 feet above the intersection during Katrina. The speed was shown about 134 mph. The vehicle was upside down and planed all wrong.

The tickets went out anyway.

Gordon Freeman's picture

Bzzzzzzz! Wrong answer!  Things are going to get MUCH MORE absurd, mon ami...

buzzsaw99's picture

from reuters:

"From tomorrow, we have the job of showing we are united and blocking the effort of speculators," said Paolo Bonaiuti, a government undersecretary and senior aide to Berlusconi...

Stuck on Zero's picture

Italy is taking the wrong approach.  The way to handle naked short sellers is by taking their money.  The way to do that is to take deep government pockets and force the stock to up.  Announce something incredible to drive the price up.  Force a merger if necessary.  Before long you will soon all the naked shorts. A company I know of was getting clobbered by naked shorts and then out of the blue we were purchased by a bigger company for double the open market price.  What a squawk.  Two brokerage houses in Canada and one in the Netherlands came begging for mercy. 

Black Forest's picture

Force a merger if necessary

With Greece, China, Germany or the US? Decide.

Cleanclog's picture

Perhaps with Tom Cruise and John Travolta via Scientology.  The aliens will take care of the planet Earth playthings!

Urban Redneck's picture


The Italian "regulatory" approach reeks of bureaucratic impotence.  Press releases before the fact are counter-productive.  And some mid-level bureaucrat in Rome or Milan doesn't have access to deep enough pockets to to scare away TBTF vultures, if they are even employing a simplistic and primarilly short equity strategy.

But it is necessary to beat the bankers at their own game- their lack of fear and consequences has catastrophic global consequences.  And watching a TBTF who thinks "daddy is going to bail him out" skull fucked all the way to the poor house is better bread & circus for the masses than American Idol or whatever inconsequential garbage they are watching on TV now. 

Oh yeah, since "to the victor go the spoils" is the first rule of death/piss match banking- if they do it right, they'll some have some extra dough to either help out the weaker EU hands less able to defend themselves, or pay off a few pennies of that obnoxious debt.


equity_momo's picture

You clerarly dont understand markets if you think AOL-Warner type mergers are the answer. Because trust me , anyone buying anyone since 08 is paying a premium that will vapourize. Shorts are an integral part to markets. What do imagine will happen if there were zero shorts in the market on an NFP number like Fri? Selling begets selling. A healthy SI is a healthy market.