So On This Whole Naked Sovereign CDS Ban...

Tyler Durden's picture

There are 4 hours until midnight in Germany. There are trillions in gross sovereign CDS notional. Germany alone had $71.4 billion in Gross CDS notional and $13.3 billion in net according to DTCC. Add up all of Europe and you get half a trillion. How on earth will the German market unwind these with all European traders already long gone. We also make the generous assumption that US CDS traders are still around: most of the BSDs tend to leave for the nearest Marriott Garden Inn by 1pm. So with naked CDS positions now verboten, who will be allowed to sell CDS? For a symmetric hedged transaction, anyone selling CDS (long credit), would have to be short cash govvies to be permitted to sell CDS. And who in their right mind would disclose that they are short anything. This is the most ill-thought out regulatory plan in the history of capital markets, and that, shockingly, includes the Frankenstein monster created by our own lame duck coruptus in extremis senator.

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jkruffin's picture

The Dukes are yelling right now in Germany, trying to get the traders back in the office and "TURN THOSE DAMN MACHINES BACK ON!!!!!!"  lol

BlackBeard's picture

This is going to be awesome.  Capital market infrastructures are going to be put to the test.  Let's hope they don't epic fail like the NYSE on Tuesday mornings.

Assetman's picture

And who in their right mind would disclose that they are short anything.

The French.

Postal's picture

The French are not in their right mind.

Tipo anónimo's picture

I'm junking you because that was SO awesome!  Couldn't breathe for a moment there.

Sudden Debt's picture

This just get better and better by the day :)

The lower this goes, the cheaper the buy.

jkruffin's picture

LOL Reuters and AP are so far behind the 8-Ball, they still have main headlines that stocks are falling due to retail and tech   LOL

nonclaim's picture

Can I change the rules of the game too?

From midnight on you are no longer in power. Have a good night.

Apostate's picture

Well said, black cat.

What an amazing death pact these rulers signed. Astounding!

ZackAttack's picture

This is Calvinball. You are not Calvin.

Whizbang's picture

but you can be calvin if you find 17th base by 5:00

mephisto's picture



Other kids' games are all such a bore!
They've gotta have rules and they gotta keep score!
Calvinball is better by far!
It's never the same! It's always bizarre!
You don't need a team or a referee!

You know that it's great, 'cause it's named after me! Nicolas Sarkozy!

rawsienna's picture

Greek bailout in trouble ..  Euro break up coming.

Sudden Debt's picture

Funny thing is, BNP Paribas an Societé Général still offer the same products :)

Just SWITCH!! :)

Let's see if the French will follow, otherwise this goes exponential!

etrader's picture

It seems only to be   verboten in deutschland.

Nothing to stop "opertions" to  switch base into other Euro area's.

(side-note Ms Drury is in for Ms "b-cups" Burnett on the Street Signs slot)


primefool's picture

If the greek bailout is in trouble and greece is forced out of the euro- we should get a tooth rattling rally in the Euro- No?

tecno242's picture

A lot of people trying to solve a problem they don't understand...

oh well..

go ahead Europe.. have fun creating a bid for everyone who was still hanging on long to sell into.

Double down's picture

Solving financial problems politically, not a good method 

Postal's picture

What?! I've never heard such nonsensical drivel!


Tart's picture

S&P forming a bullish falling wedge on daily. Something that might have zh followers whining HFT's floated it up on low volume at the close but I say bs, closes green on day on technicals

AccreditedEYE's picture

I'll take the other side of that trade Tart.

Me XMan's picture

They're thinking no one holding papers will sell. It's gonna be fun to watch next couple days.

lizzy36's picture

This is fucking insane.

How can Germany ban naked short selling on Euro soverign bonds?  Don't these bonds trade elsewhere (rhetorical).

Unless France and the UK follow Germany (which lets face it at this point is a distinct possibility). 

etrader's picture

All Europe’s finance ministers were in Brussels today so it would be no surprise.....

dcb's picture

the same way we ban trade with iran. you trade the stuff you get excluded from the markets by european banks, get fined, etc. the euro area is the "largest" market. so they have clout.


did anyone think the system was going to be fixed without disruptions. by the way I consider any downward move by markets to be an indication of good regulation.

ambrosiac's picture


Naked sovereign...  as in, the Emperor has no clothes.

Crook County's picture

I told that kraut a fucking thousand times that I don't roll on Shabbos!

w's picture

ZH, you've got it so wrong I think.


Finally someone has the guts to begin to stick it up the financial industry's ass and here you are going all outraged on us.

Isn't it time someone not too corrupted and gutless started to clip those bankers' wings? Isn't the odd mishap to be forgiven as long as the moves take us towards something other than the corrupted farce that financial markets have become?

mephisto's picture

Understand the feelings, but no. This is the wrong move. Hedge funds use leverage and derivatives.

Leverage isn't a sin.

Trading derivatives isn't a sin.

So what is wrong? Its with

Ripping off clients who dont have an army of PhDs is a sin.

Frontrunning clients is a sin.

Using main street's savings for collateral for leveraged trades is a sin, (JPM, BAC).

Hedge funds do none of these 3, they trade with the big banks, dont have clients as such.

We all need to figure out how to let a high frequency, high-tech market exist and still protect retail banks and pension funds. Banning certain trades isnt how, its too crude.



mynhair's picture

No fear, Berspanky will fix all.

You don't pay taxes, I hope.

Buck Johnson's picture

I've been reading from bloomberg and other places and it looks like Germany made a stupid blunder.  The problem is as one person is quoted saying, “It makes it look as if the Germans are worried about something behind the scenes that the market’s not aware of,” said Michael O’Rourke, chief market strategist at BTIG LLC in Yardley, Pennsylvania, which provides trading services to institutional investors. “It almost looked panicked, which further undermines confidence in the markets. They’ve done as poor a job as one can do in delivering a message.”.  They are panicked about something and it isn't helping the market.  For Germany to do what it did says that they know of something coming down the pipe very soon and they are doing things to protect their economy.

mephisto's picture

Agree 100%. Was out for dinner with gf. Now sat reading the news at 1am in London, what just happened?

Its very tough to trade any asset in this environment, long or short. If in doubt, sell it. Above all sell DAX. Check the chart its at crazy levels.

Last time we were out for dinner was May 6th, came back to see the market 3% down and my bid-offer 6 times the usual spread.

I will warn ZH readers next time we are out for dinner.