short selling

This is the ECB’s opinion on short-selling, which contains a slight rap over the knuckles for Germany:

While it may be necessary to impose short selling restrictions in times of financial crises, they should be introduced in a coordinated manner and removed again as soon as normal market conditions are re-established

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A Greek former European Commissioner has accused the country’s central bank of encouraging naked short-selling of Greek bonds by altering the regulations on its electronic bond trading platform last year. Vasso Papandreou, a senior deputy in the governing socialist party, made the charges on Wednesday in a written question to parliament.

The six-page question addressed to Mr Papaconstantinou set out details of measures taken by the central bank last year that appeared to facilitate naked shorting. First, the HDAT bond settlement period was extended from t+3 to t+10. Second, the central bank abolished penalties for investors who did not deliver a bond on the settlement date, in a move that allowed failed transactions to be continuously recycled. Read more

A disappointing auction of government debt has followed Germany’s decision to implement a partial ban on naked short-selling of certain stocks. A €6bn offer attracted just €6.42bn bids.

The German action against naked shorting—selling securities such as shares and bonds that are not owned or borrowed—comes amid heated discussion in Europe of regulatory curbs on speculative trading, which has been widely blamed by politicians for exacerbating the Greek debt crisis. Read more

The central bank of Greece is making life harder for those short selling its debt.

Traders’ short positions will be automatically covered at the end of each trading day by the country’s Electronic Secondary Securities Market, HDAT, run by the central bank.The short positions will be covered regardless of the price. The move could reduce liquidity and increase trading costs. Insofar as it reduces short selling of Greek bonds, it should increase the price and reduce the yields. The yield is the interest rate paid by the Greek government on the debt they issue. Read more