Tag Archives: cds

Stacy Summary: So Europe says naked short sales – i.e. fraudulent selling – are banned; unless the restrictions negatively impacts liquidity; in which case, ‘competent‘ authorities will allow it. As Max always says – fraud IS the system. If you remove fraud from the equation, there is no system. So don’t look for this ban to actually ever be used.

• Europe bans naked short selling

To tackle the increased risks posed by uncovered short sales, the proposal requires that anyone entering into a short sale must at the time of the sale have borrowed the instruments, entered into an agreement to borrow them or made other arrangements to ensure they can be borrowed in time to settle the deal.

However, these restrictions don’t apply to the short selling of sovereign debt if the transaction serves to hedge a long position in debt instruments of an issuer. Moreover, if the liquidity of sovereign debt falls below a specified threshold, the restrictions on uncovered short selling may be temporarily suspended by the competent authority