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HEADS UP!! GERMANS TO OUTLAW SHORT SELLING


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#41 IndexTrader

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Posted 18 May 2010 - 06:30 PM

Once again, they are banning the naked short selling (without actually finding the borrowable shares), not the regular short selling, right?


http://www.bloomberg...id=ao6BsFTFFiKc


Naked short selling in the derivative market is one thing, but when it comes to stocks is it not an entirely different matter? Basically you if you plan to short, you better deliver the goods in case you are wrong - is this not the gist of banning naked CDSs? I am trying to ask, how is this any different than what the US markets did in 2008? Frankly, I find short banning in the midst of a crisis a pathetic reaction from the standpoint of gov't.


Naked short selling of securities has been illegal for quite some time in the US. What the gov did in 2008 was ban short selling of financial securities. My understanding here is that naked short selling of a handful of German securities will be banned. To me that means you could still sell them short provided you can borrow the securities.

They also banned naked short selling of credit default swaps of government bonds in Europe. To me this means they are banning the purchase of insurance on bonds they don't own.

IT

#42 arbman

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Posted 18 May 2010 - 07:36 PM

Naked short selling of securities has been illegal for quite some time in the US. What the gov did in 2008 was ban short selling of financial securities. My understanding here is that naked short selling of a handful of German securities will be banned. To me that means you could still sell them short provided you can borrow the securities.

They also banned naked short selling of credit default swaps of government bonds in Europe. To me this means they are banning the purchase of insurance on bonds they don't own.



Yes by all means trying to slow down the decline by banning the short selling is pathetic, but it is what it is. In any case, banning the naked short selling of the securities is justified, but not in the futures contracts. CDS contracts should've been regulated and traded in a public market, we all said this over and over, but I think one should be always capable in getting in any (regulated) contractual agreement about the price changes...

What I mean is that when the smartest party finds the dumbest counter party and buys from them the CDS contracts just before setting the exchange on fire, it really doesn't stand out as a sophisticated investment vehicle, rather a dumb scam to extort money from the governments and public eventually in the form of bail outs...

Of course, then you have the same politicians who vote for the bail outs probably also involved in these hedge funds benefiting from all of these along with the financial institutions and you have to pay them all with your taxes, what a system to extort money!

Edited by arbman, 18 May 2010 - 07:39 PM.