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Saturday 18 November 2017

'Naked short' ban grows

GERMANY has followed the example of the US and slapped a ban on some high-risk bets that prices of bonds and stocks will fall.

The ban is on a strategy known as "naked short selling" and is designed to drive down the value of financial shares and markets.

Analysts are, however, sceptical that Germany's surprise move will be effective in taming market volatility, with one saying it suggested "desperation".

The German move is an attack on the financial speculation which it blames for much of the eurozone's debt crisis.

Germany's lack of coordination with any other countries, including any other eurozone members, underscored the measure's weakness as a tool to calm markets, analysts said.

"The ban takes effect at midnight," a Finance Ministry spokesman said, confirming what sources in Germany's ruling coalition had said earlier.

A coalition source said Chancellor Angela Merkel would formally announce the ban later today.

In naked short selling, a trader sells a financial instrument short, betting that its price will fall, without first borrowing the instrument or ensuring that it can be borrowed, as would be done in a conventional short sale.

The ban will run until March 31, 2011, according to the government's financial watchdog, Bafin.

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