Deutsche Boerse warns against short-selling bans

19th May 2010, Comments 0 comments

German exchange operator Deutsche Boerse hit out on Wednesday at a German ban on certain speculative bets the government considers destabilising, warning the move could harm fragile markets.

After German authorities banned naked short sales on eurozone government bonds and some credit default swaps, Deutsche Boerse said such measures "can be harmful to market quality and increase costs of liquidity."

Naked short selling is when investors sell stocks or bonds they do not own and have not even borrowed, hoping to be able to buy them back later at a lower price, often the same day, thereby earning a profit.

Dealers said Germany's unilateral move, which also included naked short sales on 10 major financial stocks, had only added to a sense of crisis in Europe.

With naked short sales still allowed in much of Europe, Deutsche Boerse said that "it is important to establish harmonized and inter-coordinated procedures within Europe."

© 2010 AFP

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