BaFin, the German financial regulator, has banned naked short selling of debt securities and financial companies until March 2011. In a statement issued on Tuesday, BaFin has temporarily banned so-called credit default swaps (CDS) where the reference bond and liability are from a Eurozone country, and which does not serve to hedge against default risk (naked CDS).
The announcement comes less than a month after the Greek financial regulator, the Hellenic Capital Market Commission, banned the short selling of shares listed on the Athens Exchange.
In contrast, U.S. politicians in the Senate rejected a bank reform bill that would have banned naked CDS trades. The Senate also introduced a one-year review period on whether Wall Street banks should move their swap trading desks to subsidiaries.
The financial sector companies included in the BaFin CDS ban are:
Aareal Bank AGAllianz SECommerzbank AGDeutsche Bank AGDeutsche Brse AGDeutsche Postbank AGGenerali Deutschland Holding AGHannover Rckversicherung AGMlp AGMnchener Rckversicherungs-Gesellschaft AG
Two months earlier, BaFin introduced a transparency system for net-short selling positions for the majority of German Banks listed above. In early March, the regulator issued a General Decree under which market participants must notify BaFin of net short-selling positions in selected financial stocks of a threshold of 0.2 % or more and publish the same of a threshold of 0.5 % or more.
German stocks can still be shorted in London and New York.