Despite a recent announcement by the Dutch financial regulator AMP that it was not considering an embargo on naked short selling of Eurozone government bonds, on Thursday the Dutch parliament voted in favour of such a ban.
On Wednesday BaFin, the German financial regulator, banned naked short selling of debt securities and financial companies until March 2011.
The Dutch move is largely a populist measure by opposition parties, as the Dutch parliament has yet to organise a ruling coalition after the government collapsed in February. The interim government does not have to enforce the ban, however it will have to offer a number of alternative solutions.
Contradictory reports originally emerged on Wednesday as the Dutch regulator told Reuters that it had no immediate plans to follow in Germany’s footsteps.
The move also puts pressure on a European-wide ban of naked short selling. The Dutch finance minister has called Germany’s unilateral ban unwise, but is in favour of a more coordinated European approach.
The ban by Germany, aimed at decreasing volatility, has achieved the opposite effect as European markets continue to fall. According to a RBC Capital Markets credit report, “the fact that the ban does not seem to apply to jurisdictions outside of Germany suggests that ‘shorting’ interest may simply become more intense in other financial centres.”
The ban would not be a first for the Netherlands. In 2008 AFM banned short selling entirely for six months after the collapse of Lehman Brothers.