So technically Germany isn’t banning short-selling in various financials — it’s only banning naked short-selling.
And because of this, many are wondering what the big deal is. After all, naked short-selling (shorting a stock without having borrowed it) is already against the rules in the United State. If anything, it seems, the country is just catching up to reasonable rules that exist elsewhere.
If this were just about catching up with world rules it wouldn’t have been rushed in with just a few hours notice, it wouldn’t be temporary (well, kind of temporary, the regulation is due to expire at the end of March 2011) and it wouldn’t apply to just a handful of banks (at first).
It’s just very hard to take this seriously as anything but a panic move.
And if the government is panicking, the market shall as well.
The Telegraph’s Ambrose Evans-Prtichard writes about instant, post-regulation capital flight to Switzerland.
The short ban set off instant capital flight to Switzerland. BNP Paribas said €9.5bn flowed into Swiss franc deposits in a matter of hours on Wednesday morning.
The Swiss central bank intervened to hold down the franc. This caused the euro to shoot back up against the US dollar after an early plunge. The euro had already bounced off “make-or-break” technical support at $1.2135, the 50pc “retracement” of its entire rise since 2000, but any rally is likely to be short-lived.
And the line of the day…
“As a German citizen, I wish to apologise for the stupidity of my government,” said Hans Redeker, currency chief at BNP Paribas. He said the CDS ban deprives reserve managers of a crucial hedging tool for non-securitised loans and will scare away global investors needed to soak up Club Med bonds.