Euro MPs Set To Ban Naked Short Selling

Euro MPs are to vote on Monday evening in Strasbourg on stricter rules on naked short selling – financial market speculation on the value of goods that traders do not actually own.

Traders will have to disclose their positions and fulfil transparency requirements meant to prevent market abuses.

The Euro MPs will also target trades in credit default swaps (CDS), complex forms of insurance against the risk of borrowers failing to repay debts.

Socialist and Democrat Euro MPs, who argue that naked credit default swaps are equivalent to gambling against the debt of a country, will lead demands for a ban of uncovered positions in CDS.

The S&D Group’s spokesman of the parliamentary report on the short selling regulation, Robert Goebbels, said: “There is no rationale to maintain a practice that allows to sell stocks that one does not even own. Such practices do not exist in other sectors of the economy. It is time to moralise the financial world.”

Mr Goebbels said changes to the Commission’s text would require traders to close their positions at the end of the trading day. “If they fail to do so, tough penalties apply that will ensure that speculators do not make a profit,” he added.

Said Group spokesman on economic and monetary affairs Udo Bullmann: “Uncovered credit default swaps have no social or economic benefit. It is not acceptable that such transactions are legal. Using CDS without actually owning the underlying government bonds means gambling against EU member states. We will not permit this any longer.