MEPs vote for "naked" short-selling restrictions Skip to main content

MEPs vote for "naked" short-selling restrictions

Trader in Frankfurt The directive will still have to be negotiated with the Commission and the European Council
MEPs have voted in favour of restricting the practice of "naked" short selling.
Short-sellers usually borrow shares or bonds, sell them, then buy them back when the stock falls - pocketing the difference.
"Naked" short-selling is when a trader sells financial instruments he has not yet borrowed.
A new directive places conditions on the use of credit defaults swaps (CDS) - a form of government debt insurance.
Under the new rules those traders who want to "short" a CDS would have to own the underlying government bond before they could sell it.
Some MEPs argue that the practice of naked short selling exacerbated the financial crisis, with the borrowing costs of countries like Greece being driven up by "speculation" on government debt.
They argue that traders have an incentive to drive down the price of a share or bond - and thereby needlessly damage a company or an economy.
"This regulation takes one more step towards curbing speculation and improving transparency in the financial services sector," MEPs said in a statement.
Cost of borrowing
Others however argue that this form of short selling keeps assets liquid and performs a valuable secondary function of alerting the market when a stock or bond is incorrectly priced.
Andrew Baker, chief executive of AIMA - the hedge fund trade association - says that if this directive were introduced it would have negative impact on global debt markets.
"Debt markets would be less efficient, liquid and transparent. The cost of borrowing would increase and the availability of credit to borrowers would decrease, with a concomitant negative impact on growth and jobs," Mr Baker said in a statement.
However the vote in favour of the proposed directive does not mean it will be immediately implemented.
It will still have to be negotiated with the European Commission and the heads of government, within the Council of Ministers.

http://www.bbc.co.uk/news/business-12670943

Comments

Popular posts from this blog

Chronology of the Press in Burma

1836 – 1846 * During this period the first English-language newspaper was launched under British-ruled Tenasserim, southern  Burma . The first ethnic Karen-language and Burmese-language newspapers also appear in this period.     March 3, 1836 —The first English-language newspaper,  The Maulmain Chronicle , appears in the city of Moulmein in British-ruled Tenasserim. The paper, first published by a British official named E.A. Blundell, continued up until the 1950s. September 1842 —Tavoy’s  Hsa-tu-gaw  (the  Morning Star ), a monthly publication in the Karen-language of  Sgaw ,  is established by the Baptist mission. It is the first ethnic language newspaper. Circulation reached about three hundred until its publication ceased in 1849. January 1843 —The Baptist mission publishes a monthly newspaper, the Christian  Dhamma  Thadinsa  (the  Religious Herald ), in Moulmein. Supposedly the first Burmese-language newspaper, it continued up until the first year of the second Angl

Thai penis whitening trend raises eyebrows

Image copyright LELUXHOSPITAL Image caption Authorities warn the procedure could be quite painful A supposed trend of penis whitening has captivated Thailand in recent days and left it asking if the country's beauty industry is taking things too far. Skin whitening is nothing new in many Asian countries, where darker skin is often associated with outdoor labour, therefore, being poorer. But even so, when a clip of a clinic's latest intriguing procedure was posted online, it quickly went viral. Thailand's health ministry has since issued a warning over the procedure. The BBC Thai service spoke to one patient who had undergone the treatment, who told them: "I wanted to feel more confident in my swimming briefs". The 30-year-old said his first session of several was two months ago, and he had since seen a definite change in the shade. 'What for?' The original Facebook post from the clinic offering the treatment, which uses lasers to break do

Is 160 enough? One Indian man's family

By Sumnima Udas , CNN October 31, 2011 -- Updated 0857 GMT (1657 HKT) Ziona, center, with his has 39 wives, 86 children and 35 grandchildren in rural Baktwang village, India. STORY HIGHLIGHTS One man in India is the patriarch of a family of 160 in rural India Ziona, who only goes by his first name, has 39 wives, 86 children and 35 grandchildren. Ziona's father, Chana, founded the Christian sect in Baktwang that promotes polygamy "I never wanted to get married but that's the path God has chosen for me" Mizoram, India (CNN) -- The world's population hits 7 billion this week, but Ziona, the patriarch of what may be the biggest family in the world, is not bothered. "I don't care about overpopulation in India ... I believe God has chosen us to be like this (have big families). Those who are born into this family don't want to leave this tradition so we just keep growing and growing," he says with a smile. Ziona, who only goes by his f