The Federal Financial Supervisory Authority (BaFin) on Tuesday temporarily prohibited naked short sales of debt securities of euro zone countries admitted on a domestic exchange to trading on the regulated market.It also temporarily prohibited credit default swaps (CDS) in which the reference liability is at least also a liability of a euro zone country and is not used to hedge default risks (naked CDS).
Moreover, BaFin prohibited naked short-selling transactions in the shares of the following companies from the financial sector:
- AAREAL BANK AG
- ALLIANZ SE
- COMMERZBANK AG
- DEUTSCHE BANK AG
- DEUTSCHE BÖRSE AG
- DEUTSCHE POSTBANK AG
- GENERALI Deutschland HOLDING AG
- HANNOVER RÜCKVERSICHERUNG AG
- MLP AG
- MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AG
BaFin justified this move by the extraordinary volatility of debt securities of countries from the euro zone. Moreover, the spreads of credit default swaps on credit default risks of several countries of the euro zone had widened considerably. In this context, massive short selling of the debt securities concerned and the conclusion of uncovered CDS on credit default risks of euro zone countries were resulting in further excessive price movements which could result in further serious disadvantages for the financial market and could jeopardise the stability of the financial system as a whole.
In view of these circumstances, BaFin once again prohibited naked short-selling transactions in the shares of selected companies from the financial sector.
