Germany prepares tougher short-selling rules-paper

February 23, 2010

   By Matthias Sobolewski
   BERLIN, Feb 23 (Reuters) – German financial watchdog Bafin is preparing tougher rules on the short-selling of shares in big financial sector companies, a coalition document showed on Tuesday.
   The centre-right coalition will on Wednesday pass a resolution backing the watchdog’s plans, parliamentary delegates from Chancellor Angela Merkel’s conservatives and junior coalition partners the Free Democrats told Reuters.
   “The parliamentary finance committee feels the Bafin’s planned introduction of regulation requiring greater transparency for the short selling of shares in important financial companies is necessary,” a final draft of the resolution showed.
   At the end of January, Germany ended a partial ban on the short-selling of financial stocks, letting a measure designed to reduce trading volatility lapse.
   Short-sellers are investors who borrow shares and sell them on in the hope of buying them back at a lower price to make a profit. Bafin’s ban applied to an especially high-risk form of trading called “naked” short selling, where the trader sells stock he has not yet borrowed. It is not yet clear whether the new rules will apply just to “naked” short selling.
   According to the draft resolution, the coalition backs Bafin’s plans to require the notification of short selling in the shares of relevant companies.
   Bafin should be able to “swiftly carry out radical measures” if the situation on financial markets worsens again.
   Volker Wissing, who heads the parliamentary finance committee, said short sales were “extremely dangerous transactions that could trigger systematic risks”, that require more transparency.
   Stock market regulators around the world instituted curbs on short-selling to halt the downward spiral of financial stocks following the collapse of U.S. investment bank Lehman Brothers.
   French market watchdog AMF last month said it was prolonging its short-selling ban until further notice, adding that it was working with other EU market regulators to find a permanent, Europe-wide solution. (Additional reporting by Alexander Huebner; Writing by Paul Carrel and Sarah Marsh; Editing by Jon Loades-Carter) ((; +49 30 2888 5214; Reuters Messaging: rm://
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 Tuesday, 23 February 2010 15:29:41RTRS [nLDE61M229] {EN}ENDS

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