German shorting ban is 'reckless and draconian' - M&G

Germany's ban on naked short-selling in European sovereign debt, as well as shares in its 10 largest financial institutions, has sent shockwaves through global markets today. Here, M&G's Stefan Isaacs explains why the action appears to be largely symbolic and politically driven.

At this stage the details are very limited but it appears that the German supervisory body BaFin has banned the "naked" short selling of eurozone sovereign bonds, their credit default swaps, and the shares of ten leading German financial institutions. The ban was effective as of midnight last night. This move by the German authorities has had the effect of spooking already fragile markets. As we have discussed before markets do not like a lack of transparency and these actions appear to be draconian and uncoordinated. The fact that the ban was announced after the European market close...