EU tightens short selling rules on sovereign debt

The European Union has banned the naked short selling of CDS on eurozone government debt, to prevent short selling aggregating price declines.

The European Parliament and EU Council last night approved a set of rule changes, resulting in a permanent but optional ban on naked credit default swaps on sovereign debt, reports Bloomberg. Under the new rules, traders will be prevented from buying CDS on government bonds unless they are used as a hedge for an existing exposure. In a statement, EU Financial Services Commissioner Michel Barnier said under the measures investors will have to tell regulators and the market if they have built up significant short positions in a company's equity. "These balanced measures will ensure t...