Greece to make bond shorting illegal??

Discussion in 'Financial Futures' started by Ivanovich, Apr 8, 2010.


    Martinghoul - is this more scaremongering by ZH or does this have merit?

    Greek trading system HDAT, which is run by the central bank, told primary dealers of Greek sovereign debt the move was a response to the scale of open short positions on such bonds, according to a copy of the HDAT document obtained by Reuters.

    This week financial markets hammered Greek bonds and bank shares, driving the euro zone member's borrowing costs higher and pushing it closer to tapping a last-resort European Union-International Monetary Fund safety net.

    "Due to massive debit position in HDAT transactions, the Committee of Primary Dealers Supervision and Control decided as of today and until further notice to automatically proceed to repo auctions, at the end of HDAT trading day, in order to cover all transactions with such debit positions," the statement obtained by Reuters said.

    Traders said the decision meant that any uncovered short positions on Greek government bonds would have to be covered, regardless of the price, at the end of the settlement day in the repo auction.

    This would make it more difficult to short Greek bonds but might end up affecting market makers more than others, according to some traders.

    Year-over-year, trading volume rose 35.9 percent in February. Daily average turnover in February fell to 0.99 billion euros from 1.1 billion in January.

    Greece's borrowing costs have surged as markets worried about the country's soaring deficit, its debt load and its ability to rollover debt.

    More in link...
  2. It's pure scaremongering, IMO. And I am one of those bad people who is very pessimistic regarding Greece's prospects, so you'd expect me to cry foul and accuse the authorities of manipulation. However, it's not the case.

    I can go into the gory technical details if you like, but it'll have to be tomorrow.
  3. If they do, it will work out about as well as the short-sale ban on financials back in September 08.
  4. jjj1000


    It is real. You can still short it but have to repurchase at the end of every trade day. Geez, Greece is pushing all the wrong buttons. I think this will spook the market and kill liquidity. see link to reuters:
  5. No!!!!! This is completely and utterly wrong.

    Pls, I beg you, do refrain from making silly statements like this, as you don't understand how repos work.
  6. jjj1000


    If I am being ignorant here, I would gladly change my opinion if you could explain to me (and others in ET) why is this not accurate. Please.
  7. Sure thing, I will... Let me ask you first, though. What do you think happens when you short-sell a govt bond? Have you ever tried doing this as a retail customer of a brokerage, say?
  8. jjj1000


    Never. I have never traded bonds of any kind. I assume you get a short position and have to deposit margin on it, like a stock.
  9. Well, not quite... Let's say you sold some treasuries. That means you need to deliver the bond to the buyer at settlement (T+1). That can happen in one of two ways: either you own it to begin with or you borrow it in the repo mkt (by doing a reverse repo).
  10. LeeD


    Greece is infamous for backward financial regulations. They used to be the only country in Europe who forbid shorting (more specifically, borrowing) stocks listed in Athens to non-exchange members.

    Government officials in general are not famous for understanding technicalities of financial markets.

    Yes, please! Besides rampant credit default swap market, what loopholes will let speculators bet on Greece's demise?
    #10     Apr 9, 2010