Was naked shorting of German financials really an issue?

Discussion in 'Wall St. News' started by ASusilovic, May 19, 2010.

  1. We know it’s hard to assess the scale of naked shorting in any particular security.

    However, it does make sense to look to the scale of conventional ‘borrowed-stock’ shorting activity for an indication.

    Data Explorers — which tracks short positions in the market — has looked into the matter and provided FT Alphaville with the following chart on Wednesday.

    It shows the percentage of shares outstanding in the specific names affected by the ban — click to enlarge:


    As can be seen, apart from Commerzbank, the scale of shorting activity was actually — relatively speaking — following a declining trend in recent weeks.

    This chart, meanwhile, shows how the shorting activity in those names compared to general shorts in DXI German common stock:


    As Data Explorers explains:

    Note: the spreadsheet track the German DXI tracks the change in short interest across the German common equity market (90 companies, large, mid and small cap to a value of $780mm) and the ten names that have been the subject of the naked short selling ban. We have removed approximately 50 small caps names with a valuation less than Aareal Bank AG (subject to the naked ban) in order to compare like with like. The report is broken into two sections; the DXI (Data Explorers Indices) and the ten names subject to the naked short selling ban.

    Here, meanwhile, are their main conclusions (our emphasis):

    · The German ban is on naked (i.e. no borrow) short selling on 10 financial names. There is also a ban on buying CDS coverage for government bonds that are not owned.

    · Our data shows that the short interest (as measured by percent shares outstanding on loan) has been trending down since Feb 2010. Against this, the larger German market has seen a gradual increase.

    · Out of the ten names that are subject to the naked short selling ban only Commerzbank has seen relatively high levels of short interest over the past year and a half (at around 5%). The other remaining named stocks are well under 2%.

    · We do not track naked short interest.


    This is a distraction from Schäuble's finance ministry to calm the German public. There is absolutely NO EVIDENCE AT ALL that naked short selling was an issue in Germany's financial stocks. Pure politics.
  2. Merkel was a sitting duck.

    She had to do something.
  3. Yeah, the "little people" buying gold and news reports of supposedly shortage of gold coins and other glittering metals cried for some "senseless" action... :D
  4. Clearly it wasn't. It's not like Europe was fine until some nasty hedge funds started shorting German financials en masse, as though that is what was causing the market selloff. This move down in the last few months has been driven mostly by long-only investors seeing the fundamentals fall off a cliff, not by an evil cabal of short-selling Hugh Hendrys conjuring a crisis out of nothing. Hedge funds are like a few gnats on a single elephant's arse, compared to the giant herd of institutional investors who are now stampeding out of Eurozone assets.

    Merkel has panicked like a political noob. Not only has the move caused the opposite of what was intended - the first-day reaction was a hard selloff - but the rest of the EU is now annoyed she didn't consult them. This has reduced her credibility, and may even turn out to be a career-ender for her, just like Mahathir Mohammed in Malaysia back in 1998 (he imposed capital controls, the rest of Asia didn't - it fucked Malaysia's economy up and tarnished their credibility permanently).

  5. If there is anybody who has to go then it's Wolfgang Schäuble - self proclaimed "master-hawk" in the Bundeskabinett. This guy had so many strange not to say obscure political agendas - frightening...
  6. +1