Market Crash Anyone?

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#1 Sun, Jul 10, 2011 - 3:39pm
Black Hole Sun
Joined: Jun 14, 2011

Market Crash Anyone?

Italy May Enforce Naked Short Selling Ban As Early As Tonight To Prevent Market Rout Submitted by Tyler Durden on 07/10/2011 15:17 -0400

Once again the great diversionary scapegoating of speculators begins, after as Il Sole 24 Ora reported that the Consob, or Italy's regulator, may enact a naked short selling ban as early as tonight. The premise is that it is the shorters who are responsible for the ruinous state of the global ponzi. Not the fact that it is a, well, global ponzi. Distraction 101. And yes, it did not work back in 2010 when banning naked shorting was implemented in other European countries, it will not work this time either. But it won't stop bankrupt governments from trying. To wit: "Commissioners will assess the situation before markets open Monday, said a Consob spokesman, who declined to be named in line with the regulator's policy. Commissioners may decide to restrict "naked" short-selling in line with similar decisions taken in other European countries, he said.... The Consob meeting occurs after shares of Italy’s biggest banks fell to the lowest in more than two years on July 8, and government bonds dropped, driving 10-year yields to a nine-year high." 24 Ore adds: "Consob intervened several times in the past on short selling after the collapse of Lehman Brothers to protect stock markets."

More from 24 Ore:

Meanwhile on Sunday afternoon, Lamberto Cardia, Consob, who led Consob from 2003 to 2010, had more to say. For Cardia short selling "in the presence of a serious crisis should be totally prohibited for the period required." For the former chairman of Consob, the day after the crash of Lehman Brothers Bank restricts short-selling within three days, "it is preferable to a reduction in short-term market movements rather than attend to the serious damage that will result in load of listed companies, also strategic for the country. "

And to think there was a time when the stock market could drop without resulting in strategic consequences for the host country...

As noted, this is not the first time this approach has been taken:

On July 5, European lawmakers voted in favor of a ban on short selling of government bonds in the EU unless traders have at least “located and reserved” in advance the securities they intend to sell. The European Union Parliament in Strasbourg, France, also called for restrictions on traders’ use of credit- default swaps to profit from defaults on sovereign debt they don’t own.

The European Securities and Markets Authority, which co- ordinates the work of national regulators in the 27-nation EU, should be given emergency powers to temporarily ban short selling or trades in CDS on sovereign debt in the EU, the Parliament said.

Politicians including German Chancellor Angela Merkel and French President Nicolas Sarkozy have claimed that naked short- selling and credit-default swaps worsened the euro area’s sovereign-debt crisis, and have called for EU curbs.

Michel Barnier, the EU’s financial-services chief, said last year such trades may lead to “disorderly markets and systemic risks.” Finance ministers from the 27-nation region agreed in May that traders should be allowed to short sell government bonds and stocks if they have a “reasonable expectation” that they can obtain the underlying securities. They also rejected calls from Germany for a ban on sovereign CDS.

Alas, this is nothing more than an attempt to indicate that Consob has control over the situation when it has none. As a reminder the US instituted a ban on all short sales in financials, only to see longs dump all their holdings and lead to the biggest plunge in the market in the aftermath of the Lehman collapse.

Thus, in attempting to mitigate the crisis in the aftermath of "Black Friday", Italian authorities may have just made the bears' job that much easier.

h/t G.C.

Edited by: ¤ on Nov 8, 2014 - 5:05am
Sun, Jul 10, 2011 - 4:39pm
Joined: Jun 14, 2011

I've heard ....

....rumours that say that if you try to prevent short-selling, then people start fearing that they do not know which financial institutions are still solvent, and that this may create or worsen a credit crisis. But thats just me. I also heard that in theory, one could probably still find a way to short the whole shabang, through an index short or similar.

Be aware that the euro crisis, while it may give the US a temporary reprive, is all that currently stands between the US and its rendez-vous with bond&currency vigilantes. Once the eurozone hits bottom, something very scary will reach the shores of the US (and quite possibly Japan as well).

Countdown to world debt implosion/fiat currency implosion? Slightly lower than last week.

Sun, Jul 10, 2011 - 8:05pm
Joined: Jun 14, 2011

The article is talking about

The article is talking about NAKED short selling. Big difference. Too bad we can't do that for the silver markets. Anyway, naked shorting is creating shares or silver out of thin air.

“Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.” Norm Franz