Bloomberg reports that Germany banned naked short selling and naked credit-default swaps of euro area government bonds at midnight Tuesday, as lawmakers blame the practice for worstening the European debt crisis.
German Chancellor Angela Merkel declared earlier this month that 'in some ways, it's a battle of the politicians against the markets', and one, she says, 'I'm determined to win'. The naked short selling ban looks like it's the first shot in that war.
The move, however, has been heavily criticized by traders and the financial markets community, and here's a quick round up of some of the ire the German government has stoked by its actions:
'Germany's announcement (has) dented risk appetite, as it raises the question as to whether the German regulator knows something the market doesn't. If there is a secret here, it can't possibly be a positive one'.
Rabobank research note (Reuters)
'The way it's been announced is very irresponsible, and it's sent many market participants into panic mode. We thought regulators had learned their lessons from September 2008. Where is the emergency that necessitates the introduction of an overnight ban ?'.
Darren Fox, Simmons & Simmons (Bloomberg)
'It will be complete chaos. I really don't know what the German think they are doing'.
Unnamed bond trader (The Daily Telegraph)
'Germany just switched off the financial lights in Europe.
Unnamed senior FX trader (Reuters)
And analysts over at Bank of America Merrill Lynch have apparently issued a research note titled: 'What's Germany Going To Ban Next ? Rainy Days ? Harsh Words ? The Macarena ?
Finally, our Highly Placed Professional reports that Chancellor Merkel has also banned rival teams from scoring against Germany in the forthcoming World Cup. In addition, Germany's securities regulator BaFin has ruled that securities may now only be traded in physical form on the Frankfurt exchange. Computers are to be swapped for pads and pencils, horses should be left at the exchange stables and swords must be handed in at the main entrance.