EU Sets Rules on Derivatives, Shorts, CDS

France and Germany have blamed the selling of naked shorts for intensifying the economic problems of such countries as Portugal, Spain, and Greece; under the new rules, selling naked shorts could be restricted or even banned in some circumstances.

Rules were also proposed to provide more information about derivatives and their markets to both regulators and investors, particularly since derivatives “have a big impact on the real economy, from mortgages to food prices,” said Barnier. He also said that regulators should have access to similar information about bond market short positions and credit default swaps as well.

The rules concerning the sale of naked shorts arose out of Germany’s ban of the action in May. Regulators in other countries and at EU headquarters in Brussels were angered by the action, but in June Germany said that regulatory steps were moving too slowly and costing governments more money to meet obligations.