ECB Backs Temporary Naked Short Sale Bans

Law360, New York (August 6, 2010, 11:45 AM EDT) -- The European Central Bank has thrown its support behind temporary bans on naked short-selling of credit default swaps linked to European sovereign debt and stocks in emergency situations.

But the central bank for countries using the euro said a total ban on naked short-selling could have severe adverse risks, particularly for market makers who use naked short-selling in their market-making functions.

“Limitations or bans should be limited in time and in scope in case of exceptional circumstances. Similarly CDS should not be subject to such permanent...
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