BaFin Bans Naked Short Selling and CDS Transactions

May 21, 2010
The German financial regulator (BaFin) issued three decrees regarding naked short selling activities and CDS transactions on 18 May 2010 (the “Short Selling Decrees”), which ban naked CDS transactions involving Eurozone Sovereign Debt Securities and naked short selling of Eurozone Sovereign Debt Securities and certain German Shares. Based on the requests by many market participants, BaFin further explained the scope of application of the Short Selling Decrees in “FAQs” published on 19 May 2010. This update summarizes the Short Selling Decrees and their consequences to both German and non-German market participants.