Dealers and issuers protest European ban on ‘naked’ CDS
Ban could harm government debt markets, according to UK DMO – dealers say any prohibition would backfire
A European ban on ‘naked' shorting of credit default swaps (CDS) is back on the table following a vote yesterday evening by the European Parliament's Committee on Economic and Monetary Affairs. The Committee wants protection buying to be allowed only if market participants have an underlying government bond position to hedge. The move has strong political support, but has been criticised both by dealers and by issuers – including the UK's Debt Management Office (DMO) – who say it could hurt debt
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