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EU short-selling ban hits liquidity, hikes uncertainty
Liquidity drained from the sovereign CDS market before the ban took hold this morning – and market-makers are still unsure what they can and cannot do
Credit default swap (CDS) traders say the market is taking the start of the European Union (EU) short-selling ban – which took effect this morning – in its stride so far, thanks to months of preparation. But the position-cutting that occurred during this period has damaged liquidity, and market-makers remain unsure about some of the detail of the new regime.
Under the regulation, market participants are prevented from buying EU sovereign CDSs unless they serve to hedge a long position in that
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