Half of Europe Bans Thinking Sad Thoughts About Banks

Short sale bans. Is there anything they can’t do?

Maybe. But does it matter? If your position is just that “speculation” on stocks is the moral equivalent of puppy-murder and should never be profitable, then you just say things like “let’s ban short sales” and don’t worry about the details. You take shorting of bank shares as a personal affront, and your goal is not to have functioning markets but just to prove that you’re tough. And your name might be Jean-Pierre Jouyet:

Jean-Pierre Jouyet, head of the AMF, the French securities regulator, said on Thursday night: “They [investors] wanted to test French resistance. This is our response, as always very determined, and it will be so for all those who want to put us to the test.”

But, as we’re seeing with new short sale bans from France, Italy, Spain and Belgium, this approach sometimes has problems, because most short selling takes place in an actual world where other things happen too. Like:

1. Sometimes those banks that you want to protect, they need the moneys. This is hard to believe because all European banks are obviously well capitalized and any suggestion to the contrary is just rumor and speculation. But! Sometimes things go wrong. Sometimes banks need to raise money. When equity investors are staying away from them, sometimes they do this by selling convertible bonds or CoCos. And since many buyers of those instruments like to hedge (by short selling), that creates problems:

Another investor warned that the move could “destroy parallel markets, the market for convertible bonds will just collapse”. He added that short sellers were often buyers of new bank stocks issued to raise funds by struggling institutions.

“If you prevent those people being short, sure it’s going to boost the share price for a couple of days, but those guys won’t be around to buy your stock in a capital increase,” he said.

The short sale bans are mostly for just 15 days, but repeatedly changing the rules in the financial markets will have effects well beyond the brief share-price gains. If you’re a convertible arbitrage investor, it’s now pretty clear that you should never buy convertibles issued by a European bank, because you may not be able to hedge when you need to. Which can’t be good for the banks’ future capital raising needs.

2. Evil speculators are crafty and have ways to short stocks other than just shorting stocks. And if you don’t ban derivatives, and let market makers continue to short to facilitate client trades, then clients can create net short positions by buying puts and/or selling calls. The regulators have picked up on this time, and are not having it. For example, Spain:

This preventive ban affects any trade on equities or indices, including cash equities transactions, derivatives in regulated markets or OTC derivatives, that has an effect of creating a net short position or increase a previous one, even if on an intraday basis. A net short position means any position resulting in a positive economic exposure to falls in the price of the stock.

Doesn’t that seem a little broad? In this world of increased correlation, buying USTs or gold probably has some negative delta to Spanish bank stocks – does Spain want to ban stocking up on gold?

France gets more specific:

3 – Is an investor allowed to create a net short position in one of the securities concerned by using derivatives?
No, investors are not allowed to use derivatives to create a net short position; they may only use derivatives to hedge, create or extend a net long position.

And don’t get cute on them either:

6 – Are trades in index derivatives allowed where the basket of securities includes one or more of the securities concerned?
a) Investors exposed to the equity market are allowed to hedge their general market risk by trading in index derivatives. In this context, the AMF accepts the marginal net short positions in the securities concerned that may result from that trading in index derivatives.
b) Trading in index derivatives for any other purpose than hedging general market risk is not allowed unless the resulting net short positions in the securities concerned are offset by long positions.

We wonder how you would test whether a net short position in an index derivative is for the purposes of “hedging general market risk” or for the purposes of “profiting on spreading false rumors” (or other non-legitimate purposes, like hedging specific market risk). Presumably anyone shorting European indexes does so because they don’t want to lose money when the market goes down. Even speculators.

More curious:

c) Taking a net short position in one or more of the securities concerned by combining index derivative transactions and other transactions is prohibited. It is therefore prohibited to:
– sell futures contracts on an index whose underlying basket includes one or more of the securities concerned, or
– buy futures contracts on any of the securities included in the underlying basket of the index except for the concerned securities.

Fun fact: because the ban covers creating new net short positions, we read section 6(c) to say that if you’re already short a French index, you can keep your short on, but you’re not allowed to buy non-bank French stocks. (Incidentally this section reads very differently in the original French though the basic intent of not shorting indices and buying back non-financials remains the same.)

3. Some people don’t live in France.

7- Who is subject to the Decision announced in the News Release?
The Decision applies to any natural or legal person, French or foreign, regardless of whether trading takes place in France or in another country, or on a regulated market or not.

The other bans are similarly extraterritorial. We wonder – and are not alone in wondering – how the French, Italian, Spanish and Belgian regulators plan to enforce bans on short selling by foreigners living abroad. But if you’re thinking about it, just remember that you don’t want to test their resolve. They may not have much in the way of ideas on how to keep capital markets functioning, but they have no shortage of resolve.

French short sale ban – press release
French short sale ban – FAQ
Spanish short sale ban
Italian short sale ban

(hidden for your protection)
Show all comments

103 Responses to “Half of Europe Bans Thinking Sad Thoughts About Banks”

  1. Citadel IB Intern says:

    Nothing like a bible passage to jump start my internship's last day

  2. PermaGuestII says:

    Sounds as effective as the Maginot Line.

  3. The Truth says:

    Testing French resistance is the old killing it

  4. GUESST says:

    how long does it take you to write these novels

  5. InvestorLawyer says:

    It's good to see some in-depth analysis in this space- I had wondered how these bans were supposed to be implemented and if they were easily evaded via options or OTC derivatives

  6. Throwback Reference! says:

    Why would you ban shorts?

    -Salute Your Shorts

  7. Alt_EST says:

    Who gives a shit about puppies?

    -Villanova MBA Graduate

  8. davidrusso says:

    let's just go all-in on social engineering these markets…cut cap gains to 0 for equity markets on the long side and for commodities markets on the short side and let everyone try to make tax free money by pushing the markets in the direction these idiots think they should go..suddenly specs become heroes.

  9. agreatdaytothink says:

    Just role up with a Panzer tank division, you'll be Kurz Verkaufen within hours

  10. barack says:

    slow down, I'm still reading

  11. Man Who Hates UBS says:

    WTF, Matt? Seriously, WTF? It's supposed to be interesting and fun reading Dealbreaker.

  12. 25th Hour Trader says:

    "The Decision applies to any natural or legal person, French or foreign…in France or in another country."

    So the froggies now have the ability to tell everyone on earth how to act. I'm already starting to feel the effects. Last night at the gym one of the employees tried to give me a towel but I surrendered before he had the chance.

  13. Guest says:

    I hate the frogs.

    – America

  14. Charles Dickens says: was the worst of times.

  15. Guest says:

    Nice post, Matt.

  16. Future CFA Level 2 says:

    Short seling is un-American.

  17. FinnHopKee says:

    Somewhere, in some small town, someone is rethinking their two EWQ put options, fearing being probed by Frenchmen but warmed by a potential $53.99 (after commission) 6 month profit. It will be a contemplative weekend, with heavy decisions on Monday.

  18. American tragedy says:

    Matt– do you have extra chromasomes or something? There is humor in here, it's just beyond my grasp……

    Nope, still can't reach it.

  19. “Also, many missionary children resent time they spend away from their parents, and they resent the mission perform that took their parents away from them. New Tribes has generally been aware of this and has been sensitive to their families.” NOT TRUE. NTM has not often been sensitive to this! Were it not for your brave Fanda kids who put it out there NTM would still be covering up the horrendous pain and damage done to children at their boarding schools. Breaking household ties is not a christian value. Seeing your parents for a bit of respite to the parents to acquire away from the rigors of language learning or whatever is not called raising your child. Kids were second, even third, on the list of important things in the NTM I lived under.

  20. First off I want to say fantastic blog! I had a quick question that I’d like to ask if you do not mind. I was curious to find out how you center yourself and clear your thoughts before writing. I have had difficulty clearing my mind in getting my ideas out. I truly do take pleasure in writing but it just seems like the first 10 to 15 minutes are usually wasted simply just trying to figure out how to begin. Any suggestions or tips? Thank you!

  21. Engroff says:

    Wow, amazing weblog layout! How lengthy have you ever been running a blog for? you made running a blog look easy. The entire look of your website is great, let alone the content!

  22. sex shop says:

    I am really loving the theme/design of your blog. Do you ever run into any browser compatibility problems? A small number of my blog audience have complained about my website not operating correctly in Explorer but looks great in Firefox. Do you have any advice to help fix this issue?

  23. Bliprople says:

    [url=]World Clock[/url] is a variety of timepiece of which shows the existing amount of time in unique spots that is known.

    Frequently such a clock at the gang of ordinary or even electronic watches and contains several exhibit, every one of them indicates time in a metropolis or even time sector in the world. Pertaining to [url=]world clock map[/url] all of the demonstrates are branded using the brand on the area or maybe region to be able to which in turn that corelates. You will find globe wrist watches to be a globe road which has a light-weight projector to show the actual elements of our planet lit from the Sunlight.

    Earth timepieces typically utilized in regions where by an extensive swap of information and also capital in different sites that is known. Throughout everyday activity, this kind of wrist watches are most typical inside finance institutions and communication facilities.

  24. Howdy very nice site!! Guy .. Excellent .. Amazing .. I will bookmark your website and take the feeds additionally¡KI’m happy to find numerous helpful info right here in the post, we’d like work out extra strategies in this regard, thank you for sharing. . . . . .

  25. Thanks, I’ve recently been searching for info about this subject for ages and yours is the best I’ve discovered so far. But, what in regards to the conclusion? Are you certain concerning the source?

  26. I’ve been gone for some time, but now I recall precisely why I did previously enjoy this web site. Thanks, I’ll attempt to check back more frequently. I’ve recently started an internet site, the data you are offering here helps me greatly. Make sure you stay all of us current like this. We appreciate you discussing.

  27. I wish to express some appreciation to you just for bailing me out of this type of difficulty. Right after surfing through the online world and coming across principles which were not powerful, I figured my entire life was gone. Existing without the presence of strategies to the problems you have resolved by means of this website is a crucial case, and the ones which might have negatively damaged my entire career if I hadn’t encountered your blog post. Your know-how and kindness in taking care of all the details was useful. I’m not sure what I would have done if I hadn’t encountered such a thing like this. It’s possible to at this point look ahead to my future. Thank you very much for the professional and sensible help. I will not think twice to propose your blog to any person who needs and wants guidelines about this subject matter.

  28. blog here says:

    Good day! I simply wish to give an enormous thumbs up for the nice info you’ve gotten right here on this post. I will probably be coming again to your weblog for more soon.

  29. Thanks foг ones marvelous poѕting! I definіtely
    enϳoуed readіng it, yοu
    will bе a gгeat аuthоr.
    I will alwаys boοkmаrk your blog and
    ωіll oftеn come back doωn the гoad.
    Ι want tο еncouгagе уοu cοntinue yоur greаt writing,
    have a nіcе weekеnd!

  30. Odis Krostag says:

    Pretty section of content. I just stumbled upon your web site and in accession capital to assert that I acquire in fact enjoyed account your blog posts. Any way I’ll be subscribing to your feeds and even I achievement you access consistently quickly.

  31. hey there and thank you for your info – I have certainly picked up something new from right here. I did however expertise several technical points using this website, as I experienced to reload the site a lot of times previous to I could get it to load properly. I had been wondering if your hosting is OK? Not that I’m complaining, but sluggish loading instances times will sometimes affect your placement in google and can damage your high-quality score if advertising and marketing with Adwords. Well I am adding this RSS to my e-mail and could look out for much more of your respective fascinating content. Make sure you update this again soon..

  32. I love your blog.. very nice colors & theme. Did you design this website yourself or did you hire someone to do it for you? Plz respond as I’m looking to construct my own blog and would like to know where u got this from. many thanks

  33. Great blog right here! Also your website quite a bit up fast! What web host are you the use of? Can I am getting your affiliate hyperlink for your host? I wish my website loaded up as fast as yours lol

  34. Magine says:

    After I originally commented I clicked the -Notify me when new comments are added- checkbox and now each time a comment is added I get 4 emails with the identical comment. Is there any way you may remove me from that service? Thanks!

  35. You’re so interesting! I don’t suppose I’ve read something like this before. So good to discover another person with some genuine thoughts on this subject. Really.. thanks for starting this up. This site is one thing that is needed on the internet, someone with a bit of originality!

  36. Thank you for the sensible critique. Me and my neighbor were just preparing to do some research on this. We got a grab a book from our local library but I think I learned more from this post. I am very glad to see such great info being shared freely out there.

  37. I think that what you posted made a bunch of sense. But, think about this, what if you were to write a killer headline? I ain’t saying your content is not good., however suppose you added a post title that makes people want more? I mean Half of Europe Bans Thinking Sad Thoughts About Banks Dealbreaker: Wall Street Insider – Financial News, Headlines, Commentary and Analysis – Hedge Funds, Private Equity, Banks is kinda plain. You could peek at Yahoo’s home page and note how they create news headlines to grab viewers to open the links. You might try adding a video or a related pic or two to get readers excited about everything’ve written. In my opinion, it could make your website a little livelier.

  38. Thank you for some other fantastic post. Where else may anybody get that type of information in such a perfect method of writing? I have a presentation next week, and I am on the search for such information.

  39. Some really superb posts on this internet site, appreciate it for contribution. “It is not often that someone comes along who is a true friend and a good writer.” by E. B. White.

  40. testa nu says:

    Our sincere regret for not saying appreciate it to you personally earlier.

  41. I’d need to examine with you here. Which isn’t one thing I usually do! I enjoy reading a publish that can make folks think. Also, thanks for permitting me to comment!

  42. Great blog you’ve got here.. It’s hard to find good quality writing like yours nowadays.
    I really appreciate individuals like you! Take care!!

  43. “Appreciate you sharing, great blog.Thanks Again.”

  44. Hi there, I discovered your web site via Google even as searching for a comparable matter, your site came up, it seems good. I have bookmarked it in my google bookmarks.

  45. baza stron says:

    I really enjoy looking through on this website , it has got superb posts . “One doesn’t discover new lands without consenting to lose sight of the shore for a very long time.” by Andre Gide.

  46. Tej wiosny Obrazy Akrylowe władają z jednej strony jasne oraz pastelowe barwy: écru amarant, żółty, piaskowy, czerwony i bananowy, a także klasyczna biel. Z drugiej strony nie dają o sobie zapomnieć również: granat czy intensywna czerwień. Jeśli chcesz dowiedzieć się wicej: nowoczesne obrazy olejne

  47. baza stron says:

    I’ve learn some good stuff here. Definitely worth bookmarking for revisiting. I wonder how much effort you put to make this kind of fantastic informative web site.

  48. You made some nice points there. I looked on the internet for the subject matter and found most individuals will consent with your site.

  49. Hey there, You’ve done an incredible job. I’ll definitely digg it and personally suggest to my friends. I am confident they will be benefited from this website.

  50. I like this web blog very much, Its a real nice office to read and receive info .

  51. I significantly get pleasure from your posts. Many thanks

  52. Just now saw your blog and I enjoyed reading your post.It was very informative and I was very impressed by your presentation.Thank you for the lovely post.I have also bookmarked your blog.

  53. I was looking at some of your content on this site and I conceive this website is real informative! Keep posting.

  54. Wow! This could be one particular of the most useful blogs We’ve ever arrive across on this subject. Actually Great. I’m also an expert in this topic therefore I can understand your effort.

  55. I’ve not found what I wanted

  56. I have recently started a blog, the info you provide on this website has helped me greatly. Thank you for all of your time & work. “A physicist is an atom’s way of knowing about atoms.” by George Wald.

  57. Gareth Jones says:

    Hey, you used to write magnificent, but the last several posts have been kinda boring¡K I miss your super writings. Past few posts are just a little out of track! come on!

  58. Say “thanks” you for your mother and father which they gave you the world

  59. Hi there! Your post rocks too as being a respectable amazing realize!??

  60. Daysi Lenny says:

    Very interesting subject , appreciate it for posting . “I am convinced that life in a physical body is meant to be an ecstatic experience.” by Shakti Gawain.

  61. I have recently in progress a web site, the info you impart taking place this web place has helped me tremendously. Gratitude for all of your calculate & work. “A physicist is an atom’s way of intentional regarding atoms.” by George Wald.

  62. I regularly enjoy reading your articles. I have been reading through this blog when I remember to check. Thanks for the work you put in. I look forward to reading more!

  63. Parfum Kopen says:

    Gorgeous essay, got the enjoyment of studying

  64. I must say i enjoy examining within this internet site , it has superb posts . “A guy of genius continues to be seldom ruined but by himself.” by Samuel Johnson.

  65. I don’t think many of websites provide this type of information.

  66. Lanora Biehl says:

    Extraordinary work you folks are doing with this webpage.

  67. I have recently started a website, the information you provide on this web site has helped me greatly. Thanks for all of your time & work. “There is a time for many words, and there is also a time for sleep.” by Homer.

  68. noclegi says:

    Hiya, I am really glad I have found this information. Today bloggers publish only about gossips and web and this is really irritating. A good website with interesting content, that is what I need. Thank you for keeping this website, I will be visiting it. Do you do newsletters? Can’t find it.

  69. luksfery says:

    Somebody necessarily lend a hand to make severely articles I might state. That is the first time I frequented your web page and up to now? I surprised with the analysis you made to create this actual publish amazing. Fantastic activity!

  70. Wonderful beat ! I would like to apprentice while you amend your web site, how could i subscribe for a blog site? The account helped me a acceptable deal. I had been tiny bit acquainted of this your broadcast offered bright clear idea

  71. preveza says:

    I acquired more new stuff on this weight loss issue. One particular issue is a good nutrition is vital when dieting. A tremendous reduction in junk food, sugary food items, fried foods, sugary foods, beef, and white colored flour products can be necessary. Retaining wastes bloodsuckers, and contaminants may prevent objectives for shedding fat. While specific drugs in the short term solve the situation, the bad side effects usually are not worth it, and they never give more than a short lived solution. It is a known indisputable fact that 95% of diet plans fail. Many thanks sharing your opinions on this blog site.

  72. I??ve been visiting your weblog site temporarly now and i always appear for a gem inside your new posts. Thanks for sharing.

  73. Emery Finkel says:

    Wasp dudes! Awesome stuff keep it up.

  74. You have noted very interesting points ! ps decent website . “Enemies, as well as lovers, come to resemble each other over a period of time.” by Sydney Harris.

  75. Oh my goodness! Awesome article dude! Thank you so much, However I am experiencing problems with your RSS. I don’t understand the reason why I can’t join it. Is there anybody having identical RSS problems? Anyone who knows the answer can you kindly respond? Thanks!!

  76. Kara Yokel says:

    Howdy! This post couldn’t be written any better! Looking through this post reminds me of my previous roommate! He always kept preaching about this. I’ll send this article to him. Pretty sure he’ll have a very good read. Thank you for sharing!

  77. I am not dependable proviso it is just my machine, on the contrary I am unable to view a quantity of of your images acceptably. I am by Chrome but approximately equipment are not loading. Social Networking Software

  78. Regards for the efforts which you have put in this particular. very useful info. “If a man writes any book, let him set down only what exactly he understands. I have guesses enough of my. ” by Johann Wolfgang von Goethe.

  79. Hi! I just would prefer to give you an enormous thumbs up for the wonderful data you’ve got right right here on this post. I’ll be returning for your site for much more soon.

  80. A person necessarily lend a hand to make critically articles I might state. This is the first time I frequented your website page and so far? I surprised with the research you made to create this actual submit extraordinary. Excellent process!

  81. One radotelefony przewozne various other thing I’d like to communicate is that rather than trying to fit all your web degree course on times that you simply finish off work (since the majority individuals are tired once they come home), try to find most of one’s sessions for the weekends and just one or two courses with weekdays, even if it indicates taking a long time away through your saturday along with sunday. This is usually fantastic because for the saturdays in addition to sundays, you will be far much more rested and also concentrated for assignment work. Thanks quite a lot for the several tips I’ve got realized through your blog web site.

  82. I as well as my pals were found to be reading the nice tactics on your web page and then the sudden developed a terrible feeling I had not thanked the website owner for those tips. All of the people were definitely as a result glad to study them and have in effect truly been having fun with those things. Thank you for truly being very kind and then for settling on this kind of smart themes most people are really needing to be informed on. My personal sincere regret for not saying thanks to earlier.

  83. Job fit done guys, wellborn content.

  84. Leon Pozzi says:

    I think this internet site has some really fantastic info for everyone. “Only the little people pay taxes.” by Leona Helmsly.

  85. Someone essentially assist to make seriously posts I would state. This is the very first time I frequented your website page and up to now? I amazed with the research you made to make this actual post extraordinary. Wonderful process!

  86. I’ve been absent for a while, but now I remember why I used to love this website. Thanks , I’ll try and check back more often. How frequently you update your website?

  87. I know this if off topic but I’m looking into starting my own weblog and was wondering what all is required to get setup? I’m assuming having a blog like yours would cost a pretty penny? I’m not very internet smart so I’m not 100% sure. Any tips or advice would be greatly appreciated. Cheers