European Parliament’s proposed ban on naked
short selling of credit default swaps (CDS) may affect the
reliability of pricing and could even reduce attractiveness of
the product as a whole.
"It’s an error. I think it’s an
overreaction," said Barney Reynolds from Shearman &
Sterling in London.
"It seems to me that shorting is a proper and necessary
counterbalance for price discovery purposes, and that banning
naked shorts is likely to dampen the efficient use of
He added: "So long as there's proper policing of improper
shorting, which is possible under existing regulation, there's
no necessity for...