In light of the German Bundesrat’s ban of naked short selling of certain assets earlier today, including the prohibition of credit default swaps on government bonds, The International Securities Lending Association’s CEO Kevin McNulty would like to give the following comment:

“Short selling is a good thing. It adds liquidity to markets, helps price discovery, and reduces spreads. It lends a huge hand in price formation so share prices are more reflective of their actual value and are therefore more valuable to all investors.

“There is a theoretical risk with naked short selling that it can lead to large numbers of failed settlements. We don't see any evidence of this risk in practice however given that settlement rates in Europe are so high.

“We are disappointed in Germany’s decision to act ahead of the European Commission’s rulings for a pan-European approach to short selling which is fair to investors and to the market.”