Assessing the arguments against shorting

Some politicians and regulators in Europe have suggested restrictions on the short selling of government bonds and credit default swaps referenced to those securities. Hans Blommestein, Ahmet Keskinler and Carrick Lucas at the OECD argue such a move could be detrimental for liquidity

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Regulators across the globe are working to implement new regulations designed to improve the stability of financial markets. As part of this, some supervisors and politicians have proposed banning the naked short selling of government bonds and derivatives related to those instruments. If adopted, this would mean that prospective sellers (possibly including market-makers in sovereign debt) would first need to locate and reserve the securities in question. 

Sovereign issuers and primary dealers

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