German Short Selling Ban Hits U.S. Stocks

Some are blaming the afternoon weakness in stocks on reports that Germany will place a temporary ban on naked short-selling.

Heading into the close, the Dow is down 85 to 10540, Nasdaq is down 31 and the S&P 500 is down 14.

According to reports, Germany lawmakers ruled that starting at midnight, a ban will be placed on naked short-selling of select banks and credit-default swaps of euro-area government bonds. Chancellor Angela Merkel is expected to announce the plan on Wednesday.

Allianz SE and Deutsche Bank AG (NYSE: DB) would be two banks included on the list of bank stocks that can not be shorted, according to reports.

Some are viewing the move as an act of desperation and a sign that more bad news from the Euorzone could be announced soon.

The Euro continued to plunge against the dollar, last trading at $1.22.

Below is a translated version of the announcement from German's Federal Financial Supervisory Authority (BanFin)

BaFin banned naked short selling and naked CDS on government bonds in the euro zone

The Federal Financial Supervisory Authority ( BaFin ) has on Tuesday naked short sales of debt securities by euro zone countries, the domestic stock exchange for trading in the regulated market are admitted to a prohibited temporarily. it has also temporarily banned so-called credit default swaps ( CDS ), where the reference obligation and a liability of a state of the euro zone is at least, and they do not serve to hedge against default risk (uncovered CDS ).

In addition, the added BaFin naked short sales of shares of the following companies in the financial sector prohibited:

AAREAL BANK AG
ALLIANZ SE
COMMERZBANK AG
GERMAN BANK AG
GERMAN EXCHANGE AG
GERMAN Postbank AG
GENERALI HOLDING Germany AG
HANNOVER REINSURANCE AG
MLP AG
Munich Reinsurance Company AG

These prohibitions apply from 19 May 2010, 00:00 clock, 31 March 2011, 24:00 Clock, and will be reviewed.

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