German lawmakers in the lower house of parliament passed a bill banning naked short-selling of eurozone government bonds, credit default swaps based on those bonds and stocks in German companies.
The bill aims to counter volatility of the euro currency, Bloomberg BusinessWeek reported.
"Naked short-selling leads to incalculable speculative risks," Leo Dautzenberg, parliamentary financial policy spokesman for Chancellor Angela Merkel's Christian Democrats, said in an e-mailed statement. "We've put up clear barriers to this uncertainty."
The legislation gives the country's BaFin regulator the ability to ban financial market instruments for as much as one year. The legislation doesn't affect intraday trading.
The upper house of parliament plans to debate the measure on July 9, Bloomberg BusinessWeek said.
Naked short-selling involves selling a security without ever being in possession of it. Some analysts believe naked short selling adds to market volatility and may have played a role in the financial crisis.
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