We know it’s hard to assess the scale of naked shorting in any particular security.
However, it does make sense to look to the scale of conventional ‘borrowed-stock’ shorting activity for an indication.
Data Explorers — which tracks short positions in the market — has looked into the matter and provided FT Alphaville with the following chart on Wednesday.
It shows the percentage of shares outstanding in the specific names affected by the ban — click to enlarge:
As can be seen, apart from Commerzbank, the scale of shorting activity was actually — relatively speaking — following a declining trend in recent weeks.
This chart, meanwhile, shows how the shorting activity in those names compared to general shorts in DXI German common stock:
As Data Explorers explains:
Note: the spreadsheet track the German DXI tracks the change in short interest across the German common equity market (90 companies, large, mid and small cap to a value of $780mm) and the ten names that have been the subject of the naked short selling ban. We have removed approximately 50 small caps names with a valuation less than Aareal Bank AG (subject to the naked ban) in order to compare like with like. The report is broken into two sections; the DXI (Data Explorers Indices) and the ten names subject to the naked short selling ban.
Here, meanwhile, are their main conclusions (our emphasis):
· The German ban is on naked (i.e. no borrow) short selling on 10 financial names. There is also a ban on buying CDS coverage for government bonds that are not owned.
· Our data shows that the short interest (as measured by percent shares outstanding on loan) has been trending down since Feb 2010. Against this, the larger German market has seen a gradual increase.
· Out of the ten names that are subject to the naked short selling ban only Commerzbank has seen relatively high levels of short interest over the past year and a half (at around 5%). The other remaining named stocks are well under 2%.
· We do not track naked short interest.
Related links:
German ban adds to eurozone worries – FT
Witz des Tages – FT Alphaville
‘How can a [CDS] market be made?’ – FT Alphaville
How the Wolf Pack is (already) playing the BaFin ban – FT Alphaville