MEPs in Strasbourg began debating legislation to crack down on short selling and the use of credit default swaps, following evidence that the practice played a significant part in the global financial crisis.
The Socialist group, along with the Greens, backed an outright ban on naked short selling – when a trader sells a share that he or she has not even borrowed, in order to make a quick profit. Robert Goebbels, the Socialist group spokesman on the legislation, told the committee that: “The time has come to put an end to naked short selling”, adding that “the vast majority of credit default swaps are little more than dangerous bets”.
The centre-right European People’s Party grouping has so far refused to say whether it will support a full ban or not, although its representatives agreed that naked short selling and credit default swaps were entirely speculative. If a sizeable proportion of the EPP supports a ban, then it should be carried with a large majority.
The Liberal Democrats did not participate in the debate, while Conservative MEP Syed Kamall told the committee his party was flatly opposed to a ban, claiming that naked short selling was a valuable part of financial markets, while naked credit default swaps were a “tiny” proportion of the market. The British Treasury is strongly opposed to a ban.
