German authorities lift uncovered short selling ban; point to improvement in financial markets

German finance regulator Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) has allowed the uncovered short selling of 11 stocks, after it decided not to renew a ban that had been in place since September 2008.

BaFin had extended the ban on a number of occasions, but opted not to expand it beyond the next expiry date of 31^st January 2010.

In a statement on its website, BaFin cited an improvement in the financial markets as the reason behind its decision. Germany came out of recession in the second quarter of 2009, and has since seen various optimistic economic reports.

However, the statement added: “BaFin continues to monitor the developments in the financial markets and will issue new regulations concerning short sales should the situation deteriorate again.”

The stocks covered by the ban included some of the biggest names in German finance, such as Commerzbank, Deutsche Bank and Deutsche Börse. Many authorities around the world introduced similar bans, as short selling was seen by many to be exacerbating the problems caused by the credit crunch.