CDS Short Sales’ Effect on Bond Market Indeterminate (Reuters)

New study says it cannot be proved that short sales worsened Greece’s debt issues.

A study commissioned by the G-20 concludes that it can’t be proved that short sales of credit-default swaps are a problem for underlying government bond markets. The report by the International Organization of Securities Commissions (IOSCO) follows criticism that hedge funds’ short sales of CDS worsened Greece’s debt problems.

The European Union approved a law to ban “naked” or uncovered short-sales of CDS in November, yet the amount of CDS trading has continued to increase, and there is evidence that the CDS market is under-collateralized, according to IOSCO.

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