Italy Orders Short Sellers to Reveal Positions After Market Dip

July 11 (Bloomberg) -- Italy’s financial-market regulatormoved to curb short selling after the country’s benchmark stockindex fell the most in almost five months and bonds tumbled oninvestor concern Italy would be the next victim of the region’sdebt crisis.     The regulator known as Consob ordered last night that shortsellers must reveal their positions when they reach 0.2 percentor more of a company’s capital and then make additional filingsfor each additional 0.1 percent. The measure takes effect todayand lasts until Sept. 9.     The decision came hours before Europe’s finance ministersgather for a regular meeting in Brussels today to seek ways toshore up Greece and defend the region’s other heavily indebted nations. The Italian ruling follows similar action taken inother European countries, including Germany, Rome-based Consobsaid in a statement posted on its website.     Consob’s commissioners held the emergency meeting yesterdayafter the country’s benchmark FTSE MIB index plunged 3.5 percenton July 8, led by a decline in UniCredit SpA and other bankshares that are the among the largest holders of the country’sdebt. The yield on Italy’s 10-year bond rose to a nine-year high of 5.27 percent, driving the premium investors demand to holdthe country’s debt over German bunds to a euro-era high of 244basis points.     UniCredit, the country’s largest bank, plunged 7.9 percentand Banca Intesa SpA, the second-biggest lender, dropped 4.6percent. Both hit lows not seen since the period when marketswere emerging from the crisis spawned by the collapse of LehmanBrothers Holdings Inc.                     
Blaming ‘Speculators’    
Italian politicians including Paolo Bonaiuti, anundersecretary for Prime Minister Silvio Berlusconi and one of the premier’s main spokespeople, blamed the slide on“speculators” and pledged action to rein in investorsperceived to be attacking Italy. Bonaiuti said Italy would beunited “in blocking the effort of speculators.”     On July 5, European lawmakers voted in favor of a ban onshort selling of government bonds in the EU unless traders haveat least “located and reserved” in advance the securities theyintend to sell. The European Union Parliament in Strasbourg,France, also called for restrictions on traders’ use of credit-default swaps to profit from defaults on sovereign debt theydon’t own.     Short selling involves the sale of securities borrowed fromthe owner, and generates profit when the trader repurchases themat a lower price and returns them to the owner. The amount of shorting is limited by the willingness of owners to lend.  
Merkel, Sarkozy     
The European Securities and Markets Authority, which co-ordinates the work of national regulators in the 27-nation EU,should be given emergency powers to temporarily ban shortselling or trades in CDS on sovereign debt in the EU, theParliament said. Politicians including German Chancellor Angela Merkel andFrench President Nicolas Sarkozy have claimed that naked short-selling and credit-default swaps worsened the euro area’s sovereign-debt crisis, and have called for EU curbs. Michel Barnier, the EU’s financial-services chief, saidlast year such trades may lead to “disorderly markets and systemic risks.” Finance ministers from the 27-nation regionagreed in May that traders should be allowed to short sellgovernment bonds and stocks if they have a “reasonableexpectation” that they can obtain the underlying securities.They also rejected calls from Germany for a ban on sovereign CDS.