Biz Brief: European Officials Mull a Ban on Naked Credit-Default Swaps

The strains from the financial crisis may be easing. But eurozone officials are continuing their push to limit the kind of speculative financial instruments that have been the source of so much pile-on volatility in the past. The European Union is mulling measures that would give regulators emergency powers to "prohibit or restrict" naked credit-default swaps -- insurance on bonds not owned by the CDS purchaser -- in reaction to the region's current debt crisis.

Details of the tentative restrictions remain unclear. According to a statement by the European Commission, measures would be "temporary in nature and subject to coordination" by the European Securities and Markets Authority. The move comes ahead of Tuesday's vote by the European Parliament to restrict trading in credit-default swaps.

European officials have grown increasingly aggressive in restricting speculative activity in the financial markets following rising public outrage. In a controversial move, Germany banned some naked short-selling in May.
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