Naked Short-Selling Ban Coming into Force in Germany

A law to ban naked short selling in Germany will come into force on Tuesday after having been approved by the parliament earlier this month.

Naked short selling means selling securities without borrowing the underlying assets, in the hope of buying them later at a lower price.

The German government unilaterally imposed a ban on naked short selling of some financial market instruments and some shares in May, and it widened it to include all German shares in June.

Initially the ban only applied for stocks of Germany's biggest banks, government bonds and related credit default swaps (CDS).

The abrupt initial ban rattled financial markets, with analysts saying unilateral action by one government suggested lack of unity in combating the market turmoil from Europe's government debt crisis.

Politicians and many others argue that markets' behavior worsened Europe's debt crisis. In Germany, there have been increasing calls across the political spectrum for tougher regulation.

- AP contributed to this story