New Trading Rules May Jolt Euro

From wsj.com

The euro could be in for a rough ride when a ban on some types of debt-derivatives trading comes into force across the European Union next week. From Nov. 1, traders and investors will be unable to buy insurance against sovereign-debt defaults, in the form of credit-default swaps, unless they hold the underlying bonds. So, if you want to buy Spanish CDS, you will need to be able to demonstrate that you already hold Spanish government bonds. You can’t just buy Spanish CDS in isolation (in a “naked” form, to use the parlance) as a punt on Spanish doom. It’s all an effort to stamp out the impression given, ... (full story)