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A spokesman from the EFSF admitted that the details were not clear after the market indicated that trading in a derivative issued by the EFSF – Partial Protection Certificates (PPCs) that are similar to credit default swaps – would be allowed without actually owning it.
An EFSF spokesman said: “When you use the certificate, you need to own the underlying bonds. You would not be able to receive the insurance if you did not have the bonds with it.”
Investors took this to mean that the market would be able to trade the PPCs without owning the sovereign debt, called “naked” trading.
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