European Union lawmakers have backed strict new regulations for short selling, The Wall Street Journal reports. Lawmakers supported a legislation that will place a near-ban on ‘naked short selling’ of credit default swaps linked to sovereign debt. The law will also require all short sellers to “cover” their position by buying the underlying security they shorted, by the end of the trading day. Hedge funds are concerned that the tough rules will make sovereign debt markets less efficient, liquid and transparent, and increase the cost of borrowing, adds Financial Times.

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