UPDATE 1-Greece seeks to curb bets against its debt

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By Emelia Sithole-Matarise and Dina Kyriakidou

LONDON/ATHENS, April 8 (Reuters) - Greece on Thursday sought to make it harder to bet against its government debt by introducing daily repurchase auctions to cover short positions.

Greek trading system HDAT, which is run by the central bank, told primary dealers of Greek sovereign debt the move was a response to the scale of open short positions on such bonds, according to a copy of the HDAT document obtained by Reuters.

This week financial markets hammered Greek bonds and bank shares, driving the euro zone member's borrowing costs higher and pushing it closer to tapping a last-resort European Union-International Monetary Fund safety net.

"Due to massive debit position in HDAT transactions, the Committee of Primary Dealers Supervision and Control decided as of today and until further notice to automatically proceed to repo auctions, at the end of HDAT trading day, in order to cover all transactions with such debit positions," the statement obtained by Reuters said.

Traders said the decision meant that any uncovered short positions on Greek government bonds would have to be covered, regardless of the price, at the end of the settlement day in the repo auction.

This would make it more difficult to short Greek bonds but might end up affecting market makers more than others, according to some traders.

"It will not kill off liquidity, but it will raise costs a bit," a source at a primary dealer said.

The volume of Greek government debt traded on the HDAT electronic system fell 10.4 percent month-on-month in February to 18.9 billion euros ($25.16 billion), according to the latest data from the Greek central bank.

Year-over-year, trading volume rose 35.9 percent in February. Daily average turnover in February fell to 0.99 billion euros from 1.1 billion in January.

Greece's borrowing costs have surged as markets worried about the country's soaring deficit, its debt load and its ability to rollover debt.

The cost of insuring Greek debt against default is at its highest since the launch of the euro in 1999, and the Greek 10-year government bond yield has leaped to offer the biggest premium over benchmark German Bunds ever seen since then.

The list of primary dealers includes Greek banks as well as non-Greek ones, including Barclays Bank, BNP Paribas, Unicredit Bank, Citigroup Global Markets, Credit Suisse Securities (Europe), Deutsche Bank and Goldman Sachs, according to the HDAT website.

(Editing by Padraic Cassidy)

(Email: emelia.sithole@thomsonreuters.com; +44 20 7542 6752))