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UPDATE 1-Germany may extend short sale ban on shares -draft

* May ban naked short selling of shares - FinMin paper

* Govt source said new ban would affect all stocks

* Currency derivatives also covered

* Impact of unilateral measure seen limited - analyst

* Spanish watchdog says German bans ill-judged

(Adds details from statement)

By Dave Graham

BERLIN, May 25 (Reuters) - Germany may widen a ban on speculative trades in financial stocks to cover all shares, a draft finance ministry document showed on Tuesday.

The draft said a raft of measures aimed at stabilising financial markets would include a “ban on naked short selling of shares, including derivatives referring thereto.”

The document did not state whether the proposals were aimed at all shares or specific companies, and finance ministry officials were not immediately available for comment.

One government source, speaking to Reuters on condition anonymity, said it was intended to apply to all shares traded in Germany.

A week ago, Germany caught markets and its European Union partners unawares when the government’s financial watchdog announced a ban on naked short-selling of shares of Germany’s top 10 financial institutions, and of euro government bonds and related credit default swaps.

Tuesday’s news, by contrast, had little market impact.

The finance ministry draft did not list specific shares to be affected.

But it said there was also a proposal to introduce a “transparency system for naked short-selling positions”, and the ban would also cover euro currency derivatives not used for hedging.

In contrast to the sharp fall in the euro EUR= and shares prompted by last week's announcement, a share trader in Frankfurt said the news was having a limited impact. "As long as Germany is doing this alone, I really see it as very questionable. The G-20 countries would need to act together, but there would always be a chance to find a hole," he said. "Too much regulation is also not going to help."

The head of Spain’s stock market regulator CNMV, Julio Segura, said on Tuesday Germany’s plans to control speculators by banning naked short selling on stocks was ill-judged.

“The regulatory changes ... encouraged by the German government are heading in the wrong direction,” Segura said during an address to parliament.

“If what we are trying to do is just ban or hamper every kind of bet on the downside ... then we would have to ban selling debt futures, or call options, which would be ridiculous,” he added.

A second trader in Hanover said he was not worried by news of the proposed ban.

“As long as other European countries don’t go along, such a ban is really meaningless,” the trader said.

For a factbox on Germany’s short-selling ban, click on [ID:nLDE64I1AZ]