AIMA - EU Short Selling Regulation

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EU Short Selling Regulation

In November 2010, the EU institutions agreed a text of a Regulation, which harmonises the short selling of shares and sovereign debt.

Among other matters, the Regulation:

introduces a ban on uncovered sovereign CDS but allows Member States to suspend the restriction in their own jurisdiction in given circumstances;
imposes a requirement that, in order to be regarded as a covered short sale, the relevant share must have been located and the short seller must have reasonable expectation that settlement can be effected when due;
introduces an EU-wide notification and reporting regime, whereby holders of net short positions must notify these privately to the regulator when they exceed 0.2% of the issued share capital of the issuer company and must publicly disclose these (on a named basis) when they exceed 0.5%. In each case, further notification or reporting is required at each 0.1% above the initial threshold;
provides national competent authorities and ESMA with additional powers to intervene in the markets in times of stress; and
excludes sales under a repo agreement or futures contracts from the definition of short sales in shares and debt instruments.

The Commission, together with ESMA, is currently undertaking the ‘Level 2’ stage of the legislative process for the Short Selling Regulation. ‘Level 2’ measures are intended to provide greater detail and clarification as to how given aspects of the agreed (Level 1) text of the Regulation are to be implemented in practice. ESMA’s Final Reports on draft technical standards and on possible delegated acts have now been submitted to the Commission. The Commission will now consider these and publish the final Level 2 measures later in the year.

Key legislative documents

ESMA's Technical Advice on possible delegated acts of the Regulation on short selling and certain aspects of credit default swaps (April 2012)

ESMA's Final Report on the draft technical standards of the Regulation on short selling and certain aspects of credit default swaps (March 2012)

Final agreed text for a Regulation of the European Parliament and of the Council on Short Selling and certain aspects of Credit Default Swaps(February 2012)

European Commission Proposal for a Regulation on Short Selling and Certain Aspects of Credit Default Swaps (September 2010)

Relevant consultations

ESMA consultation - draft technical advice on possible Delegated Acts concerning the regulation on short selling and certain aspects of credit default swaps ((EC) No XX/2012) (February 2012)

ESMA consultation - Draft technical standards on the Regulation (EU) xxxx/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps (January 2012)

European Commission Public Consultation on Short Selling CESR Consultation Paper - Proposal for a Pan-European Short Selling Disclosure Regime (July 2009)

AIMA documents

Summary of ESMA's Final Report - Technical advice on possible Delegated Acts concerning the regulation on short selling and certain aspects of credit default swaps ((EC) No 236/2012) (April 2012)

Response to ESMA's consultationon draft technical advice on possible Delegated Acts concerning the regulation on short selling and certain aspects of credit default swaps ((EC) No XX/2012) (March 2012)

Response to ESMA's consultation on Draft Technical Standards of the Short Selling Regulation (February 2012)

Summary of ESMA’s consultation paper on Draft Technical Advice on possible Delegated Acts concerning the Short Selling Regulation (February 2012)

Summary of ESMA’s consultation paper on Draft Technical Standards of the Short Selling Regulation (January 2012)

Submission - issues relating to ESMA's Level 2 work on Short Selling Regulation (December 2011)

Update Note - EU Short Selling Regulation (October 2011)

Update Note (July 2011)

Note on European Commission's draft Proposal for a Regulation on Short Selling and certain aspects of Credit Default Swaps (May 2011)

Research Note:The European Sovereign CDS Market (April 2011)

Position Paper on the European Commission’s Proposal for a Regulation on Short Selling and certain aspects of Credit Default Swaps (December 2010)

Summary of the European Commission's Proposal for a Regulation on Short Selling and Credit Default Swaps (September 2010)

Response to the European Commission's Public Consultation on Short Selling (July 2010)

Summary of the European Commission's Consultation on Short Selling(June 2010)

Summary of CESR's Report - Model for a Pan-European Short Selling Regime (March 2010)

Response to CESR's consultation - Proposal for a Pan-European Short Selling Disclosure Regime (September 2009)

Summary of CESR's Proposal for a pan-European Short Selling Disclosure Regime (July 2009)

Other relevant documents

Oliver Wyman Report -The effects of short selling public disclosure of individual positions on equity markets (February 2011)

CESR Report - Technical details of the pan-European short selling disclosure regime (May 2010)

CESR Feedback Statement - Final proposal for a pan-European short selling regime (March 2010)

CESR Final Report - CESR model for a Pan-European Short Selling Disclosure Regime (March 2010)

CESR Call For Evidence on a Regulation for Short Selling by CESR Members (December 2008)