On November 1, the Short Selling Regulation (SSR) came into force across the European Union. The SSR applies to the short selling of shares, sovereign debt, sovereign credit default swaps and related instruments that are admitted to trading or traded on an European Economic Area trading venue (unless they are primarily traded on a third country venue). The SSR:

• requires holders of these net short positions to make notifications once certain thresholds have been breached;  
• outlines restrictions on investors entering into uncovered short positions; and
• gives powers to regulating authorities to suspend short selling or limit transactions when the price of various instruments fall by set percentage amounts from the previous day’s closing price.

In line with the coming into force of the SSR, the FSA has published policy statement 12/19 which sets out the resulting changes to the FSA’s Handbook.  These changes also came into force on November 1.

The SSR does allow for limited exemptions for certain market making activities in respect of transparency requirements and the restrictions on uncovered short sales. ESMA has consulted on its proposed guidelines in respect of these limited exemptions, and plans to publish its final guidelines by the end of November.