Short Selling Regulation

Formal Request to ESMA for Technical Advice on the Evaluation of the Short Selling Regulation

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On December 10, ESMA published a formal request it had received from the European Commission for technical advice on the observable effects of the Short Selling Regulation since its coming into force on November 1, 2012.

Amongst the specific questions ESMA has been asked to answer are:

           1. To what extent any temporary restrictions and bans imposed by competent authorities on short selling have had any positive effects;        
         2. To what extent the thresholds set for notification to national regulators and public disclosure are appropriate; and
         3. Whether the exemption for market makers allows for liquidity provision without undue circumvention.

The European Commission is obliged to report on the issues above to the European Parliament and the Council by June 30, 2013.  It has asked ESMA to deliver its technical advice by May 31, 2013.  Market participants can expect ESMA to launch a consultation shortly, with a deadline for responses sometime in the spring of 2013. 

Short Selling: ESMA Questions and Answers

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On October 10, ESMA published a first update to its Questions and Answers on the implementation of the Regulation on short selling and certain aspects of credit default swaps (the Short Selling Regulation).  ESMA’s Questions and Answers provides responses to questions posed by market participants and regulatory authorities, with the aim of promoting the consistent application of the Short Selling Regulation throughout Europe.  The Questions and Answers have been updated in respect of questions related to: 

  • the transparency of net short positions;
  • calculating the net short position;
  • uncovered short sales;
  • the duration adjustment for calculating net short positions in sovereign debt;
  • net short positions when different entities in a group have long or short positions or for fund management activities; and
  • exemption for market making activities and for primary dealers operations.

FSA Consultation Paper on the EU Short Selling Regulation

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On August 30, the FSA published a consultation paper on the proposed amendments to the FSA Handbook relating to the EU Short Selling Regulation (SSR), which will apply from November 1. CP12/21. 

The consultation paper proposes the repeal of the UK’s current short selling regime contained in FINMAR 2 and sets out how the UK will implement the SSR in the UK.  Responses should be submitted by September 20.