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Member States continue updating short selling measures
Practical Law UK Legal Update 4-504-8599 (Approx. 2 pages)
Member States continue updating short selling measures
by Simon Lovegrove, Norton Rose LLP
| Published on 28 Feb 2011 |
This article is part of the PLC Global Finance February 2011 e-mail update for the United Kingdom.
Speedread
The European Commission published a proposal for a Regulation on short selling and credit default swaps in September last year to create a coherent European response on the issue. This article looks at national measures on short selling that Council Member States have updated.
In September last year, the European Commission published a proposal for a Regulation on short selling and credit default swaps (CDS). Whilst the Commission acknowledged the economic benefits of short selling, it also felt that the risks were worth creating legislation for so that a coherent European response could be implemented.
Whilst the Commission's proposal is going through the European Parliament, Council Member States have been busy updating their own national measures on short selling. For example:
- In France the AMF introduced, with effect from 1 February, the short positions disclosure regime developed by the Committee of European Securities Regulators (CESR), with respect to all French shares admitted to trading on Euronext Paris and Alternext Paris. The emergency measures that were adopted in September 2008 are no longer applicable.
- In Germany, the BaFin extended the General Decree of 4 March 2010 under which market participants must notify the BaFin of net short-selling positions in selected financial stocks at a threshold of 0.2% or more and publish net short selling positions at a threshold of 0.5% or more. The notification and publication requirements relate to all transactions which, in terms of the holder's aggregate economic interest, result in a net short position in shares of ten companies of the financial sector. The provision applies until 25 March 2012.
- The Romanian regulator introduced, with effect from 25 January 2010, measures enabling short selling transactions in shares of Romanian issuers.
However, notwithstanding European and national legislation it is important not to lose sight of the powers that now reside in the successor authority to CESR, the European Securities and Markets Authority (ESMA). For example, ESMA has an important role in coordinating action in exceptional situations. Regulators have to notify it of the measures they propose to take (or renew) in such a situation, not less than 24 hours before they come into force (this period may be shorter in exceptional circumstances). ESMA must then consider the information received and issue an opinion (within 24 hours) on whether the measure or proposed measure is appropriate and proportionate to address the threat, and whether measures by other national regulators are necessary. In addition, where certain conditions are satisfied ESMA may also take action itself.