EU to harmonise short selling rules
15 June 2010 Brussels
Image: Shutterstock
The paper, which differentiates between covered and naked short selling, is an attempt to create a EU-wide framework for regulation, which it says will mean member states have the power to act to reduce risks to their financial stability.
In recent weeks, Germany and other states have taken unilateral action to ban naked short selling, moves the EU appears to support in principle but is uncomfortable about the states acting alone. It has a longstanding ambition to create a pan-European regulatory structure, an ambition that is supported by many industry associations and market participants.
The objectives of the consultation are:
To ensure Member States have the power to act to reduce systemic risks and risks to financial stability and market integrity arising from short selling and credit default swaps,
To facilitate co-ordination between Member States and the European Securities Markets Authority (ESMA) in emergency situations;
To increase transparency on the short positions held by investors; and
To reduce settlement risks linked with uncovered or naked short selling.
The EU is keen to differentiate between covered short selling and naked short selling, the latter of which has come under increased focus in recent months. It is naked short selling that is likely to bear the brunt of any new regulation, with conditions being put on the sale, including the requirement to have an agreement in place for the loan of the securities.
The consultation is open until 10th July 2010.
In recent weeks, Germany and other states have taken unilateral action to ban naked short selling, moves the EU appears to support in principle but is uncomfortable about the states acting alone. It has a longstanding ambition to create a pan-European regulatory structure, an ambition that is supported by many industry associations and market participants.
The objectives of the consultation are:
To ensure Member States have the power to act to reduce systemic risks and risks to financial stability and market integrity arising from short selling and credit default swaps,
To facilitate co-ordination between Member States and the European Securities Markets Authority (ESMA) in emergency situations;
To increase transparency on the short positions held by investors; and
To reduce settlement risks linked with uncovered or naked short selling.
The EU is keen to differentiate between covered short selling and naked short selling, the latter of which has come under increased focus in recent months. It is naked short selling that is likely to bear the brunt of any new regulation, with conditions being put on the sale, including the requirement to have an agreement in place for the loan of the securities.
The consultation is open until 10th July 2010.
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