Brussels, 18/11/2011 (Agence Europe) - On Tuesday 18 October 2011, negotiators at the European Parliament and the Polish Presidency were close to reaching broad agreement over the draft rules on naked short-selling and credit default risks (insurance policies for sovereign debt) and final meetings were under way as we went to press. French Green MEP Pascal Canfin, rapporteur on the issue for the European Parliament, said the idea was to ban naked short-selling on sovereign debt. A press conference has been scheduled to announce the negotiation results later in the evening.
The EP wants to ban purely speculative CDS, hating the way that somebody can buy Greek CDS even though they have not actually bought any Greek debt and therefore the sale of CDS amounts to pure speculation about whether the country will go bankrupt (see EUROPE 10412). Canfin said that the EP has given the Commission's ideas greater teeth, wanting a ban on naked sales of sovereign DS to make it impossible to buy a CDS if one does not have the bonds that the CDS provides insurance against, but the Council was not intiailly considering any permanent bans or restrictions on speculative CDS.
Interinstitutional agreement has already been reached on the rest of the draft legislation. After what the rapporteur described as tough negotiations, the EP and Council seem to agree on a transparency system for significant naked holdings of shares and bonds; rules for naked short-selling (without actually owning the security,shares or bonds) which will make it compulsory to identify securities before one can trade in them and also have reasonable certainty that a seller will have the security on the delivery date; and greater powers for the European Securities and Markets Authority (ESMA) to give it the power to force share market decisions on national supervisors in the event of a crisis.
The draft legislation will prevent member states from taking one-off measures to deal with financial turbulence. Earlier this year, countries like France, Italy and Spain restricted naked short selling, but the United Kingdom left the market free to operate as it saw fit. (MB/transl.fl)